China admits Asian crisis will damage its exports

Prospects for China's exports and foreign investment "have probably never been dimmer" because of Asia's financial crisis, a state-controlled newspaper admitted yesterday. The warning was in sharp contrast to previous official reassurances that the Chinese economy was not seriously vulnerable to the turmoil in neighbouring countries. The report in the English-language China Business Daily stated that: "Weaker purchasing power in South-east Asia, Japan and South Korea is set to reduce or postpone their imports from China."

Some products manufactured in South-east Asian countries are now far more competitive against Chinese goods because of sliding currencies, but Peking has pledged repeatedly not to devalue the yuan. This year China expects a much lower trade surplus than last year's record US$40bn.

-Teresa Poole, Peking