Will he, won't he? Having sworn blind that China will not devalue the yuan, Vice-Premier Zhu Rongji looks the economic strongman of Asia. As other currencies crumble, the mainland's cosseted currency system looks a positive blessing.
Despite a banking sector caving in under bad debt, China has easily weathered the summer currency crisis. A relatively closed capital account allowed the central People's Bank of China to keep control of monetary policy at a time when soaring rates could have wreaked economic ruin.
Mainstream opinion says Beijing dare not repeat its early-1994 dash for growth by devaluing the yuan. Having promised not to, an about-face would jeopardise Mr Zhu's hard-won international credibility. With this year's Sino-US trade surplus likely to top US$30 billion, pressure from Washington seems to rule out the option.
And yet, at first sight a more competitive currency is exactly what China needs. The economy is toying with outright deflation - September saw retail inflation go negative for the first time since 1972. A cocktail of record harvests, low domestic demand, excess industrial capacity and bloated inventories could still trigger a spiral of decline.
With unemployment threatened by state-owned industry reform, a dose of inflation looks like bad medicine China could happily swallow. The PBOC is expected to cut interest rates or significantly reduce bank reserve requirements to boost demand.
A little Phillips curve trade-off seems imperative to avoid economic contraction with potentially ruinous consequences for the banking sector. Reflation is likely to be a monetary affair with no scope for fiscal expansion. Indeed, ING Barings says reduced tax collection and lower import tariffs rule out more government spending.
Economists seem confused by the mainland economy, with 1998 growth forecasts varying from 4 to 9 per cent. Bad data partially explains the divergence, but the state of demand continues to muddle experts. What can be said is export industries will drive performance.
