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Prices in China Fall Again - 2002-02-25


Prices in China have fallen for the third month in a row while the potential Asian buyers of a bankrupt U.S. telecommunications company say they have no plans to raise their bid, despite a rival offer. VOA's Amy Bickers has these stories and more in our weekly look at Asian business headlines.

State-owned companies in China are producing more than consumers can purchase and economists say the trend is causing deflation. Prices on goods in China slid for the third straight month in January, falling one percent from a year ago. China experienced a similar phenomenon between 1998 and the year 2000, when prices dropped for 22 consecutive months.

Economist Andy Xie of investment bank Morgan Stanley in Hong Kong says the government must stop overproduction. "The solution is structural. Basically, bad companies must be cut out so that they do not become a source of irrational price reduction, dragging down price levels overall," he says. "So I think the implication is for structural changes."

In Taiwan, the government predicts that the island's battered economy will return to growth in the next 11 months. Taipei says gross domestic product contracted one-point-nine percent last year, confirming that Taiwan was one of the region's worst performers in 2001. However, it predicts that stronger exports and domestic investment will push GDP growth to more than two percent this year.

Elsewhere in Asia, a $750 million bid for bankrupt U.S. fiber optic company Global Crossing is the focus of increasing opposition from creditors and investors. Hong Kong's Hutchison Whampoa and Singapore Technologies Telemedia made the offer last month.

Now, a group of Global Crossing shareholders have filed their own rescue plan, which involves issuing more than five-billion dollars worth of new securities. However, analysts say creditors may block both deals and choose to liquidate the company to recover more funds.

Global Crossing filed for bankruptcy protection in the United States in January because of huge debts from network construction and tumbling bandwidth prices.

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