China GDP surges, as well as headaches

The Chinese government reported its gross domestic product enjoyed a growth of 7.9 percent year on year in the second quarter. And the most importantly, it's bounced from the 17-year-low growth of 6.1 percent in the first quarter, showing a "clear sign" that the world's third-largest economy is recovering from the recession. According to the government statistics, China's agricultural industry grew 3.8 percent to 1.2 trillion yuan in the past six months, along with manufacturing and service, which rose 6.6 percent and 8.3 percent respectively to 7 trillion yuan and 5.7 trillion yuan. HSBC's China economist Qu Hongbin predicts a 9.5 percent growth in 2010. But at the meantime, hot money from outside also started to flow back into the country to take advantage of the growth, a déjà vu for the Chinese government. Forex reserve surged to US$ 2,13 trillion by the end of June from 1.95 trillion in March, while in January it was just 1.91 trillion. An economist in Beijing who is quoted as anonymity by the Financial Times as saying "the same expectations of a renminbi appreciation will start to accumulate all over again.”