Premiere Zhu Rongji says key task is to boost domestic demand.
Zhu Rongji, the nation's economic czar and reformist prime minister,
told a recent gathering of academics in Beijing that China's tough
economic medicine should be aimed at the ailing domestic economy,
participants at the meeting said on Wednesday.
In remarks that shed light on the thinking of China's top financial
strategist, Zhu cautioned that although countries such as South Korea
had seen steep falls in the value of their currencies, there had not
been corresponding rises in exports. He suggested that much the same
would be in store for China if it chose a similar solution and added
that the nation's key task was to boost domestic demand.
"Zhu is trying to deflect pressure from exporters who are feeling
the effects (of the Asian financial crisis)," said Shen Haihua of
Shanghai Colub Consultants, a private think tank. "They (exporters)
are hoping for a devaluation but that would not benefit the whole
country," he said.
China's exports slid 1.5 percent in May from a year ago --the first
dip into negative territory in 22 months.
June figures, due soon, could show a slight improvement but exports
were likely to remain under pressure for most of this year, largely
due to the sharp depreciation of currencies around Asia, economists
said.
Beijing has said it would speed up spending on massive infrastructure
projects to kick-start the economy, and the prime minister told his
audience he was confident that China could meet its growth target for
the year.
While economists hold mixed views on whether the target would be
achieved, they agreed with Zhu that China's focus should be on
stimulating domestic demand.
Exports were about 20 percent of gross domestic product and that
means the domestic economy was the key to boosting growth, said Shawn
Xu, economist at Merill Lynch in Hong Kong.
"Devaluation is not a good solution," he said. "GDP (gross domestic
product) dominates rather than the exchange rate."
Xu said South Korea, despite the steep depreciation of the won last
year, had only about 9.0 percent lower average export prices while
Indonesia's were down some 20 percent from levels seen before the
regional financial crisis.
Higher prices for imported raw materials and economic instability
were offsetting gains from weaker currencies.
South Korea's currency lost 40 percent last year though it has
regained some ground this year. Forecasts for South Korea's trade surplus this year were being revised upwards but that is largely due to falling imports, economists said.
Much of Indonesia's export industry has been so devastated that the
nation may not see export-led growth for some time despite the steep
decline of its currency, according to economists.
"I agree with the premier," said Zhang Jikang, assistant dean of the
school of economics at Fudan University. "Exports are not that significant for China and devaluations have created instability," he said.
(c) 1998 Reuters) |
