West rides on Asian money crisis
THE United States is reaping the economic and geo-political benefits of the foreign exchange crises in Thailand and the rest of East Asia, although its ultimate objective is to slow growth in China and pre-empt Japan from becoming its global economic rival, Thai officials said.
Speaking on the condition of anonymity, Thai officials said the fall of the Thai baht and the subsequent attack on regional currencies amount to a ''sudden transfer of wealth" from this region to Europe and the United States, where most international hedge funds originate.
''The European- and US-based hedge funds are largely behind the turmoil in this region. All of a sudden, there is a transfer of wealth from this part of the world to Europe and the United States," said one senior Thai official. ''Of course, the ultimate target is China because its economy is growing too fast."
The World Bank has projected that China, which has developed a difficult relationship with the US, will become the world's largest economy by 2020 if it can maintain its current rate of high economic growth.
Against the fierce attacks, Thailand has floated the baht, followed by the Philippines and Indonesia. The Malaysian ringgit has plunged to record lows against the US dollar, with the next target being 3.0000 ringgit to the dollar. Even Singapore has not been spared the regional crisis, with its dollar also plunging to a three-year low against the US currency.
Analysts said the next big target for the currency attack is the gateway to China, Hong Kong, which has also come under selling pressure. Hong Kong pegs its currency to the US dollar at a somewhat rigid HKD$7.74.
On August 26, Chinese Premier Li Peng urged China and member states of the Association of Southeast Asian Nations to strengthen their ties to fight against the speculative attacks on their currencies.
''China and the Asean countries need to strengthen coordination and cooperation in the financial field," Li was quoted as saying. ''One reason for the recent currency crisis, in my view, is international speculation, and the other is the bubble economy.
''We should intensify our coordination and cooperation in the field of finance and step up exchanges of information to keep each other informed so as to ward off international financial speculation," he said.
China's contribution of US$1.0 billion to a US$16.7 billion International Monetary Fund-led international bailout package for Thailand signals its willingness to become a major economic power in the region.
''Under the 'one country two systems' formula, Hong Kong handles its own economy completely," Li was reported as saying, ''but Hong Kong has adequate foreign reserves and is closely linked with China. I have not seen any major fluctuations in Hong Kong so far."
Thai officials said although Li did not publicly criticise the United States as the culprit behind the currency turmoil in the region, he focused most of his talks with his Singaporean hosts on this sensitive subject.
Japan, which is climbing out of a seven-year recession, will also be affected by the regional foreign exchange crises, with its direct investment investments in Asia at US$5.8 billion out of the total US$24.57 billion in fiscal 1996, according to the Japan External Trade Organisation.
Both Japan and China have been running up huge trade deficits against the United States, which has bitterly targeted them as the foremost economic rivals in this region.
BY THANONG KHANTHONG and VATCHARA CHAROONSANTIKUL