When the world started to melt
Asian banks: Now comes the real crisis
Asian research: Worth the paper it's printed on?
Peregrine's still flying
Hedge funds: You can run but you can't hide
Country Risk December 1997: It could be worse
Global Economic Projections: Overall Rankings
Time to buy
China goes for broke
The worst outcome in the current economic crisis would be a Chinese devaluation. The last devaluation of the renminbi yuan in 1994 allowed China to undercut rival Asian exporters and paved the way for the current problems. A further weakening would almost certainly take the Hong Kong dollar with it and renew the downward pressure on other Asian currencies. The feared rerun of 1930s-style competitive devaluations around the world would be unavoidable.
But a weaker renminbi is a tempting option for China's leaders facing internal financial and economic difficulties. Quite simply, China's banks are insolvent and 50% of state-owned enterprises (SOEs) are losing money.
The government is committed to reforming the banks and the SOEs but it needs a healthy, growth economy to absorb the pain. That it doesn't have. China's economy is slowing down and projected 8% to 9% growth rates are unachievable.