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Gold/Mining/Energy : Gold Price Monitor

GDXJ 136.00

+6.2%

Jan 20 4:00 PM EST

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To: Bobby Yellin who wrote (38950)	8/14/1999 8:35:00 AM
From: Rarebird	Read Replies (1) of 116896

China Says No Need For Yuan Devaluation Now: BEIJING, Aug 14 (Reuters) - The flagship newspaper of China's ruling Communist Party said on Saturday a devaluation of the local currency was not justified now but a move in the future was possible. The People's Daily said in a commentary in its overseas edition that economic fundamentals argued against a devaluation of the yuan but a big trade deficit could result in an ''appropriate adjustment.'' The exchange rate currently had support from strong domestic purchasing power and a sound balance of payments, the newspaper said. ''Any talk of a renminbi (yuan) devaluation is groundless if the fundamental situation of these two elements have not significantly changed,'' it said. However, it added: ''An appropriate adjustment in the exchange rate may after all be a policy option if imports significantly exceed exports and push up a trade deficit.'' China has been struggling to boost exports this year but it has managed to maintain a fairly strong trade surplus. In July, exports picked up 7.5 percent from the same month last year, giving the nation a trade surplus of $3.42 billion for the month. Despite the strong July trade data, exports for the first seven months of the year were down 2.8 percent while imports climbed more than 16 percent during the year-to-date period. Some exporters and economists have called for a devaluation to boost exports to help spur sluggish economic growth. China has held the yuan near the level of 8.28 to one dollar on its tightly controlled foreign exchange market. The currency closed at 8.2770 per dollar on Friday, up slightly from 8.2773 on Thursday. Beijing maintains controls on foreign exchange movements on the capital account and that has helped it keep the currency largely in line with its targets. Concerns over a possible yuan devaluation resurfaced last month after central bank governor Dai Xianglong stopped short of repeating the ''no devaluation'' pledge that had long been a policy fixture. He said the exchange rate was determined by the market. Some analysts said the comments might indicate Beijing had opened the door to a possible devaluation as Asian economies got back on their feet after a severe financial crisis. Analysts say Beijing would be loath to add to currency instability before the celebration of the 50th anniversary of the founding of the communist state on October 1. But there is a growing chorus of opinion that Beijing may be preparing for a possible currency move early next year. The People's Daily said a stable yuan ''is not only related to the market stability but also had a bearing on the long-term interests of the country and the people.'' While it suggested that an adjustment in the exchange rate was possible, it added that there would be no need for such a move if trade did not swing into deficit. ''But there should not be man-made adjustments if this situation (trade deficit) does not occur,'' it said.

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