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To: Roebear who wrote (14136)	7/6/1998 5:17:00 AM
From: Alex	Read Replies (1) \| Respond to of 116764

More Evidence of the Coming Chinese Devaluation Shipbuilder Says Renminbi Overvalued China's largest shipmaker, Dalian New Shipyard, has said it needs a 20 per cent devaluation in the Chinese currency to regain the competitive advantage it has lost to rival shipbuilders in South Korea and Japan. The shipyard's vice-president, Yin Mingrong, told the FT in an interview that there would be a risk of worker unrest and economic instability unless steps were taken to restore the competitiveness of Chinese exporters. His remarks were one of the first clear signals of pressure for a devaluation from China's big export-oriented industries. The prime minister, Zhu Rongji, has pledged to hold the renminbi steady to prevent more financial instability in Asia. Mr Yin said Japanese and South Korean shipbuilders had become more competitive as a result of the depreciation of the yen and the won, and this had "gravely hurt the interests of shipbuilding in China. We need a devaluation of the renminbi." In the interview at the shipyard on China's north-east coast, he said: "We have had very few orders this year." Dalian New Shipyard, a subsidiary of the China State Shipbuilding Corporation (CSSC), has the capacity to make some of the largest ships in the world. It had seen orders fall 85 per cent below its original forecasts, and new business in the first six months of this year was equivalent to just 10 per cent of total orders for 1996, Mr Yin said. He suggested the shipyard "needs a devaluation of about 20 per cent, [as] the depreciation of the Korean won has increased their competitiveness by roughly 20 per cent". The shipyard has sought to cut costs this year by improving management and broadening the company's product mix. But Mr Yin said: "If after adopting these measures the shipyard still cannot compete, then there may be some unrest. The workers will want food. We cannot sacrifice the food of Chinese workers and risk economic instability in China for the sake of the world's stability." Mr Yin tempered his call for a devaluation, saying: "This is the view of the shipyard. Of course, the country's leaders must take the whole country's interests into consideration." During the recent visit to China of Bill Clinton, president of the US, Beijing reiterated the commitment it has made repeatedly over the past year not to devalue the renminbi, a move which many fear could plunge Asia into a fresh round of competitive devaluations. However, Chinese government officials have increasingly acknowledged the impact on exporters of the no-devaluation policy, seeking to highlight the sacrifice China is making in the interests of Asian economic stability. The country's shipbuilding industry has grown rapidly in the 1990s, and China ranks as the world's third largest producer of ships after South Korea and Japan. Beijing has set a target for the Chinese shipbuilding industry to double its global share of the business from 5 per cent in 1996 to 10 per cent in 2000. Financial Times, July 6, 1998