From: Michael Wilson (MWILSON/0005514706at_private)
Date: Thu Jan 15 1998 - 10:54:12 PST

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       Thursday January 15 8:25 AM EST 
    China Says it Won't Devalue Currency
       By Andrew Browne
       BEIJING (Reuters) - The United States on Thursday welcomed China's
       pledge to support Asia's embattled economies by not devaluing its
       Top U.S. Treasury official Lawrence Summers said the promise, reiterated
       during his meetings with Chinese economic tsar Zhu Rongji and other top
       officials, was a vital contribution to Asian stability.
       "The Chinese reiterated their unequivocal commitment not to devalue,"
       Summers told reporters after arriving in Beijing on Thursday and heading
       straight into discussions.
       "I welcomed the Chinese unequivocal commitment to maintainance of their
       exchange rate regime," he said.
       The assurance "was the most important contribution that China could make
       to stability in Asia."
       According to one theory, China set the stage for the financial crisis in
       Asia with a 33 percent devaluation of the yuan in 1994 that gave a
       momentous boost to Chinese exporters at the expense of Asian rivals.
       There are fears that another devaluation could unleash a new torrent of
       Chinese exports and snuff out any hopes of an export-led revival in the
       The U.S. Deputy Treasury Secretary was in the Chinese capital as part of
       an emergency tour of Asia to try to shore up confidence.
       He is heading a delegation from Treasury, the State Department and the
       U.S. National Security Council that has already visited Singapore,
       Indonesia, Malaysia and Hong Kong.
       In China, Summers said he held wide-ranging talks on the Asian situation
       and on Chinese economic policy, following up on discussions initiated
       between U.S. President Bill Clinton and Chinese head of state Jiang
       "I think it was a very good and worthwhile discussion and it very much
       suggests that as the two presidents wished, our countries are
       cooperating well on these issues," he said.
       He said he saw eye-to-eye with Chinese leaders on the primary role of
       the International Monetary Fund (IMF), and that bilateral aid should
       only be a backstop.
       "We agreed that the performance of our economies along with the
       performance of the Japanese economy were profoundly important to the
       situation in Asia," he said.
       China has emerged so far unscathed from the economic meltdown afflicting
       smaller Asian economies, and has indicated it intends to use its growing
       economic weight as a force for stability in Asia.
       "China, as a major economy in the region, has the potential to be a
       source of strength as it works to continue to grow, to continue to open
       its economy and continues to deepen its financial system," Summers said.
       In addition to talks with Zhu, he met the Governor of the People's Bank
       of China, Dai Xianglong, and Vice-Finance Minister Liu Jibin. He was due
       to leave for South Korea later on Thursday.
       Summers arrived amid a revolt in the U.S. Congress over the IMF bailout
       for Asian economies, which is complicating efforts by the U.S.
       administration to seize the initiative in the crisis.
       The IMF has put together huge bailouts totalling more than $100 billion
       for South Korea, Thailand and Indonesia since the July 2 crash of the
       Thai baht currency roiled Asian markets.
       On Wednesday, the second-ranking Democrat in the U.S. House of
       Representatives, David Bonior, threatened to oppose the bailouts.
       "We cannot support a bailout that imposes an economic stranglehold on
       working people, tramples democratic rights, ignores the underlying
       causes of instability, and then asks the American taxpayer to foot the
       bill," he said.
       On Wednesday, the U.S. Treasury Department said it was laying the
       groundwork for an international meeting of finance ministers to discuss
       new approaches to the crisis.
                    Leader of Hong Kong expects more economic turmoil
          Copyright ) 1998 Nando.net
          Copyright ) 1998 Reuters
       HONG KONG (January 15, 1998 06:49 a.m. EST http://www.nando.net) - Hong
       Kong leader Tung Chee-hwa said Thursday that Asia should brace for more
       economic turmoil and vowed again to fend off speculators against the
       local dollar.
       "The storm ... has not yet blown over and we must constantly be on the
       alert," he told the 60-member provisional legislature before opening a
       question-and-answer session.
       Tung is facing one of his toughest tests since taking charge of this
       capitalist outpost of 6.5 million people in July, when Britain ceded the
       former colony to communist China.
       He emphasized Hong Kong's economic fundamentals were sound and said it
       had ample reserves to take on the speculators who have laid waste to a
       string of Asian currencies.
       Speculative attacks have forced up interest rates to defend the dollar,
       and Tung admitted more assaults were likely to test "our resolve and
       ability to maintain the linked rate."
       The local dollar has been linked to the U.S. currency since 1983, and
       higher rates being used to preserve the peg have dealt a hard blow to
       the economy, with tourism, retail sales and property prices all
       But Tung, a former shipping magnate picked by Beijing to run Hong Kong,
       was adamant the dollar peg would hold.
       "The fundamental approach is to unshakably defend the peg. This is the
       basic policy to maintain our economic stability and prosperity," he
       said. "If we don't hold the peg, the consequences are unimaginable."
       His comments came after Hungarian-American fund manager George Soros
       said the interest rates required to hold the Hong Kong peg were exacting
       a heavy toll on the economy.
       Tuesday January 13 10:41 AM EST 
    Japan Says Economy Shows Signs of Real Pain
       By Yoko Kobayashi
       TOKYO (Reuters) - Japan's financial headaches have not only dampened
       sentiment but are beginning to upset the real economy, the government's
       economic report said Tuesday.
       "Recent declines in share prices, failures of financial institutions and
       drastic changes in Asian economies have worsened consumer and business
       sentiment and are having an effect on private consumption and capital
       spending," Economic Planning Agency (EPA) minister Koji Omi told a news
       The monthly EPA report said the economy was still stalled, but admitted
       that it was slipping into more difficulties.
       But it did not prescribe any additional steps to help Japan cope with
       the current problems and merely stated the economic measures already
       announced by the government, such as a two trillion yen ($51.2 billion)
       income tax rebate and the use of 30 trillion yen ($228.1 billion) in
       public funds to stabilize the financial system.
       Domestic and foreign pressure has mounted in recent weeks for Japan to
       take further fiscal measures to jump-start a economic recovery.
       "For the time being, we must put top priority on efforts to pass
       legislation regarding (the announced economic) steps," Finance Minister
       Hiroshi Mitsuzuka said.
       EPA's Omi said the timing of parliament approvals on economic stimulus
       and financial stability steps would be the key to whether the economy
       will improve quickly or not.
       A senior EPA official said Japan is entering a critical stage where
       economic stimulus steps have yet to be implemented, company inventory
       levels are still relatively high, and financial system worries linger.
       "The economy will improve somewhat if we can hold out through the
       January-March period .... We are not worried about a recession," the
       official said.
       But the public appeared to be growing impatient.
       A newspaper poll released Tuesday showed public support for Japanese
       Prime Minister Ryutaro Hashimoto's cabinet has dropped to its lowest
       level ever while a majority of voters called for more economic steps
       such as deeper tax cuts and greater public works spending.
       Hashimoto, however, remains negative towards a permanent, large-scale
       tax cut. He told the Lower House parliament's full session that Tokyo
       will make efforts to boost the economy so that there will be no need for
       special income tax rebates in or after the fiscal year ending March 31,
       In a move seen prompted by embarrassment over Japan's economic woes, a
       man armed with a "pistol-like object" and identified as an
       ultra-nationalist broke into Tokyo Stock Exchange (TSE) Tuesday
       The gunman demanded that trading on the exchange be suspended and that
       Finance Minister Mitsuzuka should come to see him. Police said he was
       captured after holding a Tokyo Stock Exchange official hostage for
       nearly six hours and his hostage was released.
       Some far right groups regard the decline in the economy as a stain on
       the country's reputation.
       Tokyo stocks ended slightly firmer Tuesday, as trade was uninterrupted
       by the gunman's entry into the TSE although it set off a brief panic
       among traders earlier.
       The benchmark Nikkei 225 average ended 91.50 points, or 0.62 percent,
       higher at 14,755.94.
       Traders said they still held out the hope that further economic steps
       may be in store.
       The Nikkei index was buoyed by recovery on Wall Street and a surge in
       share markets across the region, brokers said. The expectation of
       further Japanese government measures to boost the economy supported
       market sentiment, they said.
       Taku Yamasaki, policy chief of the ruling Liberal Democratic Party, told
       a conference in southern Japan that additional steps could be considered
       in a few months.
       "If the cherry blossoms don't bloom well this year, we could consider
       it," Yamasaki was quoted by Jiji news agency as saying in response to a
       question about economic stimuli.
       Cherry blossom season in Japan is usually late March to early April.
       Thursday January 15, 4:57 am Eastern Time
    INTERVIEW-Seoul wants to delay bond in debt talks
       By Bill Tarrant
       SEOUL, Jan 15 (Reuters) - South Korea does not want to convert
       short-term commercial debt into state bonds right now -- something its
       global creditors have suggested -- because of its poor debt ratings, a
       key policy maker said on Thursday.
       Kim Yong-hwan, head of the Joint Presidential Committee on Economic
       Policies, said in an interview that Seoul would prefer its creditors
       convert part of its short-term debt into ``a simple revolving line of
       Another part of the short-term credit could be converted into a medium
       line of credit with government guarantees.
       ``And we will sound out the possibility of organising -- not a big
       amount -- new money in the form of a syndicated loan,'' Kim said.
       The former finance minister heads a 12-member committee comprising six
       representatives from outgoing President Kim Young-sam's administration
       and six from President-elect Kim Dae-jung's camp. He takes office on
       February 25.
       Talks between Korean officials and its global creditors are set to
       resume in New York on Monday.
       One idea put forward by U.S. bank J.P. Morgan & Co would convert
       billions of dollars in short-term debt owed by Korea's banks into bonds.
       But Kim Yong-hwan and other officials in Seoul have been notably
       unenthusiastic about the proposal, given the fact that the country's
       debt ratings are on the level of junk bonds.
       ``The bond should come later. At this moment, can the government safely
       underwrite at these rates? We don't want to issue bonds under junk,''
       Kim said.
       ``When the time ripens, then the next phase is to have a bond issue,''
       he said.
       He said bankers should be concerned about Korea's long-term viability.
       ``In Korea, we have a proverb: don't kill the hen when you can feed her
       and get eggs.''
       Seoul is keen to get its credit ratings upgraded in order to get its
       borrowing back on a normal footing.
       Kim said he met with teams from Moody's Investor Service and Standard &
       Poors Corp this week and assured them that a key concern -- labour
       reform -- would take place.
       On Thursday, Seoul launched a tripartite council comprising
       representatives of labour, management and government. It will find ways
       of downsizing all three sectors under a philosophy that all must share
       the pain, Kim said
       The council will seek to hammer out a consensus on legislation to be
       submitted to the National Assembly next month that would make it easier
       for businesses to shed workers as they themselves reduce their
       President-elect Kim has promised to cut the presidential staff in half
       and downgrade or merge seven ministries or ministry-level agencies.
       The 1998 budget will be cut by 15 percent and some of the savings would
       go toward a 5 trillion won unemployment fund, Kim Yong-hwan said.
       The formation of the tripartite council was a key concern of the ratings
       agencies. ``They repeatedly asked about it,'' Kim Yong-hwan said.
       Copyright ) 1998 Reuters Limited. All rights reserved. Republication or
        redistribution of Reuters content is expressly prohibited without the
        prior written consent of Reuters. Reuters shall not be liable for any
        errors or delays in the content, or for any actions taken in reliance
       Thursday January 15, 10:16 am Eastern Time
    Asia crisis to cut 1998 US GDP 0.5 pct - McDonough
       NEW YORK, Jan 15 (Reuters) - Federal Reserve Bank of New York President
       William McDonough said on Thursday that the U.S. central bank expects
       the Asian crisis to have a significant, but moderate, impact on U.S.
       growth this year.
       ``We have a view that a slowdown is likely to take place.... a modest
       (one),'' McDonough told reporters.
       McDonough spoke at the Securities Industry Association (SIA) meeting on
       the issue of dealing with the Year 2000.
       The New York Fed president estimated that the Asian crisis would
       subtract 0.5 percentage point from U.S. gross domestic product this
       year. However, he did not disclose any Fed estimates for 1998 GDP
       Asked about the situation in South Korea, McDonough said the most
       important thing was for ``people in the private sector to come to an
       The bulk of South Korean debt that needs to be renegotiated is held by
       and has been issued to the private sector.
       Queried about the austerity conditions that the International Monetary
       Fund is requiring Asian countries to adopt to get international aid,
       McDonough said this was to be expected at the early stage of a crisis.
       ``In the very early part of (the crisis), high interest rates are needed
       to stabilize markets,'' McDonough said.
       He added that some of the criticism of the IMF resulted from a mistaken
       parallel with the Latin American [NYSE:LDF - news] debt crisis of the
       He also welcomed reforms announced by Japan to stimulate its economy.
       Copyright ) 1998 Reuters Limited. All rights reserved. Republication or
        redistribution of Reuters content is expressly prohibited without the
        prior written consent of Reuters. Reuters shall not be liable for any
        errors or delays in the content, or for any actions taken in reliance
       Posted at 7:07 a.m. PST Tuesday, January 13, 1998 
                           Opposition to new IMF funding grows
       WASHINGTON (AP) -- Liberals and conservatives are lining up to defeat a
       Clinton administration request to Congress for billions of dollars for
       the International Monetary Fund, whose coffers have been depleted by
       economic bailouts in Asia.
       Some participants say the request for nearly $20 billion may meet the
       fate of ``fast track'' trade legislation last November when Congress
       voted down authority for President Clinton to negotiate trade deals that
       it could not change.
       The request includes $3.5 billion for an emergency bailout fund that
       Congress failed to approve last year and more than $16 billion for the
       U.S. share in new IMF lending power.
       Sen. Lauch Faircloth, R-N.C., chairman of the Senate Banking
       subcommittee on financial institutions, kicks off a round of panels and
       hearings on the issue Wednesday. He wants the Republican-controlled
       Congress to reject new funding for the Washington-based international
       lending institution.
       Rep. Bernie Sanders, an independent from Vermont, and groups ranging
       from Friends of the Earth to the conservative Heritage Foundation plan a
       meeting on IMF funding Thursday. Sen. Alfonse D'Amato, R-N.Y., chairman
       of the Senate Banking Committee, plans a formal hearing after Congress
       returns Jan. 26 with Treasury Secretary Robert Rubin and other
       ``We must be vigilant and aware of what is taking pace but insist on
       discipline and thoughtful action before taxpayer dollars are put at
       risk,'' D'Amato said in a statement Monday on the bailouts.
       Sanders is predicting a bitter debate with Clinton and House Speaker
       Newt Gingrich on one side and the liberal-conservative alliance on the
       other, saying taxpayer money should not be put at risk for ``socialism
       for the rich.''
       Rep. Peter DeFazio, D-Ore., is preparing a bill that would change the
       way the IMF gets its money by getting international banks to impose a
       user fee on certain transactions, an aide said Monday.
       Marijke Torfs, a director of the environmental group Friends of the
       Earth, said ``the left and the right are together'' in opposing IMF
       bailouts. ``The right says bailouts interfere with the market. The left
       says taxpayers should not pay for them because they cause job losses in
       countries receiving them and overexploitation of natural resources.''
       Ian Vasquez, of the conservative Cato Institute, said neither the
       American public nor Congress has liked IMF bailouts and predicted
       opposition inside and outside Congress would grow during the next few
       The bailouts ``are an expensive, bureaucratic and unjust solution to
       what would occur quickly and fairly under market conditions,'' Vasquez
       said. ``If investors have bet the wrong way in a country they should
       take their medicine and not get rescued by the IMF.''
       Two influential Republicans, House Ways and Means Committee Chairman
       Bill Archer, R-Texas, and Jack Kemp, the 1996 Republican vice
       presidential candidate, expressed doubts in weekend television interview
       programs about IMF bailouts in Asia and whether Congress will authorize
       more money for them.
       Defending the bailouts, Rubin said last week he hoped Congress would
       approve the request for new IMF funding ``because our economic interests
       are so much at stake.'' The administration rushed his deputy, Lawrence
       Summers, to Asia for urgent consultations this week with the region's
       governments on the financial crisis.
       The administration also wants to keep the 182-nation IMF strong because
       it is the only organization that can step into a crisis as the lender of
       last resort. Since July the IMF has arranged rescue packages totaling
       $120 billion for Thailand, South Korea and Indonesia, committing $32
       billion of its own resources.
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