China says it won't devalue yuan to spur economy
BEIJING, Jan 11 (Reuters) - China's economic growth is expected to slow
to about eight percent in 1998, but Beijing will not devalue its yuan
currency to spur the economy, the Business Weekly said on Sunday.
`It will not be difficult for China to achieve growth of around eight
percent under current conditions,'' the newspaper quoted Qui Xiaohua,
chief economist for the State Statistical Bureau, as saying.
That forecast is well below the 8.8 percent growth estimate for 1997,
which in turn was a marked slowdown from the 9.5 percent notched up in
the first half of the year and the 9.7 percent the year before.
China would not try to boost growth by stimulating exports through a
devaluation of the yuan, Qiu said.
Analysts say the recent sharp devaluations of several Southeast Asian
currencies could bite into China's exports by making products from those
countries cheaper than Chinese products.
There has been speculation that Beijing could engineer a yuan
devaluation to keep its export sector competitive. Exports account for a
big chunk of China's economic growth.
`We do not need to do that,'' Qiu said.
His words appeared to be bolstered by figures released last week that
show China recorded a trade surplus of more than $40 billion last year,
with exports growing by 20 percent.
`A high growth rate is no longer the prime target for China. It has been
replaced by improvements in industrial structure,'' Qiu said.
Last September, the Communist Party endorsed a sweeping reform plan
aimed at dismantling large chunks of the wheezing state sector that is
one of the main drags on the economy.
The reforms called for more share issues, mergers and bankruptcies.
The state sector had boosted profits by a year-on-year 18 percent to
34.2 billion yuan ($4.1 billion) in the first 11 months of 1997, the
newspaper quoted bureau spokesman Ye Zhen as saying.
Loss-making state enterprises were 70.5 billion yuan in the red while
successful firms recorded 105 billion yuan in profits in the period, Ye
said. He did not give comparative figures.
($1=8.3 yuan) [INLINE]
[INLINE]
Return to top[ISMAP]-This image allows you to access site resources
)1997 - 1998 Mercury Center. The information you receive online from
Mercury Center is protected by the copyright laws of the United States.
The copyright laws prohibit any copying, redistributing, retransmitting,
or repurposing of any copyright-protected material.
Analysts: Asia woes to take toll on India shares
BOMBAY, Jan 11 (Reuters) - Indian stocks will be hit this week as
foreign funds, unsettled by the Asian financial crisis, and local
players take profit, brokers and analysts said on Sunday.
`The crises in Asian markets are forcing some foreign funds to book
profits here, as seen on Thursday and Friday. A near absence of that had
lent support to the market earlier,'' said Jaspreet Ahuja, head of
sales, at Caspian Broking India.
Bombay shares tumbled last week with the benchmark 30-share Bombay Stock
Exchange (BSE) index losing over five percent, or 189.65 points, to end
Friday at 3,530.20.
The fall came after the index had surged over seven percent in four
consecutive weeks on the back of huge positions built up by local
speculators in anticipation of yearly foreign fund allocations.
`There will also be some fall-out from unwinding of long positions (by
local players),'' Ahuja said.
He said foreign funds were wary of further exposure in India because of
the financial turmoil in some Asian countries compounded by local
mid-term polls, no signs of an economic revival and an edgy rupee.
India's markets regulator, the Securities and Exchange Board of India,
said on Friday net investments by foreign institutional investors (FIIs)
dropped by $155.4 million during December -- the second straight month
of net outflows as foreign investors pulled out of the troubled region.
It said portfolio investments by FIIs fell by $4.7 million during
January 1-8.
Some said the market's recent rise was not warranted and there was only
one way for the market to go from here -- down.
`A correction was expected. There was no reason for the market to rise
as it did in the face of local political uncertainty. I see the market
falling further to a level of 3,400 before some support arrives,'' said
Purvesh Shah, chief dealer at local brokerage Nucleus Securities.
India goes to the polls in February and March after the minority
coalition government of Prime Minister Inder Kumar Gujral fell in
November after the Congress Party withdrew its key support.
Brokers also said market sentiment would be dampened by Thursday's
warnings by Moody's Investors Service that ratings of India's sovereign
debt and the country's corporates would be reviewed for possible
downgrades.
`There is no positive trigger in India while there are negative triggers
all around India,'' Ahuja said.
Rakesh Jhunjhunwala, a BSE broker, said there would be no recovery until
after the elections, depending on the outcome.
`We should not set a bottom (for the market), but only a top,'' he said.
Slide in Hong Kong stocks likely to continue
HONG KONG, Jan 11 (Reuters) - Heavy selling left Hong Kong stocks at
their lowest levels in more than 2-1/2 years last week and the slide
looks set to continue as the market digests a surprisingly sharp rise in
prime rates announced on Friday.
The Hang Seng Index plunged 1,785.93 points, or 16.72 percent, last week
to close at 8,894.64 on Friday, its lowest close since May 10, 1995.
Hong Kong stocks in London continued the slide on Friday after local
banks were forced by plunging Asian currencies to lift prime rates by 75
basis points to 10.25 percent, higher than the 50 basis points the
market expected in the market.
And Bank of East Asia Ltd chairman David Li said Hong Kong interest
rates were expected to rise at least half a percentage point in the next
three to four months.
`The (prime rate) rise will, of course, hit bank lending,'' Li was
quoted by the Sunday Morning Post as saying.
The Hang Seng London Reference Index plummeted 513.82 points, or 5.78
percent, to close at 8,380.82 on Friday.
`Hong Kong and China have been up until the beginning of the New Year
relatively insulated from this but now they are taking quite severe
punishment and can probably go lower from here,'' said Credit Lyonnais
Securities Asia Ltd chairman Gary Coull.
`The Hong Kong stock market is influenced by property and property
prices are going down, so that weighs on the market. There is a weight
overhanging Hong Kong which is only going to be lifted when there is
some normality in interest rates.''
Hong Kong home prices have tumbled some 20 percent from their 1997 peaks
and are set to continue falling, casting a pall over the government's
first land auction of 1998 due on Tuesday.
Brokers said the property-heavy Hang Seng Index may test 8,000 points.
``You really cannot predict right now at which level the Hang Seng Index
will find support,'' said Henry Lui, research analyst at Mansion House
Research.
The plight of Peregrine Investments Holdings Ltd, a victim of turmoil
rocking Asian currencies and stocks, has sent shivers through the
brokerage community.
Peregrine, one of the largest independent investment banks in Asia, said
on Friday it was considering alternatives after Zurich Centre
Investments Ltd pulled out of a deal to invest US$200 million into the
company.
Hong Kong's securities watchdog put restrictions on certain members of
the Peregrine group and the Stock Exchange of Hong Kong has suspended
Peregrine Brokerage Ltd's membership.
Analysts said while Asian markets remain volatile, Hong Kong is unlikely
to achieve a sustainable rebound.
`It is very hard to gauge what the next regional factor will be. It is
just one domino after another,'' said Geoff Galbraith, vice president
institutional sales at DBS Securities.
China-related stocks are also expected to remain sickly.
The H-share index of China-incorporated companies has collapsed to a
series of record lows and dropped 189.05 points, or 26.3 percent, last
week to close at 531.02 points on Friday.
The Hang Seng China-Affiliated Corporations Index tumbled 510.62 points,
or 29.2 percent, last week to end at 1,235.22.
China-based Huaneng Power International Inc is due to launch an offering
of 250 million H-shares this week.
Half of the new issue is due to be placed with strategic investors,
leaving 40 percent for overseas institutional investors and the
remainder for an initial public offering (IPO) in Hong Kong. The small
size of the retail portion should ensure a reasonable take-up, analysts
said.
However, the response to two other IPOs, due to make their trading
debuts this week, was poor.
Q-Tech Holdings Ltd posted a subscription level of only 0.42 times for
its IPO and Peaktop International Holdings Ltd had a subscription level
of 0.70 times. Q-Tech offered 67 million new shares at HK$0.80 per share
and is due to make its trading debut on Monday and Peaktop offered 62
million new shares at HK$1.00 each and is set to begin trading on
Thursday.
Kim Eng Holdings (Hong Kong) Ltd, which offered 18 million shares at
HK$8.00 a share in an IPO, is due to debut on Friday.
Asian currency crisis may stoke political change
SINGAPORE, Jan 11 (Reuters) - The financial maelstrom ravaging Southeast
Asia may eventually jeopardise the political stability of some countries
in the region, with Indonesia most at risk, analysts said at the
weekend.
``There is a lot of political dissatisfaction there. That may
escalate,'' Carolina Hernandez, president of the Institute for Strategic
and Development Studies in Manila, told Reuters.
``There may be a backlash with religious and racial overtones,'' she
said, referring to simmering resentment among Indonesians against the
ethnic Chinese who dominate the economy.
Chaiwat Khamchoo, chairman of the International Relations Department at
Chululangkorn University in Bangkok, said the crisis may spark political
instability in Indonesia.
``Indonesia is problematic,'' Chaiwat said, adding that the problem
stemmed mainly from the ``one-man leadership'' of President Suharto, who
has led the country of 200 million people for 30 years.
The rupiah plunged past 10,000 to the U.S. dollar last week in a
sell-off sparked by fears Jakarta did not have the political will to
implement tough austerity measures, which were the conditions of a US$40
billion rescue deal put together by the International Monetary Fund
(IMF).
The currency crisis erupted in July 1997 when Thailand was forced to
float the baht. The contagion has spread like a deadly virus in
Southeast Asia and has even struck down South Korea, once the world's
11th largest economy.
The Hong Kong-based Political and Economic Risk Consultancy Ltd (PERC)
said in a report the financial crisis in Indonesia had prompted some
analysts to express fears of negative gross domestic product (GDP)
growth this year.
``As a result, inflation and interest rates will remain high and social
pressures are bound to increase as unemployment rises,'' it said.
Hernandez said what was scary in Indonesia was that ``dissent there is
suppressed. That may explode.''
The problem of riots against ethnic Chinese ``may accompany (an)
economic downturn,'' PERC said. ``A major question now is will the bad
economics beget still more bad politics or will the pressures result in
positive political reforms?''
Morton Abramowitz, a senior fellow at the Council of Foreign Relations,
wrote recently in the Washington Post that regional leaders ``will face
difficulties maintaining political support.''
``However great their contribution to their countries' prosperity,
Malaysian Prime Minister Mahathir bin Mohamad and Indonesian President
Suharto are increasingly seen as the problem and not the solution,'' he
said.
The situation in other Southeast Asian countries may be more manageable,
though no less problematic.
Chaiwat said the crisis in Thailand should not lead to the re-emergence
of army rule in the country, which has been ruled by a string of
generals who came to power on the back of more than 30 coups.
``I don't think people will support a military solution. That can
largely be ruled out,'' he said.
He said people were more willing to allow the government of Prime
Minister Chuan Leekpai a chance to get the country back on track, but
``I'm not sure how long people will have patience.''
In Malaysia, PERC said ethnic tensions may rise between the majority
Malays and Chinese and Indian minorities ``as a result of competition
for scarce resources.''
Washington is deeply concerned over the financial turmoil in Southeast
and Northeast Asia, which has raised questions about security and
stability in the region.
President Bill Clinton called Suharto and Singapore Prime Minister Goh
Chok Tong late on Thursday to discuss the economic situation.
And U.S. Defense Secretary William Cohen on Sunday begins a 12-day Asia
visit in Malaysia. The tour was planned six months ago, but it has taken
on growing importance due to the market and currency turmoil.
Cohen will hold security talks with government leaders in Malaysia,
Indonesia, Singapore, Thailand, China, Japan and South Korea.
``Clearly, it (the economic crisis) is part of the general context of
the visit,'' Pentagon spokesman Ken Bacon told reporters. ``But the
message is that the United States has a strong interest in the security
of Asia.''
Japan's prime minister faces key test in parliament
TOKYO, Jan 11 (Reuters) - Japanese Prime Minister Ryutaro Hashimoto on
Monday heads into a raucous session of parliament that will debate his
plans to revive the nation's economy.
But with opposition parties in disarray, commentators forecast a clear
field for Hashimoto to pass a fiscal agenda that is regarded as crucial
for Japan's financial recovery.
Analysts say Hashimoto, who on Sunday started his third year in power,
has been helped by troubles in the opposition, including the recent
self-implosion of its biggest party Shinshinto (New Frontier Party), led
by long-time Hashimoto rival Ichiro Ozawa.
``This Diet (parliament) session is going to feature a lot of screaming
and yelling by the opposition, especially about Hashimoto's handling of
the economy, but he will get his budget and supplementary budget through
before the fiscal year ends (at the end of March),'' said political
analyst Ryuichiro Hosokawa.
Hashimoto's fiscal 1998 budget includes one-time income tax cuts worth
two trillion yen ($15.1 billion).
Critics have said the tax cuts are too little, too late to boost Japan's
economy, hit hard by a nosedive in domestic demand after a two percent
rise in the consumption tax last year.
A newly-formed opposition alliance which includes former Prime Ministers
Tsutomu Hata and Morihiro Hosokawa wants even more, demanding a
permanent three trillion yen in income tax cuts and another three
trillion yen in corporate tax breaks.
Authoritative sources said Finance Minister Hiroshi Mitsuzuka was
expected to say in his opening speech to the parliament on Monday that
Japan's economy is stalled.
They said he is likely to stress that Japan's economic recovery is
important for stabilising Asian economies and for continued global
economic growth.
The minister will tell the parliament Japan will introduce a system to
use 30 trillion yen worth of public funds and a fund to help boost
banks' capital, in order to stabilise Japan's financial system and
protect deposits.
Tetsufumi Yamakawa, chief economist at Goldman Sachs in Tokyo, said
Hashimoto might be forced to beef up his fiscal measures in the course
of the parliamentary session.
He forecast Japan's unemployment rate would rise to post-World War Two
highs during the session, a shock likely to prompt the government to
come up with more money.
``If we see more signs of weakness in the economy, there is a higher
chance of additional government measures,'' Yamakawa said.
However while Hashimoto may bow to some opposition demands to show he is
a leader willing to compromise, the basic thrust of his fiscal agenda is
unlikely to change.
``The opposition will make certain demands, but the only question is
whether or to what degree Hashimoto will accommodate them,'' Hosokawa
said.
The session comes at a critical juncture for Japan, which faces slumping
economic growth, a precarious financial system and a currency hovering
at five-year lows against the dollar.
Under such dire circumstances, Hashimoto would have been expected to
face a shaky political future.
John Neuffer, senior research fellow at Mitsui Research Institute, said
passing the budget would position Hashimoto's ruling Liberal Democratic
Party to do well in its next election test, an Upper House poll in July.
``If they manage to muddle along they'll do okay in the election because
the opposition is such a wreck,'' Neuffer said.
In December, just as Hashimoto's popularity hit a record low amid a
rapidly declining economy, Ozawa disbanded his own party.
The breakup, triggered by policy differences, set off a flurry of
opposition realignments whose net result was to leave it in greater
disarray and less of a threat to Hashimoto.
The LDP has 256 seats in the decisive 500-seat lower house while under
the new alignments the biggest opposition alliance has about 100
legislators, the largest of which is Naoto Kan's Democratic Party which
holds 69 seats.
Before its breakup Shinshinto boasted 126 seats.
U.S. team heads for Asia to take stock of economies
LONDON, Jan 10 (Reuters) - A team of U.S. officials headed by Deputy
Treasury Secretary Lawrence Summers headed for Asia on Saturday to carry
out a consultation mission on the region's troubled tiger economies.
The whirlwind tour will start in Singapore and include visits to
Indonesia, Thailand and Malaysia to assess the region's deepening
economic turmoil, the U.S. Treasury Department said on Friday.
A U.S. embassy official in Singapore told Reuters that Summers would
arrive there on Sunday evening and leave for Indonesia on Monday
afternoon.
Summers will call on Singapore Prime Minister Goh Chok Tong early on
Monday, a Singapore government statement said.
President Bill Clinton spoke late on Thursday to Goh and Indonesia's
President Suharto to discuss the regional economic situation.
Summers' trip will ``take stock of the economic situation, hear the
authorities' current plans and express (President Clinton's) commitment
to effective stabilisation efforts,'' the U.S. Treasury Department said.
The delegation includes representatives from the State Department and
the National Security Council.
Plans for the hastily-assembled trip, announced on Thursday night by the
White House, still were tentative and other countries may be added, the
Treasury said on Friday. There was speculation that Summers might also
visit Japan and China.
U.S. officials have indicated Summers will press Asian leaders, notably
in Indonesia, to follow austerity measures proposed by the International
Monetary Fund (IMF) as conditions for billions of dollars promised in
aid.
Indonesia moved into the forefront as a cause for concern after
announcing a budget that analysts said appeared to ignore the remedies
that the IMF had proposed to deal with its huge levels of debt.
Indonesia's currency plummeted in value, financial markets dropped
sharply and neighbouring Asian countries' markets also suffered from the
spreading worry.
On Friday, White House economic adviser Janet Yellen said the vigorous
U.S. economy would weather the Asian turmoil, likely with the loss of
only one-half percentage point to one percentage point of growth in
1998.
But Clinton administration concern over Asian instability clearly was
mounting, leading to the decision to send the delegation led by Summers
for a firsthand look.
Economist Sachs slams IMF for Asia crisis
MADRAS, India, Jan 10 (Reuters) - Harvard economist Jeffrey Sachs on
Saturday blamed the International Monetary Fund (IMF) for aggravating
Asia's financial crisis, but said regional economies should recover
before long.
Sachs, director of the Harvard Institute of International Development,
told an international business conference in the southern Indian city
that the crisis in East Asian economies had resulted from a ``panic
withdrawal'' of funds from their markets.
``My sense is that the IMF added to the panic,'' he said, adding that
the fund had erred by using the same rescue techniques employed in the
past instead of specific remedies tailored to the differing needs of
Asian economies.
``The IMF took its normal remedy off the shelf and started to apply
it,'' he said. He criticised the Fund's demand for bank closures in
Indonesia, Thailand and South Korea as part of its recent bail-out
packages.
The move sent wrong signals to the market, Sachs said.
Asia's fast-growing ``tiger'' economies retreated last year after a
sudden withdrawal of investment funds linked to high short-term debt
burdens.
``It is a short-term crisis which if properly managed can lead to quick
recovery,'' Sachs said.
He said the East Asian countries had open economies, government
surpluses, high savings rates and low inflation but international
investors suddenly chose to focus on short-term debt as the key issue.
Private foreign investors had followed their peers in jumping off the
Asian markets without fundamental justification, he said. ``It was an
unjustified race for the exit.''
But recent initiatives by South Korean banks to roll over their credit
and efforts to recapitalise banks are expected to help East Asian
economies tide over the crisis, Sachs said.
``I believe that we need one major development to happen. That is for
the IMF to rethink its basic approach to the crisis,'' Sachs said.
``When that happens I am confident there is a turnaround beginning.''
``We are beginning to see the glimmer of a more sensible approach to the
crisis,'' he said. ``I see a reasonable chance in the next two weeks as
the crisis is assessed.''
Indonesia opposition chief calls on president to resign
New York Times News Service
BANGKOK, Thailand -- Indonesia's leading opposition figure, Megawati
Sukarnoputri, called on President Suharto Saturday to step down when his
term ends in March and told a chanting crowd she was ready to succeed
him.
Her declaration came during a period of growing public demands for an
end to Suharto's 32-year rule as the country's economy swirls in crisis.
A crash in the currency Thursday touched off a wave of panic buying that
continued Saturday.
``I hereby take this opportunity to declare my determination to become
the leader of our nation and people -- if this is indeed the will and
consensus of the people,'' she told about 500 supporters in the garden
of her suburban Jakarta home.
They raised their fists and shouted, ``Long live Mega!''
But the possibilities for Ms. Megawati to assume power are limited, and
her speech Saturday seemed to involve protest as much as politics. In
March, Suharto is expected to be reappointed by a largely handpicked
assembly.
Over the last two years, Ms. Megawati -- the daughter of Indonesia's
founding father, Sukarno -- has become the symbol of dissatisfaction
with Suharto and the focus of the nation's suppressed grievances.
But this was the first time she put herself forward as a candidate to
succeed him in a country where open challenges to Suharto are not
tolerated. Suppression of her growing popularity 18 months ago led to
the worst rioting in Jakarta, the capital, in decades.
Her rally was held as Indonesian officials sought to calm fears of food
shortages that have been spurred by the worst economic crisis since
Suharto took office in 1965.
After three decades of almost-uninterrupted growth in the world's
fourth-largest nation in population, economists predict a recession this
year, along with widespread bankruptcies, huge unemployment and a
likelihood of social unrest.
``We have more than enough rice,'' declared a headline in the daily
Jakarta Post, as people continued for the third day to clear shelves of
foodstuffs, fearing shortages, price rises and possible rationing.
``We are asking people to remain calm,'' the newspaper quoted the
production and distribution minister, Hartarto, as saying. Many
Indonesians use only one name.
``The government is working hard to take care of the needs of the people
for basic consumer goods across the country.''
Indonesia's economic slump, which began last fall, caused a panic last
week when the currency tumbled after the announcement of an annual
budget that was seen as failing to address the country's urgent needs.
This raised fears that in response to government inaction, the
International Monetary Fund might withdraw a $40 billion rescue package
it organized last October.
Many Indonesians took hope on Friday from the news that President
Clinton had spoken by telephone with Suharto and was sending a
delegation to Jakarta led by Deputy Treasury Secretary Lawrence Summers.
The two top officials of the IMF were also on their way to Indonesia,
joining the attempt to shore up confidence and halt the country's
downward spiral.
The current crisis comes before a session in March of a People's
Consultative Assembly that is expected to name Suharto to a seventh
five-year term -- although he has not yet formally declared his
intention to stay on.
Ms. Megawati is not legally the leader of a political party and is
therefore not eligible to be chosen by this assembly, and it was not
clear how she could succeed Suharto.
Nor was it clear how seriously she intended to push forward with her
declaration of readiness to lead the nation.
If Suharto were to step aside, his successor is more likely to come from
within his government's power structure, including the politically
influential military.
Suharto took power from Ms. Megawati's father in 1965 after what the
government described as an aborted Communist coup. As many as 500,000
people died in widespread massacres of leftists and minorities.
Since then, Suharto has pulled his country of 200 million people up from
poverty to increasing prosperity, but he has severely limited civil and
political rights and has choked off potential opposition.
In early 1996, when Ms. Megawati began to play a more prominent role as
the leader of one of the two legal quasi-opposition parties, the
government backed a rival faction of the party and engineered her
removal. Rioting that followed in July took at least five lives.
Ms. Megawati's public presence has been muted since then, but the
political landscape has suddenly changed, and she appeared to be moving
to reassert herself Saturday.
``I call on all people to demand that Suharto is not renominated for a
seventh term of office,'' she said.
``We must orchestrate a peaceful succession of national leadership so
our nation can be saved from this crisis of confidence.''
)1997 - 1998 Mercury Center. The information you receive online from
Mercury Center is protected by the copyright laws of the United States.
The copyright laws prohibit any copying, redistributing, retransmitting,
or repurposing of any copyright-protected material.
This archive was generated by hypermail 2b30 : Fri Apr 13 2001 - 12:59:59 PDT