Asian leaders to discuss economic storm

October 23, 2008
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, BEIJING, October 23 – Asian leaders will on Friday discuss how they can work together to combat the global economic storm as their countries, once seen as being relatively immune, increasingly struggle with the crisis.

The Asia Europe Meeting (ASEM) of 43 nations, to be held in Beijing on Friday and Saturday, has provided a timely first opportunity for the region\’s leaders to meet face-to-face to discuss the world\’s financial woes.

With their nations\’ export-dependent economies slowing and stock markets plumetting, Asian leaders have made it clear the financial crisis will be their top agenda item in the Chinese capital.

"As the outlook is looking increasingly serious, that may kick them into action for regional cooperation," said Claire Innes, Asia Pacific manager at economic and political analysis company Global Insight.

"The first wave of the financial crisis didn\’t really affect Asian banks. "But you\’re now seeing volatility in stock markets and pressure on exchange rates in a flight to safety, and exports remain the central engine of growth in the region leaving it exposed to any prolonged global downturn."

Indeed, recent days have seen countries sound louder alarm bells over the crisis, after the first few weeks of the financial storm was focused primarily on the problems in the United States and Europe.

South Korea announced a 130-billion-dollar package to stabilise financial markets, China reported its lowest quarterly growth in more than five years and Singapore said it was in recession.

Japan\’s stock markets have led the region\’s stock markets down, with Tokyo\’s Nikkei stock index falling more than 11 percent last Thursday for its biggest one-day loss in two decades.

Meanwhile, India\’s Prime Minister Manmohan Singh has conceded his country will face a slowdown and neighbouring Pakistan is on the verge of a complete economic meltdown.

Amid this backdrop, a number of Asian leaders have called for countries to come together and discuss how to face the global turmoil.

The Philippines has put forward a plan for the 10 Southeast Asian nations plus China, Japan and South Korea to establish a fund to help neighbours facing severe liquidity problems.

The 13 countries will come together Friday morning for a breakfast meeting at the ASEM summit.

And while in Japan ahead of ASEM, Singh called for India and other developing nations to play a greater role in moves to step up surveillance and regulation of the global financial system.

Joseph Cheng, political science professor at the City University of Hong Kong, said Japan and China, Asia\’s two biggest economies, were under some regional pressure to come up with measures to help out other Asian countries.

"The initiative has to come jointly from China and Japan as they have substantial exchange reserves, they are in a position to give out loans in the region," he said.

Cheng said measures could include strengthening a bilateral currency swap agreement reached after the Asian financial crisis in 1997, set up to help countries in need to get loans to meet their short term credit crises.

However Cheng and other analysts cautioned that Asian nations were not likely to devise any common agreements to fight the financial crisis similar to one produced by Europe.

"Asian governments do not have a good history of coordination, so I think it\’s very unlikely that they\’re going to come up with a US or European-style bailout package," said Mark Williams, an economist at Capital Economics.

"I think that each country is going to be looking after itself."

Michael Pettis, an American finance professor at Beida University in Beijing, also pointed out that China and Japan had very different economic needs.

"So… it\’s not really clear that they\’re going to come up with a solution that addresses both and the needs of other Asian countries," he said.

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