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To: Tim McCormick who wrote (26164)	12/5/1997 3:24:00 PM
From: BillyG	Respond to of 50808

Stable currency in China............... Copyright 1997 Asia Pulse Pte Limited ASIA PULSE December 05, 1997 SECTION: Nationwide Financial News LENGTH: 403 words HEADLINE: CHINA'S YUAN EXPECTED TO REMAIN STABLE DATELINE: BEIJING, Dec 5 BODY: The fundamentals for a stable exchange rate of the Chinese yuan will not change in the near future, according to " China Securities" on December 4. The newspaper disputed a recent prediction that the yuan would decline in value against the U.S. dollar as a result of recent currency slumps in several Southeast Asia nations. Trends in exchange rates of a currency should be judged by supply and demand in the foreign exchange markets, or the condition of a country's balance of international payments, the paper said. Huge current-account deficits are a direct and internal cause of recent financial crises in Southeast Asia nations such as Thailand, the Philippines, Indonesia and the Republic of Korea, the paper reported. But China, with sound economic growth, has reported a surplus in both its current and capital accounts for consecutive years, and its foreign exchange reserves were valued at US$ 134 billion at the end of September. Huge hard-currency reserves, which are enough to pay for imports for more than nine months, guarantee the central bank's ability to respond to any instability on foreign exchange markets. "All this has formed the foundation for a stable exchange rate of the Renminbi," according to the paper. The makeup of a country's foreign capital also affects the exchange rate of its currency. China has utilized US$ 320 billion in foreign funds, which breaks down to US$ 200 billion in direct investment and US$ 120 billion in foreign debts. Short-term debts account for less than 12% of all debts. The fact that long-term foreign capital dominates in China is helpful to the prevention of possible capital flight. And the inconvertibility of the yuan also makes it hard for speculators to launch an attack on the currency. Some experts have suggested an artificial devaluation of China's currency to counter the possible negative effects on exports arising from the devalued currencies of other Southeast Asia countries. However, the newspaper reported that a comprehensive analysis of the political and economic situations in Southeast Asia indicates that their expected rise in exports will have limited effects on Chinese exports. "The overall trade balance of China will not be upset," the paper reported, adding that Chinese enterprises have become more competitive during the yuan's steady appreciation. (XIC) LANGUAGE: ENGLISH