Weapons of Mass Destruction (WMD)

DATE=9/3/2003

TYPE=CORRESPONDENT REPORT

TITLE=CHINA-ECONOMY (L)

NUMBER=2-307098

BYLINE=LUIS RAMIREZ

DATELINE=BEIJING

CONTENT=

VOICED AT:

INTRO: The U-S Treasury Secretary says China has promised to eventually relax controls on its currency, but he says Chinese officials are giving no timetable. V-O-A's Luis Ramirez reports from Beijing, where the U-S official has just concluded a two-day visit.

TEXT: At the end of his meetings with Chinese officials Wednesday, U-S Treasury Secretary John Snow suggested that no new ground has been broken in U-S efforts to get China to end strict currency controls, but he qualified the discussions as good.

/// SNOW ACT ///

We're laying out our point of view. And, they're listening and responding. I think we're going to make some progress on this issue.

/// END ACT ///

He says Chinese officials pledged to eventually allow their country's currency to trade freely, but did not say when. He nonetheless, sounded upbeat about longer- term prospects.

There is growing political anger in the United States about China's fixed exchange rate. Labor groups and manufacturers say an artificially weak currency makes Chinese-made goods unfairly cheap and steals jobs from Americans.

The United States' trade deficit with China is more than one hundred billion dollars. During his visit to Beijing, Mr. Snow called the deficit "unsustainably large," indicating that Washington's patience on the issue could eventually wear thin.

Chinese officials say a stable currency has been key to the country's economic growth, and they say now is not the time to relax currency controls. They warn that doing so now could be destabilizing, increasing unemployment and possibly triggering a banking crisis. Chinese banks are currently struggling due to a large number of non-performing loans.

Andy Rothman is an financial analyst in Shanghai with C-L-S-A, an investment bank. He says it appears it is not in the United States' interest to push the Chinese too hard.

/// ROTHMAN ACT ///

I think that they have decided it would be too risky for them to make that change while the banks are in serious trouble and they are also facing some of their own economic problems. I think Treasury Secretary Snow is implicitly agreeing with the Chinese.

/// END ACT ///

Analysts say a stronger Chinese currency would mean losses for U-S companies that manufacture in China, because operating costs would rise.

Sources say that while China's leaders will not soon re-value their country's currency, they are prepared to offer other concessions to appease Washington.

Analysts say these could include cutting incentives for exporters, purchasing more U-S bonds, and loosening controls on currency holdings.

/// REST OPT ///

Beijing was the second stop of Mr. Snow's three-nation Asian tour, which began in Japan. His last stop is Thailand, where he is to attend a meeting of the finance ministers of the Asia Pacific Economic Cooperation group. (Signed)

NEB/HK/LR/KPD