China risk analysis
... The pace of financial reforms has lagged far behind other areas-and nearly every China "nightmare" scenario begins with a banking crisis. ... Is China in line for a big collapse like that in Thailand or Korea? ... Inflation in China Chinas CPI turned positive for the first time in 15 months last January and has been climbing steadily all year, pushed upwards by rising fuel and food prices, as well as by a hike in the costs of water, electricity and medical care. ... Inflation continued to accelerate in China as the countrys consumer price index rose in November at its fastest annual rate in six years, stoking further worries economic growth is overheating. Inflation in China, which hit its highest level in nearly seven years in January, has come under the spotlight amid fears the fast growing country might overheat, fanning consumer prices and threatening long-term economic growth. We have given this factor the most weight with regard to our basket of countries and since the risk factor associated with inflation in China is high, we have assigned it a weight of 2. ... Exchange Rate system in China After 1994, fundamental changes were seen in Chinas foreign exchange system, as the government merged the "official" and market exchange rates into a unified one based mainly on market demand and supply, under a single, managed floating exchange rate system.