Highlights of China

OVERVIEW
China's economic growth has moderated to a more sustainable pace.
Headline inflation is receding even as non-food price pressures emerge.
Amidst weaker and uncertain global prospects, China's growth will be supported by strong international competitiveness and a robust domestic economy.
On current growth forecasts, there is no need to ease the overall macroeconomic stance, although global uncertainty calls for vigilance and flexibility.
Reducing China's very large external surpluses remains a key policy challenge.
RECENT ECONOMIC DEVELOPMENTS
In line with slower growth elsewhere, China's GDP growth moderated so far in 2008.
The moderation of growth in 2008 in part reflects less buoyant investment.
External trade volumes have decelerated, but sharp increases in import prices are inflating import values.
The large decline in the terms of trade reduced China's trade surplus from a year ago in the first five months.
More detailed external trade data seems consistent with a slowing global economy and a still robust domestic economy.
High food price increases pushed up overall consumer inflation, but the worst of the food price hikes may be over.
Surges in other commodity prices had until recently had less impact on China's consumer prices.
Higher prices of food, oil, and industrial raw commodities have started to spill over into some other prices, although spill-over to core consumer prices has remained limited.
Foreign reserves accumulation breaks new records.
The balance of payment surpluses complicate monetary policy, but money growth remains under control.
Motivated by the need to rebalance the economy and to dampen price pressures, China's RMB has continued its gradual exchange rate appreciation.