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China economic meeting this weekend prompts speculation on currency revaluation
Finance Minister Predicts
Strong Rand Against Dollar
Mail & Guardian, Johannesburg
Thursday, November 25, 2004
http://www.mg.co.za/Content/l3.asp?cg=BreakingNews-Business&ao=126133
South African Finance Minister Trevor Manuel told
textile workers on Thursday that foreign-exchange
matters were critical to understanding the future
of the textile industry.
He said one of the realities was that the
fundamentals of the United States economy were
out of kilter. The U.S. was "importing more than
it's exporting" and the inevitable consequence of
this was the devaluation of the dollar.
The textile industry had to take into consideration
the inevitable appreciation of the rand.
"We can pull guns on each other, we can misbehave,
and perhaps then the rand will fall. For all other,
rational reasons we are not going to see the
depreciation of the rand against the dollar."
He said further: "It is not the rand; the problem is
the dollar. Unless we factor that into our thinking,
we are going to be looking at solutions in the
wrong places."
The textile industry had to determine where the
rand would be against the dollar in May or June
next year, he added, and had to take into
consideration these factors when determining
the future of the industry and the best way to
protect jobs.
Manuel noted that the rand had been at 6.6 rand
to the dollar a year ago when he spoke to textile
workers and it was now under 6. It had been 13.8
to the dollar in December 2001.
He argued that the industry had to seek out sectors
of the market where it could be competitive, noting
that thousands of jobs had been lost in the textile
sector in recent years.
Manuel said a good example of a clever marketing
strategy was what the Indian textile market had
done -- it had identified that it could not compete
against Chinese imports at the lower end of the
market in the U.S. and had opted to supply above
that line.
Without directly saying that the government was
avoiding taking any interventionist action in the
textile industry, he nevertheless underscored
the point by referring to the automobile industry.
He said 10 or 11 years ago the industry had been
in the doldrums with heavy tariffs imposed on
imported vehicles. Now this industry -- where
trade barriers had come down -- was booming,
with Mercedes introducing a left-hand-drive
C Class car at its East London plant.
He warned textile workers that the reality of
Chinese competition was enormous and would
grow.
The Chinese deputy governor of its central bank,
Lee Ruogo, had noted that the cost of Chinese
labour was 3 percent of its American counterpart.
He had warned that Americans should move out
of textiles and possibly even agriculture and focus
on higher-technology goods.
Noting that he was being provocative, Manuel said
he had to warn the industry about the "five-letter
word," which was "China." This country was
"growing stronger and stronger" as a centre of
manufacturing. It was a reality that workers --
and employers -- in the textile industry had to
face, he said.
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