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Strategies & Market Trends : HONG KONG -- Ignore unavailable to you. Want to Upgrade?

To: Defrocked who wrote (2061)	8/11/1998 10:26:00 AM
From: DJBEINO	Read Replies (2) \| Respond to of 2951

Reasons Blocking Devaluation of Yuan China will be unable to lower the yuan for the time being despite the present flooding of the Yangtze river, according to financial experts. They contended that China has more to lose than to gain by devaluing its currency. They cited seven reasons why the Chinese government won't be able to lower the value of its banknote. First of all, the Chinese financial system would crash if the yuan is depreciated because of an astronomical demand for the U.S. dollar as China is sure to suffer an economic crisis. Second, China is dependent on foreign imports for 50 percent of the capital goods and raw materials needed for the production of export goods. Hence, the rise in exports will be offset by the increase in imports, and the effect will be the halving of projected profits. Third, China will witness limitations on export increases due to shrinking global demand. The possible depreciation of other Asian currencies in competition with the yuan will wipe out Chinese hopes of export increases. Fourth, as China is now marking up a huge trade surplus with the United States, its export expansion will face a wall of opposition by American protectionists. Fifth, the growing American protectionism will stand in the way of the Chinese bid to gain membership in the World Trade Organization (WTO). Sixth, China will lose a valuable source of foreign capital inflow if the Hong Kong dollar becomes a target of speculative investors and, consequently, its pegging to the U.S. dollar comes to an end. Lastly, the Chinese administrative power in Hong Kong will be blamed for the destruction of Hong Kong's economy after its takeover of the former British colony. Based on these seven reasons, the financial experts said that China will not depreciate the yuan for at least the next six months. They said China purposefully made frequent announcements about a possible devaluation of the yuan as a warning to Japan to expedite the restructuring of its economy in order to buttress the value of the yen against the U.S. dollar.

To: Defrocked who wrote (2061)	8/11/1998 10:49:00 AM
From: Ron Bower	Respond to of 2951

Defrocked, Not rhetorical at all. Japan is dragging down all of Asia (perhaps the World) and China is only taking appropriate actions to protect itself. If part of this protection is converting a falling yen into $US to preserve foreign reserves, then bless them. Why isn't Japan buying yen? They don't want to part with their $US? The decision on the yuan and the $HK is China's. The market cannot force the devaluation if China resists. They have been buying and will continue to buy if necessary. Burn the traders often enough and they'll give up. Had Japan adopted this policy we wouldn't have the current mess. JMHO, Ron