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To: IceShark who wrote (2950)	7/9/1998 2:48:00 PM
From: Cynic 2005	Respond to of 86076

Similar article in WSJ two days ago: Exporters Seeking Relief Lobby for Devalued Yuan By CRAIG S. SMITH and KARBY LEGGETT Staff Reporters of THE WALL STREET JOURNAL SHANGHAI, China -- Squeezed between East Asia's discounted currencies and China's high-priced yuan, exporters here are starting to cry for relief, warning of worker unrest if none is forthcoming. "Our employees are getting moody ... they're working harder and harder but getting less and less," says Shen Wenzhong, an executive at Shanghai Hudong Shipyard, China's third-largest shipbuilder. While the country's overall exports so far this year are still higher than last year, many exporting enterprises have seen sales plunge as customers switch to cheaper East Asian exports and East Asian markets themselves shrivel. China's exports fell 1.5% in May over a year ago, the first drop in 22 months. Business for some exporting industries has disappeared altogether. Shanghai Hudong Shipyard didn't book a single order in the first half of this year, despite cutting the price of its ships 30% and trimming its work force 20%. "If the yuan is not devalued, we won't be able to avoid making a loss this year," said Mr. Shen, adding that orders this year will determine the company's revenue through 2000. Polish Comparison The rising pain is increasing pressure on Beijing to devalue its currency against the U.S. dollar, erasing some of the advantage gained by East Asian exporters when their currencies depreciated sharply last year. While Beijing has the means to forestall a devaluation and keep its overall economy strong, it's most spooked by the specter of a worker revolt at one of the industrial complexes bearing the brunt of the export slowdown. With millions of workers already losing their jobs amid a painful economic restructuring, a movement similar to Poland's 1980 Gdansk shipyard strikes would find plenty of sympathy among the masses. The pro-democracy Solidarity movement that grew out of the Gdansk strike eventually ended Communist one-party rule in Poland. "You can't rule out the possibility of social unrest ... it will be impossible to avoid to a certain extent," said Xie Huiming, an economist for textile trader Orient International Group. He argues, though, that the economy will emerge stronger for having purged itself of many inefficient state-owned companies. Already, China has laid off 400,000 textile workers this year and plans to cut jobs for another 200,000 by the end of December. By the end of June, 850,000 laid-off textile workers remained unemployed, according to the People's Daily. Some Western economists warn that as many as 50 million workers will lose their jobs this year. Slowing exports and competition from cheap East Asian imports has forced Shanghai Chlor-Alkali Chemical Ltd. to lay off nearly a seventh of its employees and cut salaries for those who have kept their jobs by as much as 80%. "We cut our prices by more than 50%, but still exports are expected to drop by 50% this year," says company spokesman Liu Xiaoxian. The heavy losses suffered in the first six months of this year were the first in Chlor-Alkali's history. Export Growth Slowdown And even Chinese government economists say the country's export growth could slow further in the second half of 1998. "If strong steps are not taken in time, we can expect export growth to ... drop further to 5% for the whole year," wrote Zhao Jinping, an economist under the State Council, in Monday's International Business Daily. Export growth slowed to 8.6% year-to-year in the first five months of this year from 26% in the same period last year. Exports to South Korea dropped 30% in the first five months over a year ago and exports to Japan fell 5.7% in the period. To blunt the blow to exports -- and keep pressure off the yuan -- China has already boosted tax rebates to exporters. The country's banks also plan to extend more credit to exporters in the second half of this year, state newspapers reported Monday. China's central bank governor, Dai Xianglong, said in Shanghai Sunday that banks should make more loans to machinery and electronics exporters, according to the reports. As part of that effort, China's main foreign currency lender, the Bank of China, will lend export companies an additional 25 billion yuan ($3.02 billion) this year, the reports said. Still, calls for a devaluation are growing from battered exporters. "China's economy isn't strong enough yet to accommodate such great changes in the global economic environment without any substantial readjustment" in the exchange rate, said Jin Fannan, a senior official at Shanghai Tyre & Rubber Ltd., which has lost almost all of its East Asian market share to Korean competitors. "I think 10% is an appropriate percentage for devaluation," he said.