Trade Credit Insurer Sees Negative Global Impact From Chinese Economic Growth

According to a report in the latest issue of Foresight – a Euler Hermes ACI biannual publication – China’s economic growth makes it of exceptional importance to the global market, but analysts question whether or not it will be the source of, or solution to, new inflation throughout the world.

(PRWEB) April 20, 2006 -- China’s growth continues to accelerate, pushing its economy ahead as the fourth largest in the world and contradicting forecasts that the economic boom was moderating. This continued growth is fueling speculation about the commodities market, as the Asian nation’s demand for materials increases to meet its boom in construction, manufacturing, and transport. However, analysis from global trade credit insurer Euler Hermes ACI suggests that China may be the cause of and solution for inflationary pressures in the global economy.

According to a report in the latest issue of Foresight – a Euler Hermes ACI biannual publication – China’s economic growth makes it of exceptional importance to the global market, but analysts question whether or not it will be the source of new inflation throughout the world via increased commodity prices. The report states that the upward inflationary pressure applies only to the upstream side of industry. On the downstream side, China – in its own factories – is producing the very antidote to primary inflation.

“China is transforming the commodities, using very cheap labor, and exporting modestly priced manufactured goods – all within the framework of an increasingly open world trading system,” said Euler Hermes Country Risk Manager David Atkinson. “Through this, China is creating sharp competition everywhere in a growing number of sectors, thus exerting deflationary pressures on the prices of consumer goods.”

Meanwhile, economic analysis from Euler Hermes ACI suggests that indicators for China remain mixed, with upside risk on domestic demand and downside on net exports, with the latter expected to be dominant throughout 2006. This information has been published in the latest Euler Hermes Economic Outlook, available now by request. The current issue of the Economic Outlook, which is produced quarterly, also contains the Euler Hermes 2006 commodities forecast.

Taken as a whole, China’s impact on world inflation is predicted to be only slightly negative this year; the forecast for 2007-2008 suggests deflationary pressure as commodities prices moderate under the impact of both global economic slowdown and increased capacities. Despite China’s relaxations of exchange controls and forecasts of lower growth, bilateral trade tensions with the United States and the European Union will persist. “Competitive pressure from the export of Chinese goods should continue, as long as the nation’s wages do not accelerate substantially and the yuan is not substantially revalued – neither of which seems imminent,” concluded Atkinson.

The full report on China can be found in the latest issue of Foresight, which is available by sending an email request.

Euler Hermes ACI is North America’s oldest and largest provider of trade credit insurance solutions and risk mitigation information and expertise. For more information about the company’s products and services, visit www.eulerhermes.com/usa.

Euler Hermes is the worldwide leader in credit insurance and one of the leaders in bonding and guarantees. With 5,400 employees in 43 countries, Euler Hermes offers a complete range of services for the management of customer receivables. The North American subsidiary (Euler Hermes ACI) is headquartered in Owings Mills, MD. For more information visit www.eulerhermes.com/usa.

Euler Hermes, a subsidiary of AGF and a member of Allianz, is listed on Euronext Paris. Standard & Poor’s rates the group and its principal credit insurance subsidiaries AA-.

Press Contact:

Rick Ostopowicz

Euler Hermes ACI Public Relations and Communications Specialist

Phone: (410) 753-0652

These assessments are, as always, subject to the disclaimer provided below.

Cautionary Note Regarding Forward-Looking Statements:

Certain of the statements contained herein may be statements of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words ‘may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, potential, or continue’ and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (i) general economic conditions, including in particular economic conditions in the Allianz Group's core business and core markets, (ii) performance of financial markets, including emerging markets, (iii) the frequency and severity of insured loss events, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) the extent of credit defaults (vii) interest rate levels, (viii) currency exchange rates including the Euro-U.S. Dollar exchange rate, (ix) changing levels of competition, (x) changes in laws and regulations, including monetary convergence and the European Monetary Union, (xi) changes in the policies of central banks and/or foreign governments, (xii) the impact of acquisitions, including related integration issues, (xiii) reorganization measures and (xiv) general competitive factors, in each case on a local, regional, national and/or global basis. Many of these factors may be more likely to occur, or more pronounced, as a result of terrorist activities and their consequences.

The matters discussed herein may also involve risks and uncertainties described from time to time in Allianz AG’s filings with the U.S. Securities and Exchange Commission. The Group assumes no obligation to update any forward-looking information contained herein.

###