Along with China's entry into the WTO, a great change has taken place in Japan's currency policy. The Japanese Yen has continued devaluing. The exchange rate of Japanese Yen to US Dollar was down from 125:1 to 130:1, and all the way down to 130:1 and 140:1. It's said the yen may even hit the mark of 145:1 or even 150:1. The depreciation of the Yen represents a basic measure of Japan to deal with China's accession to the WTO. First, it makes the RMB overestimated and thus weakens China's competitiveness; second, it prevents Japan's enterprises from shifting high-tech industries to China. Its fundamental aim is to maintain Japan's international status and competitiveness after China's entry into the WTO.
Analysts of the Research Headquarters in Hong Kong Anbound Co. noted that after China's accession to the WTO, along with the advancement of trade liberalization and the resultant increase in foreign investment, China will obtain a good opportunity to develop its hi-tech industries and its overall economic environment will get close to the international standard, which would, of course, threaten Japan's international status. Under this circumstance, the Japanese authorities have chosen the way of devaluing the Yen to inflict a "soft casualty" upon China.
Firstly, Japan intends to weaken China's competitiveness. In the face of a country's currency that may possibly devalue at any time, foreign capital will not immediately go to invest there. In view of this, China must keep the RMB stable so as to stimulate the inflow of foreign investment after its entry into the WTO. On one hand, the RMB exchange rate remains basically stable; on the other hand, the Japanese Yen keeps falling. Under such circumstance, an overestimated situation of the RMB will quickly take shape and China will have to bear all the effects arising therefrom.
Secondly, Japan can't sit by in the face of the transfer of hi-tech industries. After its WTO entry, China will focus on the development of hi-tech industries, and many foreign investors, who likely include Japanese, are keen on Chinese high-tech industries and markets. Japan has always styled itself as a high-tech country, so if high-tech industries is shifted to China, it would be a grave problem for Japan, so the Japanese government must try to prevent the occurrence of this situation.
(People's Daily February 4, 2002)
