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Strategies & Market Trends : Asia Forum

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To: Stitch who wrote (5531)	8/14/1998 9:21:00 AM
From: Ron Bower	Read Replies (2) of 9980

Stitch, Just read one of the best arguments for devaluation - deflation. While I am not yet convinced that it will happen, this person does present a fairly good case. FWIW, Ron --------- Indosuez's chief economist Michael Taylor said: "China will devalue because in a continuing deflationary environment across the region, devaluation is becoming China's best policy option to support a reform programme that the government hopes will deliver sustainable non-inflationary growth." He expected the unit would drop about 20 per cent to between 10.25 and 10.50 yuan against the US dollar by December or January. He said the mainland did not need devaluation to maintain export competitiveness or preserve its financial system - it was largely a question of policy. "China's principal economic problem is deflation and this is why the Chinese Government will eventually devalue the yuan." He said devaluation was not a signal that the mainland would suffer the same economic and financial implosions that have hit Southeast Asia.

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