Opinion|December 4, 2010 9:59 pm

Chinese Economy Flexing Its Muscles

Financial firms lead by those in Hong Kong have over subscribed for the second yuan bond issued in Hong Kong. The $750 million (5 billion yuan) was 10 times over-subscribed. The strong demand is driven by expectations of a further appreciation in the Chinese currency.

A strengthening Chinese economy will increase trade volumes with key partners (especially Australia and Brazil). The AUD is likely to strengthen further against the USD over time, especially with the Australian interest rate being where it is.

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