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Non-Tech : Beijing YanHua Petrochemical (BYH) Taking Off -- Ignore unavailable to you. Want to Upgrade?

To: Julius Wong who wrote (111)	2/13/1998 12:13:00 PM
From: Jim Lou	Read Replies (1) \| Respond to of 257

Julius, I'd like to summarize an article from The People's Daily (overseas Chinese edition) dated Feb 11, 1998. The title is Famous economist Xiao Zhuoji believes that the peg of HK$ to US$ will not change. The following reasons are given by the author: 1) The peg is backed by solid financial strength of HK. In fact, the issuance of each HK$ is based on a guaranteed peg of the 1 to 7.8 rate (US$-HK$). Currently, HK's foreign currency reserve is over 100 billion in US$. This is a big difference between HK and other SE Asian countries. Therefore, the peg is stable. 2) Since Hong Kong returned to China, the one-country-two-system policy has been carried out. HK's financial system will not change. The peg system is the foundation of HK's financial system, it will not be changed because of HK's return to China. 3) US dollar is used in international accounting as standard currency. Pegging HK$ to US$ benefits HK's economy. 4) It is impossible for HK$ to peg to RMB, although RMB is on the rise. Although there is an exchange rate, capital swap is not realized. 5) The peg between HK$ and US$ has contributed to HK's prosperity and stability in the past. Therefore, in order to maintain the prosperity and stability, the peg must be adhered to. About RMB: Concerns have been voiced in foreign countries over the possibility that RMB may depreciate. These concerns are based on the consideration that if RMB does not depreciate, China's trade position in SE Asia may lack competitive strength. The problem has to be analyzed individually: A) The portion of China's exported goods that are similar to those of other SE Asian countries is only 12%-15% of China's total export. This portion is not important. These goods are basically textile products, clothing, toys, and some household electronic equipment. Other areas of export are not affected. B) Although some countries depreciated their currencies, the cost of their exported goods remain high, due to the higher labor cost in those countries and the rising cost of raw materials. Cost reduction could only result in limited effect. C) International competition has multiple dimensions: apart from price competition, technology, product quality, brand names and sales are all arenas for competition. Therefore, there are many ways for raising our competitiveness, it does not have to be RMB depreciation. Therefore, there is solid reason why RMB's exchange rate against foreign currencies will remain stable. Maintaining RMB's value is China's major policy in international trade. One must be on guard against those foreign opportunists who intend to make waves on RMB's exchange rate. It is necessary to take timely and appropriate procedures against those attempts. OK, the above is the summary, pretty extensive, and in a rush, I know. The article supposedly reflects the opinion of one individual economist. But when it is published in PD, it usually means more. At least, that is my understanding. Any comments?