|FIGHTING THE ASIAN FLU|
July 1, 1998
PHIL PONCE: Today President Clinton wrapped up the Shanghai portion of his nine-day visit to China. This booming cosmopolitan city has become a symbol of China's emergence as a global economic player. Clinton's tour included a private meeting with entrepreneurs at the forefront of China's evolving market system. Later, the President toured Shanghai's new stock exchange, billed as the most modern in the world and another example of China's phenomenal economic growth in the last decade, growth that's been reflected in an average annual increase in the Gross National Product of 11 percent.
At a speech in the atrium of new high rise hotel President Clinton praised Shanghai's ingenuity and energy, but he also expressed regrets he and President Jiang Zemin failed to agree on lowering trade barriers and other reforms necessary for China's admittance to the World Trade Organization.
PRESIDENT CLINTON: President Jiang and I agree on the importance of China's entry into the World Trade Organization. There will have to be an individual agreement that recognizes the transition China must undertake. But the terms have to be clear and unambiguous. I'm disappointed that we didn't make more progress on this issue, but we'll keep working at it until we've reached a commercially viable agreement.
PHIL PONCE: China argues the reforms the President wants would slow down its economic growth, something it can't afford to do. It needs to keep growing at a fast pace just to keep up with its population growth. China has also embarked on a radical restructuring of bloated state-owned industries, a restructuring which is already closing factories and putting millions out of work. In addition to its inefficient industries, financial observers point to a dangerous level of bad debt in China's banking system. And its most immediate concern, China now finds itself surrounded by East Asian countries whose economies have gone from boom to a deep and prolonged recession.
The economic turmoil in Indonesia, the world's fourth most populous country, toppled former President Suharto's 35-year regime. This year its economy is projected to shrink an alarming 20 percent. To the North, Japan, the world's second largest economy, officially admitted last month that it was in a recession. The banking system is almost paralyzed by hundreds of billions in bad loans, and Japan's currency, the yen, recently plunged to a 10-year low against the dollar.
The yen's fall raised warning flags throughout the region that other nations would devalue their currencies to stay competitive. The big question has been China. Though not suffering like other Asian economies, China's growth rate and exports are falling just as its reform of state-owned industries is costing workers their jobs. China could boost exports by devaluing its currency, the yuan, also called the RenMinBi, but early in Asia's financial crisis Chinese officials promised to hold the yuan steady.
But when the Japanese yen threatened to go into a freefall last month, the Chinese warned they could be forced to devalue their currency after all. Fearing that step would provoke another round of currency crises, the United States and Japan intervened and started buying yen to stop its slide. This past weekend in Beijing, President Clinton praised China for doing its part.
PRESIDENT CLINTON: China has shown great statesmanship and strength in making a strong contribution to the stability not only of the Chinese people and their economy but the entire region by maintaining the value of its currency.
PHIL PONCE: Tomorrow President Clinton travels from Shanghai to Hong Kong, where the Asian economic crisis is already taking a heavy toll.