International | May 30 2006
By Chris Shaw (Tokyo)
The list of countries pressuring China to revalue its currency continues to grow, but this time the call is coming from closer to home.
Thailand’s finance minister, Thanong Bidaya, speaking at a conference between the ASEAN nations, China, South Korea and Japan in Tokyo over the weekend, is the latest to urge the Chinese not to take too long in revaluing, especially given the increasingly fragile outlook for the US dollar going forward.
He argued the speed of the increase in Asian currencies could cause problems and potentially another financial crisis similar to the one that impacted on the region in the late 1990s.
His view is the strengthening in local currencies is impacting on competitiveness and therefore exports, while also reducing the amount of money being repatriated into the economies by citizens working overseas, an impact that would only strengthen if the greenback continued to weaken. This, he argued, could lead to weakness in an Asian currency that could quickly flow through the region and potentially spark another crisis.
As a result, he wants China to speed up the revaluation process, as such a move is regarded as being an important element in addressing the current imbalances in the global economy.
The Asian Development Bank has supported the minister’s view, as Masahiro Kawai, the bank’s head of the office of regional economic integration, said the region needed to guard against the impact of further falls in the US dollar. His concern was any potential action may not be implemented until a crisis occurs, whereas there is now an opportunity to act before the situation can get out of hand.
To date the Chinese has shown little inclination to speed up the pace of any revaluation, supporting the view of many market commentators who suggest they will act in what they see as their best interests rather than succumb to any external pressure.
