Asian countries are worried that China might exacerbate their difficulties by devaluing its currency, although Beijing has pledged this won't happen. As Chinese Affairs Analyst, James Miles, reports, Beijing has also been stressing that it remains committed to wide ranging economic reforms in its industrial and financial sectors:

China has been hosting visits by two top Western financial officials: the head of the International Monetary Fund, Michel Camdessus, and the American deputy treasury secretary, Lawrence Summers.

Both men have been touring Asia in an effort to find solutions to the region's financial crisis. Many Asian countries are worried that a devaluation of the Chinese currency, the renminbi, could trigger renewed financial turmoil in the region.

Beijing, however, has pledged that it won't devalue its currency. It insists that even though exports from other Asian countries have become much cheaper because of recent devaluations, China can maintain its export competitiveness. It also insists that it remains committed to its wide ranging economic reform programme.

It's still far from clear how long Beijing will uphold its promise to maintain its currency's exchange rate against the US dollar. Many analysts say the renminbi is overvalued. But China's leaders are having to rethink their economic strategy in light of the regional crisis.

Before the turmoil erupted, it had been widely believed that China aimed to make the renminbi fully convertible by the end of the century. It's likely that Beijing will now adopt a much more cautious approach, which might well apply to China's moves to open up its stock markets to foreign investors.

But in spite of the economic slowdown in Asia, Beijing is still calling for resolute measures to reform its state-owned enterprises. This is a risky strategy given that slower growth will exacerbate the country's growing unemployment problem. Employees laid off in the course of enterprise reform will find fewer job opportunities.

The Communist Party newspaper, the People's Daily, has published a series of commentaries this week stressing the need for new breakthroughs in state enterprise reform. One said the reform process had encountered fierce currents, but said the bigger the difficulties faced, the closer China was to achieving a breakthrough.

Any breakthrough will depend on reforms in the financial sector. Beijing is well aware that its banking system suffers from many of the same problems as those that have precipitated the upheavals elsewhere in Asia. Chinese officials now appear to be stepping up their efforts to curb the practice of lending money to enterprises that have little chance of repaying their debts.
 

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