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.