By moving fast on the fiscal side and on financial reform, Japan can help to restore confidence. Zhu Rongji has committed to not devaluing the renminbi at least this year. There are strains on China's export sector. But the trade balance is in surplus, and the economy is still growing, though at a reduced rate. We don't believe there is strong speculative activity on the renminbi.
China has capital account controls.
At home, the Chinese must move aggressively on state enterprise and banking reform to mitigate the pressure on exports. Some say that globalization is widening the gap between the rich and the poor. Many of the troubled economies were trying to integrate into the international system by adopting export-oriented strategies and inviting foreign capital in. Globalization tells us that if you want such integration, domestic governance becomes very important. You have to be able to police yourself.