US financial crisis haunts Asian leaders

FE Team | Published: September 29, 2008 00:00:00 | Updated: February 01, 2018 00:00:00

UNITED NATIONS, Sept 28 (AFP): Japan is worried about a severe credit crunch, India wants regulations tightened while China expects the situation to get worse before it gets better-the US financial crisis has been haunting Asian leaders as they took the rostrum at the UN General Assembly.
As the United States debated a 700-billion-dollar Wall Street bailout package to ease the turmoil reverberating around the globe, the region's leadership was concerned that financial contagion could cause a repeat of the market turmoil that rocked Asia a decade ago.
The 1997-98 Asian turmoil led to a prolonged global debate for a revamp of the international financial architecture but no concrete efforts were made to tighten supervision of the financial system, the leaders said.
"There is a need for a new international initiative to bring structural reform in the world's financial system with more effective regulation and stonger systems of multilateral consultations and surveillance," Indian Prime Minister Manmohan Singh told the UN summit last week.
"This must be designed in as inclusive a manner as possible," said the World Bank economist-turned politician.
He said that while industrialised nations could afford periods of slow growth as a result of upheavals in international financial markets, "developing countries certainly cannot."
The US crisis struck as Asian economies were grappling with a severe food and energy crisis.
Think tanks have shaved Asian economic growth forecast following the crisis, which peaked this month with the bankruptcy of top investment bank Lehman Brothers, government rescue of insurance giant AIG and collapse of Washington Mutual under the weight of bad mortgage bets.
Chinese Premier Wen Jiabao, in his speech, warned that the international impact of the US crisis could become "more serious," stressing the need for concerted efforts to contain the turmoil.
Chinese exports to the United States have been expanding rapidly and any slowdown due to the crisis could impact growth in the world's most populous nation.
Even on the financial side, China, the world's biggest holder of foreign reserves, is closely linked to the United States. It is the second biggest holder of US treasury bills.
New Japanese Prime Minister Taro Aso said the current crisis reminded him of the Asian turmoil, when "the world saw a nightmare in which liquidity suddenly dried up."
He assured world leaders that Japan, Asia's largest economy, would invigorate its own recession-struck economy to help spur global growth.
"I will work determinedly to realise this very contribution, said Aso, who has promised to return to the old ways of his long-dominant ruling party's use of public money to boost the economically languishing countryside.
For economies such as the Philippines, where oil and food price hikes had sent inflation up and growth down, the US crisis gives greater worry.
"The light at the end of the tunnel had become an oncoming train, with new shocks to the global financial system," declared Philippine President Gloria Arroyo. "It would take time and perseverance to put the pieces back together."