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.