Indicator Change
December 2006: 57.7
June 2006: 62.5
Period-to-period change: -7.7%
December 2005: 61.5
Year-to-year change: -6.3%

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Highlights
China’s Adjusted Trade and Financial Openness Indicator dropped to 57.7 in December 2006, down from 62.5 in June, indicating a greater degree of imbalance in trade and cross-border investment. A traditional measure of openness (which does not adjust for the degree of trade imbalance) increased from 80.3 to 84.1 over the same period. The divergent movements reflected the increasing overall trade and investment imbalance.

Analysis
Although China’s combined exports and imports of goods increased by 12 percent, exports grew more rapidly, which contributed to the growing trade imbalance. At the same time, foreign direct investment rose at a slower pace than GDP for the first time since 2001, which also played a factor in lowering the indicator value.

Methodology
The Adjusted-Trade and Finance Indicator consists of two sub-categories: a trade flow measure and a financial flow measure. The trade flow measure includes the ratio of exported goods to GDP, the ratio of imported goods to GDP, the ratio of exported services to GDP, and the ratio of imported services to GDP. The financial flow measure includes the ratio of portfolio inflow to GDP, the ratio of portfolio outflow to GDP, the ratio of FDI inflow to GDP, and the ratio of FDI outflow to GDP. These ratios are adjusted so that each component reduces the indicator score whenever it is in imbalance. In other words, the overall indicator score will decrease as the degree of imbalances increases.
Xinhua Finance/Milken Institute China Indicators
The Xinhua Finance/Milken Institute China Indicators provide investors, analysts, and financial professionals insight into China’s money and capital markets. Five of the eight indicators have been launched since November 2006: the Renminbi Pressure Indicator, the Chinese IPO Indicator, the Market Adjusted Debt (MAD) Indicator, the Banking Strength Indicator (BSI), and the Adjusted Trade and Finance (ATF) Indicator. The remaining three indicators (the China M&A Indicator, the China Privatization Indicator, and the China Corporate Governance Indicator) will be launched later this year.

Period Coverage and Frequency
The indicator covers the period beginning with the data for year-end 2001 and is updated on a semiannual basis.

Sources of Data
The historical data used in the construction of this indicator are provided by CEIC and the IMF.

To view additional information, visit www.xinhuafinance.com/indicatorsand www.milkeninstitute.org/chinaindicators.

Contact information:
Xinhua Finance
China
Ms. Joy Tsang, +8621 6113 5999, +852 948 64363, joy.tsang@xinhuafinance.com
Mr. Scott Zhang, +8621 6113 5996, scott.zhang@xinhuafinance.com

Taylor Rafferty (Media contact for Xinhua Finance)
Japan
Mr. James Hawrylak, +813 3221 9513, James.hawrylak@taylor-rafferty.com
United States
Mr. John Dudzinsky, +1 212 889 4350, John.Dudzinsky@taylor-rafferty.com
Europe
Faisal Kanth, +44 20 7614 2900, Faisal.Kanth@taylor-rafferty.co.uk

Milken Institute
Ms. Jennifer Manfrè, Associate Director of Communications
+1 310-570-4623, jmanfre@milkeninstitute.org

 
Xinhua Finance Limited (“XFL”) is China’s premier financial information and media service provider and is listed on the Mothers Board of the Tokyo Stock Exchange (symbol: 9399) (OTC ADRs: XHFNY). Bridging China’s financial markets and the world, Xinhua Finance’s proprietary content platform, comprising Indices, Ratings, Financial News, and Investor Relations, serves financial institutions, corporations and re-distributors worldwide.  Through its subsidiary Xinhua Finance Media Limited (NASDAQ: XFML), XFL leverages its content across multiple distribution channels in China including television, radio, newspaper, magazine and outdoor media. Founded in November 1999, XFL is headquartered in Shanghai, with offices and news bureaus spanning 11 countries worldwide.   For more information, please visit www.xinhuafinance.com.
 
The Milken Institute is a nonprofit, independent economic think tank whose mission is to improve the lives and economic conditions of diverse populations around the world by helping business and public policy leaders identify and implement innovative ideas for creating broad-based prosperity. The Milken Institute has extensive expertise in China and conducts ongoing research on China's banking and capital markets. It is based in Santa Monica, Calif. For more information, please visit www.milkeninstitute.org.