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Thursday, August 19, 1999 Published at 14:48 GMT 15:48 UK

Business: The Economy

China proves fragile investment

China is still suffering from the effects of the Asian economic crisis

China has seen a large fall in foreign investment and a decline in exports, increasing speculation about a possible currency devaluation.

A Foreign Trade Ministry spokesman said new contracted investment had fallen by 20% in the past seven months, while exports were down by more than 2%.

But he said that Beijing was not yet ready to restart talks with the US about China's entry into the World Trade Organization, on hold since China's embassy in Belgrade was hit during Nato's Kosovo bombing campaign.

The fall in foreign investment is partly due to the continuing economic crisis in Asia.

Signs of upturn

Much of the foreign investment into China, as well as a large part of its export market, has traditionally come from its south east Asian neighbours.

Ministry spokesman Hu Chuseng said that, despite the downturn, July had shown some signs of recovery, with exports actually rising by 7%.

However, cheaper products from countries which have devalued have caused a surge in China's imports - up 16% over the past year.

This has badly affected China's trade surplus, which last year stood at $40bn.

So far this year that surplus, which has been a cushion against devaluation of the Chinese Yen, is down by more than 60%.

US blamed for talks deadlock

Chinese sources have recently hinted that devaluation may be desirable to start an export recovery which would boost the country's ailing domestic market.

However, the spokesman would not comment on a possible devaluation.

Hu Chusheng said China had never changed its attitude and stance on joining the World Trade Organization, and blamed the US for the stalling of talks.

In the past, China has linked reopening the talks with the US providing what it calls a "satisfactory explanation" for the bombing of its Belgrade embassy in May.

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