| China is one of the few Asian countries to
have escaped financial turmoil. But the stability of the yuan against the dollar
has caused it to rise vis-à-vis other Asian currencies, which is fuelling present
fears about a devaluation of the Chinese currency. To be sure, maintaining the
present parity will lead to a notable fall in China's foreign trade position in
the long term. But there is no hurry to devalue. In 1998, China's foreign trade
held up well despite the Asian crisis, due especially to assembly and subcontracting
operations. Furthermore, a precipitous devaluation would almost certainly not
have had the benefits expected of it, and would have carried with it important
risks. An optimal strategy would be based, instead, on a gradual readjustment
of the exchange rate, spread out over a year or two. |
Abstract |
