The outlook for Asia-Pacific sovereign credit ratings for the remainder of 2005 remains mixed.

Hesitant domestic demand, with reduced import demand from China, could test consumer and business confidence across Asia. India and China, however, continue to assume growth leadership. The recent change in the Chinese exchange rate regime is also boosting the region with a new bout of speculative activities and liquidity.

On the monetary front, life is getting more interesting – inflationary pressures, driven by both strong demand and rising oil prices, remain strong in several economies posing a challenge to monetary authorities.

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