By Steven Mufson
Washington Post Foreign Service
Friday, January 16, 1998; Page A17

BEIJING, Jan. 15—U.S. Deputy Treasury Secretary Lawrence H. Summers said he received an "unequivocal commitment" in meetings here today with top Chinese economic policy makers that China would not devalue its currency despite competitive pressures from around Asia.

Emerging from a meeting with China's central bank governor, Dai Xianglong, Summers said China's pledge to keep its exchange rate steady was "the most important contribution that China could make to stability in Asia."

Summers also met with Vice Premier Zhu Rongji, China's most important economic policy maker, who, in an effort to dampen speculation and calm markets, reiterated for a third day his commitment to defend the Chinese currency.

Many analysts and traders fear that China might devalue its currency to hang onto markets and prevent its exports from being undercut by products from the rest of Asia now that drops in other Asian currencies have reduced local costs, such as labor. A devaluation also would make it more attractive to foreigners to invest in China, which draws more than half its foreign investment from elsewhere in Asia.

But a drop in the value of China's currency would deal a devastating blow to efforts to stabilize regional markets and economies by pressuring other currencies, and perhaps sparking a series of competitive devaluations as countries vied to maintain an edge for their exports. A devaluation by China would also damage confidence in the Hong Kong dollar and undermine the Hong Kong government's efforts to defend its exchange rate, which is pegged to the U.S. dollar.

"The Chinese reiterated their unequivocal commitment not to devalue," Summers said. He added that "we agreed that the performance of our economies along with the performance of the Japanese economy were profoundly important to the situation in Asia."

Summers said that Chinese leaders also agreed that the International Monetary Fund would continue to take the lead in providing assistance. Bilateral assistance should play a secondary role, Summers said. The IMF already has put together more than $100 billion in bailout funds for Asian nations.

In today's state-run newspapers, Zhu was quoted as acknowledging that the devaluation of Southeast Asian currencies could pose "severe challenges" to China's exports and influx of foreign funds. But Zhu said that China would meet those challenges, maintain exports and keep its economy growing at a rate of more than 8 percent this year. That rate is slower than government forecasts made just a couple of months ago, but it is still higher than the rate forecast by many analysts.

"China is losing currency competitiveness," said Joan Zheng, a senior economist at J.P. Morgan and a former official at the People's Bank of China.

But she said that devaluing the yuan "does not appear feasible in 1998." She said that because of the already huge U.S. trade deficit with China, a devaluation by China "would provoke bitter U.S. protest and trade conflicts and also raise more hurdles to China's World Trade Organization membership."

Moreover, she said that China is still likely to have an overall payments surplus this year, even with a drop in exports and smaller inflows of foreign investment.

Summers arrived this morning and left this afternoon for South Korea. He was leading a delegation from Treasury, the State Department and the U.S. National Security Council. So far, he has visited Singapore, Indonesia, Malaysia and Hong Kong on a lightning tour of the region.