China increased benchmark interest rates for the sixth time this year Thursday, the Chinese government announced, in the government's latest attempt to slow surging growth and rising inflation in the world's second-largest economy, Reuters reported.

The People's Bank of China increased its benchmark one-year deposit rate by roughly one-quarter percentage point, or 27 basis points, to 4.14%, and also raised the one-year lending rate about one-fifth percentage point, or 18 basis points, to 7.47%. The central bank's last interest rate increase occurred in September, Reuters reported.

Earlier this year, China's monetary officials shifted their monetary bias from "prudent" to "tight' to slow the nation's double-digit GDP growth economy.

Economic boom

China's GDP has grown more than 10% for more than four years, serving as a centerpoint for not only emerging market development in Asia, but also as an engine for global growth. Low-cost labor and the nation's weak currency, the yuan (which is fixed at an artificially low rate, a trading band, by the Chinese government), have fueled an export boom and a large trade surplus. That surplus has led to many benefits for the world's most populous nation, including rising real incomes, an expanded middle class and historic economic development, but has also stoked inflation.

Further, monetary and industrial officials in the world's other major economic regions in the United States and Europe have urged Chinese officials to slow the nation's economy -- and implement other reforms -- to take price pressure off commodities (such as oil) and resources.

As the globalization era progresses, transportation is at a premium. Young, growing economies in Asia, Latin America, and Eastern Europe are placing enormous demands on their infrastructures, even as they expand them.

Further, the growth in intercontinental trade has meant that shipping vessels also are in short supply, and among shipping companies, Dryships (NASDAQ: DRYS) is worth an evaluation.

Dryships ships commodities, grains, bauxite, fertilizers and steel products in its fleet of 35 vessels.

In general, analysts like Dryships' mix of spot charter market revenue and long-term contracts, in addition to the company's adequate performance regarding cost controls.

In the current international trade environment, that would be enough to recommend the shares, but the major positive is the vessel market. Shipping space is at a premium, and shippers like Dryships have considerable pricing power as a result. Hence, analysts see large EPS gains for the company, among other shippers in the sector. The Reuters F2007/F2008 EPS consensus estimates for DRYS are $4.25/$8.62.

There are days when the U.S. Federal Reserve probably feels like it's part of a well-researched, coordinated public policy effort to both keep the U.S. economy growing at an acceptable rate with low inflation, and serve as an engine for global growth. Then there are days like today, when the Fed undoubtedly feels like it's out there on its own, like that well-known bald eagle -- a solitary guardian amid ever-present risks and dangers.

The Fed meets December 11 to decide whether to continue to ease monetary policy. The consensus among economists and Wall Street analysts is that the Fed will lower key short-term interest rates by a quarter-percentage point to 4.5%, with some analysts predicting a half-percentage point cut by the Fed.

In an effort to stimulate domestic demand amid a U.S. economy slowed by subprime mortgage defaults, the Fed has twice lowered key interest rates this year, cutting the Fed funds rate -- the rate banks charge each other -- to 4.50%, and the discount rate -- the rate the Fed charges banks for short-term loans -- to 5.00%.

China announced Wednesday it will tighten its monetary policy in 2008 for the first time in a decade to slow its surging economy, Channel News Asia reported Wednesday.

China said it would shift monetary policy from prudent to tight, but gave few specific details regarding the policy.
At the same, The Wall Street Journal reported that China's State Information Center, a think tank under the National Development and Reform Commission, said in a report published in the China Securities Journal that China should let the dollar-yuan rate move as much as 1% above or below the central parity rate [subscription required] in each daily trading session, up from 0.5% now.

China's sizzling economy has grown by over 10% annually for more than four years, and many economists expect another double-digit GDP gain in 2007, despite the Chinese government's effort to cool the economy. In 2006, China's GDP totaled $10.2 trillion in purchasing power parity terms and $2.5 trillion in real terms, according to research by the U.S. Central Intelligence Agency.

China Investment Corp, which manages China's foreign exchange reserves, and China steel companies Baosteel Shougang Group and Angang Steel are said to be working on a bid for Rio Tinto (NYSE: RTP), Forbes reported Monday, citing China Business, the state-owned Chinese weekly. Rio denied receiving an approach from Chinese investors, Agency France Presse reported.

Deal talk had sent Rio's shares up about 7% in Australia early Monday. However, in the U.S., there was little follow through: Rio's shares fell $2.20 to $433.85 in mid-day Monday trading.

Earlier this year Rio rejected an offer from BHP Billiton (NYSE: BBL), saying BHP's offer undervalued the company. Two subsequent requests for talks by BHP were also turned down.

Sector/Deal Analysis

Way back in the 20th century, rails were hardly considered a growth play. But with consistent demand for commodities and raw materials, along with the (seemingly) continual rise in truck transport costs, the rails are becoming a primary shipment mode, which means good things -- long-term -- for rail companies.

Among the rails, CSX Corp (NYSE: CSX) is a company worth a review. CSX operates the largest rail network in the eastern United States, with a 22,000-mile network in 23 states and two Canadian provinces.

In general, analysts see CSX's revenue growth slowing somewhat in 2007, offset by better margins, pricing power (including expired contracts repricing) and improved asset utilization.

Further, coal traffic may slow heading into 2008, but intermodal traffic is expected to remain solid. Numerous infrastructure improvements and capacity increases should improve CSX's delivery times and reduce dwell times. In addition, trading around $42 with a p/e of 16, CSX currently is somewhat of a bargain, as Wall Street has discounted CSX's share for a U.S. economic slowdown, taking the stock down about 20% from a $52-high reached this summer.