MACAO: A leading analyst commented yesterday on what to expect if the central government revalues the national currency, renminbi (RMB), saying the appreciation of RMB could add heat to inflation in Macao in the near future, but would help the local economy in the long run as more mainlanders would come to visit and spend more.

Dominic Sio, president of the Board of Directors, Macao Development Strategy Research Centre, explained that prices of commodities imported from the mainland would certainly go up when RMB appreciates, increasing the rate of inflation that is now beginning to emerge in Macao. Most of the fresh food and daily necessities sold in Macao come from the mainland.

However, Sio pointed out, a stronger RMB could also bring more cash to Macao as more mainlanders would come to visit the enclave and feel comfortable to spend more. He also agreed that the cost of visiting the mainland would go up when the much anticipated moment comes. But he did not share the prediction that Macao residents would resist going to the mainland simply because the costs would rise.

As for businesses, Sio said some of the US and European orders for textiles and garments could come back to Macao in the second half of the year if RMB appreciated shortly. Overall the strengthening of RMB would not affect Macao manufacturers much because only a fraction of their production is out-sourced to the mainland.

Currency appreciation reflects the growth of national strength, Sio acknowledged, and a stronger RMB would benefit Macao in the long run. However, he emphasized, he did not see any likelihood of the central government allowing free conversion of RMB in the near future. Only some slight adjustment of the exchange rate was conceivable at the moment, he concluded.

(HK Edition 05/05/2005 page3)