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

To: don pagach who wrote (5382)	8/3/1998 11:25:00 PM
From: MikeM54321	Read Replies (1) \| Respond to of 9980

Don, Sorry to jump in when you addressed Ron, but he did exactly what you suggested already. Only problem is, it's on another thread. A couple of months ago I was posting quite a few questions about devaluation. Ron and Tom(also on Hong Kong thread) did an excellant job of explaining why China would not devalue. We went back and forth for weeks upon weeks covering this subject. Their reasoning was sound and they ended up being correct. But about a month ago, I got the sense that Tom was not quite so confident anymore. But with Ron, I didn't get any sense he wavered. This is only my opinion of what I perceived. I could be totally off base. I doubt anything Ron said months ago changed. But, anyway, just wanted to let you know Ron did state his case already. That's why he made his seemingly unsupported statement in reply to my post. You may be able to find all our past discussions if you do a search on "yuan" and "devaluation." Or maybe, "Hong Kong dollar" and "devaluation." I may review them because I'm getting slightly concerned once again. :) If you find any good current articles on possible devaluation, by China, please link us to them. It would be appreciated. MikeM(From Florida)

To: don pagach who wrote (5382)	8/3/1998 11:51:00 PM
From: Ron Bower	Respond to of 9980

Don, My apologies - wrong thread. I was responding to Mike forgetting that this was the Asia Forum instead of the Hong Kong thread. We discussed this extensively there. The only real reason for China to consider devaluing the yuan would be to improve exports. As exports amount to only 20% of their economy, they would be aiding a small portion of this 20% to the detriment of the 80%. There are many other ways for them to aid the exporters, most of them thru programs already in place. Secondly, a devaluation would, at best, provide only short term benefits as it would prompt a new round of devaluations of the other regional currencies. The Asia Crisis was prompted by China's earlier devaluation of the yuan. At that time, they were looking to bring in foreign currency in the form of export monies and foreign investment. Since then, the growth in these two areas has exceeded all of Asian. The 'crisis' is due primarily to Japan's failure to realize that China would be attaining such a large portion of market share. China has been ahead of the other Asian countries in responding to the 'crisis'. Already projecting high unemployment from the government layoffs, they are spending billions on badly needed infrastructure. They also have shown a capacity to make adjustments as the situation warrants by slowing the rate of privatizing government owned companies because the Asian Crisis will cause unanticipated unemployment. You can expect them to continue making adjustments, but devaluation has been thoroughly examined and rejected. I could go on for about 3-4 more pages on why they should and will not devalue related to China's growing domestic economy, privatization plans, imports, raw material exports, property values, loan repayments to foreign creditors (particularly Japan), future efforts to get foreign investment, WTO status, etc. It gets pretty extensive. Leave it that Zhu Rongi has been adamant in this and has stated the reasons. Hong Kong will also hold the $US peg. The currency traders have made their runs at it and, in spite of the rising $US, Hong Kong has maintained the peg. (There was one very hard run by a group of traders trying to force it down that didn't work) The traders have pretty well given up and the $HK is remaining stable. When this all washes out, with Japan procrastinating on necessary reforms and the ASEAN countries in chaos, it is possible that China will replace Japan as the dominant economic force in Asia. If - they continue on their current path to Democracy. Sorry to make this so long. I actually had to cut some things out. FWIW, Ron PS - I see that as I was editing, I got help. Thanks Mike.

To: don pagach who wrote (5382)	8/4/1998 12:33:00 AM
From: Ron Bower	Read Replies (2) \| Respond to of 9980

Don, To repeat the postscript at the end of my other post. As the reason given for the yuan to be devalued is China's export competitiveness. >"The U.S. deficit with Japan declined 8.5 percent in May to $4.95 billion as both imports and exports fell. The U.S. deficit with China rose 8.3 percent in May to $4.63 billion with increases in both imports and exports."< In the case of China, both imports and exports increased. FWIW, Ron