Beijing yesterday voiced its strongest support so far for Hong Kong's controversial intervention to support the peg and the stockmarket and indicated it had not used its own money. Separately, the State Planning Development Commission (SPDC) minister, Zeng Peiyan, said he guaranteed the mainland would not devalue its currency this year. SPDC deputy minister Wang Chunzheng said the financial crisis in East Asia, especially Japan and South Korea, and the devaluation of Asian currencies put great pressure on the financial situation in Hong Kong and its stockmarket. 'The measures taken by the Hong Kong SAR Government are strong and appropriate and have been effective in stabilising the stock and financial markets there. 'It has relied on its own strength to protect the peg. This is completely correct. ' Asked if the central government had used its reserves to buy Hong Kong dollars or shares in the market, Mr Wang said that he had not heard of this. Mr Zeng said support of the Hong Kong dollar peg was one of several reasons the mainland should not devalue the yuan. Most important, a devaluation would lead to a new wave of international devaluations and cause instability to the Hong Kong dollar's link to the US dollar. Devaluation would not increase mainland exports to East Asian and Southeast Asian countries, which had fallen this year because of a drop in domestic demand, he said. Another reason was that more than 50 per cent of mainland exports consisted of processing imported raw materials and re-exporting them. Devaluation would increase the cost of the raw materials and be of limited value in increasing export competitiveness. Mainland firms had the potential to improve the quality of their goods, management and level of service, he said. Devaluation would have a negative impact on the confidence of domestic and foreign investors and could lead to inflation and increase the debt burden of domestic firms. Beijing had adopted an active and responsible attitude, he said. Despite the crisis, the mainland continued to enjoy a comfortable foreign-exchange position. In the first eight months, it posted a trade surplus of US$31.4 billion, up from $25.5 billion in the period last year. Actual foreign investment in the first eight months was $27.42 billion, down 1.45 per cent from the same period last year, and contracted foreign investment rose 6 per cent to $31.7 billion. New investment from Europe and North America offset a sharp fall in investment from Japan, mainly because of the depreciation of the yen, Mr Zeng said. But, despite the substantial trade surplus, foreign exchange reserves had risen less than $1 billion this year and stood at $140 billion. Mr Zeng said this was due to foreign and domestic exporting firms retaining part of their hard-currency earnings and to illegal evasion of foreign-exchange controls.