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Morgan Stanley: China shouldn't appreciate RMB (01/12/04)

    A Chinese economist says if China revaluates its currency it could damage the economy and create an economic "bubble" like Japan.

    Morgan Stanley's chief Asia economist Andy Xie warned, if the Reminbi appreciates under international pressure, it will trap China, with low growth, low interest rates and low inflation but a strong currency, China Radio International reported on Dec 1.

    He pointed out that the macro economic situation in today's China resembles that of Japan when its currency was pressed to revalue during its fast growth period.

    At present, at least 1.2 billion US dollars of hot money has entered the Chinese mainland and Hong Kong, as speculators gamble on a revaluation of the RMB.

    The Japanese yen revaluated in 1985, causing domestic enterprises to move out of Japan and invest in South-East Asian nations.

    The low interest policy that followed created an economic "bubble", with over-investment in stock market and real estate, that Japan is yet to recover from.

 


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