Lee warns of yuan devaluation

Lee warns of yuan devaluation

SINGAPORE (Reuters): Singapore Senior Minister Lee Kuan Yew
said further depreciation of the Japanese yen against the dollar
could pressure China eventually into letting the yuan fall, state
television said on Saturday.

Lee, the republic's prime minister from 1959 to 1990, was on
an official visit to Tokyo when he spoke of the effects of the
Asian economic crisis on China at a conference.

He said even China's massive foreign reserves might prove
insufficient in certain circumstances.

"The Chinese are committed to defending (the yuan) to the best
of their ability. The question is, though, what is the best of
their ability?" he was quoted saying.

Lee told government and business leaders China would be able
to defend the yuan, also called the renminbi, for at least a
year.

"If the yen goes to 150 (to the dollar), 160, 170, then the
renminbi will be (in a) difficult (situation), as Chinese exports
become relatively more expensive, investment flows into China
slow and the economy begins to slow," Lee said.

The yen has stumbled badly against the greenback for the past
few months and was on Friday quoted around 140 to the dollar.