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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: tekgk who wrote (431)	1/4/1998 1:18:00 PM
From: Rational	Respond to of 9980

Tekgk: There are two rates. The rate of interest on a Chinese bank's deposits with the CB is the one that will be lowered. These are all state banks and so they cannot sell yuan for yuan to devalue. The other rate which banks pay on deposits is not being lowered to trigger a legal/illegal sell of yuan. Sankar

To: tekgk who wrote (431)	1/4/1998 3:11:00 PM
From: Tony van Werkhooven	Respond to of 9980

From what I understand, China is currently at approximately 0% inflation, under utilized capacity, and lots of goods to sell. Combine that with significant structural unemployment (official plus unofficial), the risk of starting an inflationary spiral in the near future seems minimal. If you are right, that "no sane depositor will put their money on deposit at a bank at the proposed new rates," than the central bank will accomplish its purpose- reallocate assets to either increase domestic consumption or provide capital to support the needed restructuring of the state enterprises. Hence making internally generated capital all the more important Given the existing turmoil in asia, outside capital will be more difficult to obtain than it was just last summer.

To: tekgk who wrote (431)	1/5/1998 11:24:00 AM
From: RealMuLan	Read Replies (3) \| Respond to of 9980

tekgk: As a Chinese myself, I can tell you that the underground market in China for foreign currency is not prosperous at all, if not non-existed, because the exchange rates between Yuan and US dollar are about the same for the underground market and official banks ever since 1994. There was a little difference back in 1993, about 3% higher in underground market. And even if then you could hardly find any people did this kind of business because the margin was too small and it was illegal. You can make more money in other legal business than in this illegal business.