Rubin backs China to hold firm on yuan

Rubin backs China to hold firm on yuan

KUALA LUMPUR (Reuters): U.S. Treasury Secretary Robert Rubin left China yesterday to embark on a whirlwind tour of crisis-torn Asia, convinced that Beijing has the resolve to live up to its new image as an island of stability in the battered region.

During his three-day stay in Beijing on the sidelines of U.S. President Bill Clinton's state visit, Rubin received his strongest assurances yet that China will keep its yuan currency stable to help prevent a renewed Asian financial thunderstorm.

China's "unambiguous" promise not to devalue its currency came as an obvious relief to Rubin since bolstering Beijing's resolve to hold the line on the yuan has become a top priority on Washington's agenda in Asia.

Both Clinton and Rubin heaped praise on China for resisting the pressure to devalue in the face of financial turmoil, lauding Beijing's "statesmanship" and forward-looking economic policies -- even as they admitted it was in China's own interest to do so.

A devaluation would cut the price of Chinese products in terms of foreign currency, making it easier for the country's exporters -- the backbone of China's economy -- to compete with other nations whose currencies have been weakened.

But China, in the midst of a historic economic transformation that has already brought about profound changes in the every day lives of China's 1.2 billion people, knows there is no such thing as a free lunch.

"One continues to be impressed by the vision expressed by their leaders and by the understanding they express of the issues they face," Rubin told reporters accompanying him aboard an Air Force jetliner en route to Malaysia.

The U.S. Treasury chief last visited China nine months ago.

Asked to compare his impressions now to what he had heard back then, Rubin said Beijing's commitment to overhauling its creaking economy and slowly opening it up to the outside world appeared to remain strong.

"They continue to express a determination to move along at a good pace," he said.

Still, the summit brought no breakthrough on Beijing's 10-year long effort to join the World Trade Organization, which the United States continues to stall because it believes China needs to do more to its vast domestic market to foreign competition.

The ringing endorsement of Beijing's monetary stance was in stark contrast to the continued pleading with the region's erstwhile powerhouse, Japan, to finally do something -- anything -- to get its sickly economy and weak yen back on its feet.

Rubin, who on Friday also met Finance Minister Xian Huaicheng and Prime Minister Zhu Rongji, the architect of China's reforms, has not ruled out the possibility of further intervention to help the yen.

But Clinton yesterday lamented the lack of a magic "wand" to make Asia's crisis go away, and agreed with Rubin that the key to the yen's stability was Japan's own economic policies.

"We can be supportive, but they have to make the right decisions," he said.

After a series of high-level meetings in Kuala Lumpur, Rubin was due to travel to Bangkok today and continue on to Seoul tomorrow in a whistlestop tour of the region designed to take Asia's economic pulse almost a year after its financial woes began.

Thailand and South Korea are among the hardest-hit of the former Asian tiger economies. Together with Indonesia, they are at the receiving end of bail-out deals totaling more than US$120 billion, drawn up by the International Monetary Fund and conditional on harsh economic reform programs.