Rubin backs China's resolve to hold firm on yuan
05:17 a.m. Jun 28, 1998 Eastern
By Knut Engelmann
KUALA LUMPUR, June 28 (Reuters) - U.S. Treasury Secretary Robert Rubin
left China on Sunday to embark on a whirlwind tour of crisis-torn Asia,
convinced that Beijing has the resolve to live up to its new image as an
island of stability in the battered region.
During his three-day stay in Beijing on the sidelines of U.S. President
Bill Clinton's state visit, Rubin received his strongest assurances yet
that China will keep its yuan currency stable to help prevent a renewed
Asian financial thunderstorm.
China's ''unambiguous'' promise not to devalue its currency came as an
obvious relief to Rubin since bolstering Beijing's resolve to hold the
line on the yuan has become a top priority on Washington's agenda in
Asia.
Both Clinton and Rubin heaped praise on China for resisting the pressure
to devalue in the face of financial turmoil, lauding Beijing's
''statemanship'' and forward-looking economic policies -- even as they
admitted it was in China's own interest to do so.
A devaluation would cut the price of Chinese products in terms of
foreign currency, making it easier for the country's exporters -- the
backbone of China's economy -- to compete with other nations whose
currencies have been weakened.
But China, in the midst of a historic economic transformation that has
already brought about profound changes in the every day lives of China's
1.2 billion people, knows there is no such thing as a free lunch.
Not only could a devaluation in China set off a chain-reaction of
similar moves by other Asian countries, thereby neutralising the effect
of Beijing's move, China would also have to pay a steep political price,
effectively gambling the respect it has gained in the West for resisting
the temptation of a quick-fix devaluation.
''One continues to be impressed by the vision expressed by their leaders
and by the understanding they express of the issues they face,'' Rubin
told reporters accompanying him aboard an Air Force jetliner en route to
Malaysia.
The U.S. Treasury chief last visited China nine months ago.
Asked to compare his impressions now to what he had heard back then,
Rubin said Beijing's commitment to overhauling its creaking economy and
slowly opening it up to the outside world appeared to remain strong.
''They continue to express a determination to move along at a good
pace,'' he said.
Still, the summit brought no breakthrough on Beijing's 10-year long
effort to join the World Trade Organisation, which the United States
continues to stall because it believes China needs to do more to its
vast domestic market to foreign competition.
The ringing endorsement of Beijing's monetary stance was in stark
contrast to the continued pleading with the region's erstwhile
powerhouse, Japan, to finally do something -- anything -- to get its
sickly economy back on its feet.
Japan is mired in a deep recession and its currency, the yen, has fallen
drastically against the dollar, making it harder for the rest of Asia to
recover from its own difficulties. But years of urging Tokyo to finally
tackle its economic weakness so far have fallen on deaf ears.
The imminent threat of a Chinese devaluation aimed at catching up with
the plunging yen was a key factor behind the surprise U.S.-Japan move to
bolster the yen by jointly intervening in the foreign exchange market
two weeks ago.
Even though the move had only a short-lived effect on the yen, which
previously had hit its lowest level against the dollar in eight years,
China's central bank governor Dai Xianglong made a point of thanking
Rubin for the intervention.
''Clearly, we have a fair bit of discourse with the Chinese about the
region,'' Rubin said on Sunday. ''The role of Japan is enormously
important. It's integrally related to what's happening in Asia.''
Rubin, who on Friday also met Finance Minister Xian Huaicheng and Prime
Minister Zhu Rongji, the architect of China's reforms, has not ruled out
the possibility of further intervention to help the yen.
But Clinton on Sunday lamented the lack of a magic ''wand'' to make Asia
's crisis go away, and agreed with Rubin that the key to the yen's
stability was Japan's own economic policies.
''We can be supportive, but they have to make the right decisions,'' he
said.
After a series of high-level meetings in Kuala Lumpur, Rubin was due to
travel to Bangkok on Monday and continue on to Seoul on Tuesday in a
whistlestop tour of the region designed to take Asia's economic pulse
almost a year after its financial woes began.
Thailand and South Korea are among the hardest-hit of the former Asian
tiger economies. Together with Indonesia, they are at the receiving end
of bail-out deals totalling more than $120 billion, drawn up by the
International Monetary Fund and conditional on harsh economic reform
programmes.
Copyright 1998 Reuters Limited. |
