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Pastimes : Ask Mohan about the Market

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To: Rmn who wrote (12095)	12/21/1997 11:56:00 PM
From: Zeev Hed	Read Replies (1) of 18056

Ramsey, you usually raise interest rates to fight a raid on your currency, so I presume you are saying that China will devalue unilaterally (as a competitive move and to keep the Yuan in line with the Won and other tigers). I do not see what will be served by that, their imports of technology will be higher and their labor, even at current relative currencies are still cheaper than the neighbors. I think the lowering of interest rates is more an internal fight against destabilization of their banking systems (allowing the banks to rebuild balance sheets by earning greater spreads). This is just my opinion. This will also lower the interest rate burden on a number of state entreprises which are not particulalrly efficient (not because of labor cost as much as multilayer of beurocracy and lack of responsiveness to market forces). Zeev

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