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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story


Bloodied But Unbowed
Greater China fights the Asian contagion

WHILE SOUTH KOREA STAGGERS and Southeast Asia crumbles, Greater China -- Hong Kong, Taiwan and the mainland -- has stayed on its feet. The Hong Kong dollar and the renminbi have been solid, and the New Taiwan dollar, while weak, is down only 15% against the U.S. dollar -- in sharp contrast to the 50%-60% nosedives suffered by neighboring currencies. Taiwan, Hong Kong and China stock markets have been mauled, but their economies continue to hum along and national coffers are in the black.

But is Greater China about to be sucked into the Asian economic whirlpool? Last week, Hong Kong-based Peregrine Investments Holdings, Asia's top home-grown merchant bank, went into liquidation after its fatal exposure to Indonesian bonds scuttled a needed capital injection. First Pacific, a Hong Kong holding company connected to Indonesia's Salim Group, said it will sell its profitable European arm, partly to raise funds to shore up its debt-burdened Philippine unit Metro Pacific. Taiwan corporations have not had similar troubles, but food giant President Enterprises said it was suspending investment projects in Southeast Asia. And its investment to the mainland is slowing.

Economists say the pain will only get worse. But, they add, Greater China currently has the wherewithal to maintain stable currencies and economies. Unlike their beleaguered neighbors, Hong Kong and Taiwan have no public debt, and corporate debt is also at manageable levels, says Kevin Chan, Greater China economist at ING Barings in Hong Kong. The mainland has huge foreign debts -- about $115 billion -- but reserves total $140 billion. In contrast, Thailand and South Korea borrowed abroad to the tune of three to five times their foreign reserves, Chan says.

Crucial to the ability to stay the course: export competitiveness. Falling currencies make exports produced by regional rivals relatively cheaper in global markets -- a concern particularly for the mainland's manufacturing sector. Nevertheless, experts expect China and Hong Kong to resist for now the temptation to keep pace by floating their currencies because of the turmoil devaluation brings. Price advantages tend to be offset by devastated corporate balance sheets and banking-sector tumult, says Nicholas Kwan, chief regional economist at Merrill Lynch in Hong Kong. But what happens to that resolve as regional recession drags on and manufacturers lose jobs to competitors? "You can argue Greater China is slightly apart from the others, but we're still part of the whole region," says Kwan. If the trio loses its footing in coming months, "the crisis we have will be easily doubled." -- By Jonathan Sprague

This edition's table of contents | Asiaweek home



U.S. secretary of state says China should be 'tolerant'

Philippine government denies Estrada's claim to presidency

Faith, madness, magic mix at sacred Hindu festival

Land mine explosion kills 11 Sri Lankan soldiers

Japan claims StarLink found in U.S. corn sample

Thai party announces first coalition partner


COVER: President Joseph Estrada gives in to the chanting crowds on the streets of Manila and agrees to make room for his Vice President

THAILAND: Twin teenage warriors turn themselves in to Bangkok officials

CHINA: Despite official vilification, hip Chinese dig Lamaist culture

PHOTO ESSAY: Estrada Calls Snap Election

WEB-ONLY INTERVIEW: Jimmy Lai on feeling lucky -- and why he's committed to the island state


COVER: The DoCoMo generation - Japan's leading mobile phone company goes global

Bandwidth Boom: Racing to wire - how underseas cable systems may yet fall short

TAIWAN: Party intrigues add to Chen Shui-bian's woes

JAPAN: Japan's ruling party crushes a rebel at a cost

SINGAPORE: Singaporeans need to have more babies. But success breeds selfishness

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