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

To: Zeev Hed who wrote (5534)	8/14/1998 10:10:00 AM
From: Ron Bower	Read Replies (1) \| Respond to of 9980

Zeev, I'm not an economist, but... Devaluations are inflationary. If China were to enter a deflationary period, the argument is presented that they would devalue to increase prices. While deflation is good for the consumer, it's bad for the government because it means lower tax revenues. By devaluing enough to cause moderate inflation, the tax revenues can increase, the government can continue to spend. This person acknowledges that devaluing will not be necessary to boost exports, but may be necessary for domestic economic reasons. IMO it's one of the best arguments for devaluation I've seen, but it will take a few more months to be sure that China has entered a deflationary period. If the year shows deflation, probable devaluation late this year or early next year, but only enough to correct. JMHO, Ron