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Technology Stocks : C-Cube -- Ignore unavailable to you. Want to Upgrade?

To: CPAMarty who wrote (28220)	1/17/1998 12:50:00 PM
From: John Rieman	Respond to of 50808

China won't devalue the Yaun anytime soon. VAT tax rebates on exports likely...................................... insidechina.com U.S. Experts Won't Cheer Until China Sings NEW YORK -- Before the curtain falls on the Asian financial crisis, the foreign investment audience is waiting for China to make its grand entrance on the stage, U.S. analysts and fund managers said. What aria the diva will sing is still anybody's guess. At the gloomy end, billionaire financier George Soros publicly wondered if China would be "another shoe to drop." But some upbeat experts saw China as Asia's ultimate stabilizing factor. China's huge economy, close trade relations with its Asian neighbors and long-term strategic interests make the nation a crucial participant in any new economic order that emerges after the crisis. "The United States and International Monetary Fund should work closely with China in any event," said Barber Conable, chairman of the National Committee on U.S.-China relations and a former chairman of the World Bank. The most closely watched move by China is on the currency front. Should China devalue the yuan to protect its export market share, it could touch off another round of devalutions in Asia. If the yuan devalues, market analysts say the Hong Kong dollar's peg is unlikely to stay intact. The pledge by Zhu Rongji, China's economic czar, that the government will maintain the yuan's value sent a welcome relief to anxious financial markets, analysts said. <Picture: zhurong2.gif>Zhu on Wednesday reiterated a promise in Beijing at his meetings with visiting U.S. Deputy Treasury Secretary Lawrence Summers. (Pictured, Chinese Vice Prime Minister Zhu Rongji, right, meets with visiting U.S. Deputy Treasury Secretary Lawrence Summers, left, in Beijing to discuss the Asian currency crisis.) "If Zhu Rongji said no devaluation, he will keep his word," said Chen Zhao, an economist at the Bank Credit Analyst Research Group, adding: "At least in the short-term." Other analysts and fund managers agreed China would not rush to fuel the fire of the Asian currency crisis. But the question is: For how long can it resist the pressure? They reasoned that deteriorating export performance by the middle of 1998 would make the no devaluation promise difficult to keep. "We think a 10-to-15-percent depreciation this year is possible," said Jan Van Eck, executive vice president and portfolio manager at Van Eck Funds. Currency traders said the yuan on the non-deliverable forward (NDF) market already showed signs of weakness, implying a five-percent devaluation this year. But veteran China watchers dismissed the idea that China must depreciate its currency to stay competitive in export markets. For example, China could increase its Value Added Tax (VAT) rebates, which have been highly effective since 1994 in boosting exports, said Chen. "Export subsidies" are akin to an effective devaluation without altering the nominal exchange rate, he said. (Reuters)