Sunday, November 9, 2008

China vows to step up role in fixing world markets

China vowed to step up support for developing countries on Thursday, as representatives of 21 Pacific Rim economies urged coordinated action to revive capital markets and economic growth.

The meeting of the Asia-Pacific Economic Cooperation forum, at which members warned against retreating into trade protectionism as economies slow, was the first of three by finance officials and world leaders this month to tackle the world financial crisis.

Participants in the APEC meeting called on big developing countries, especially China, to increase their role in straightening out the world economy at a time when emerging markets are driving growth. Asia's economic giant agreed.

"The government of China is ready to join hands with the governments of different countries and with international financial institutions such as the IMF to strengthen our cooperation and safeguard the stability of financial markets and promote economic development," Li Yong, China's deputy Finance Minister, told reporters.

"We clearly understand this economic crisis and its impact on the international financial system and economic development. International cooperation is needed to counter this crisis," he said at news conference marking the end of the two-day meeting.

The International Monetary Fund said on Wednesday that large developing countries such as China and India will fuel the world economy next year while the United States and Europe try to thaw out their credit markets and jump-start growth.

APEC recommended that financial market rules be closely coordinated to prevent future crises and promised to do everything necessary to respond to the crisis.

"We commit to strengthening the legal, regulatory and institutional mechanisms to deal swiftly with distressed financial institutions," said an APEC statement.

It also said it backs the role of the IMF and World Bank in ensuring that financial standards around the globe are improved.

Agreements forged in Peru, and at a meeting of Group of 20 finance ministers and central bankers this weekend in Brazil, will help set the framework for a summit of G20 world leaders next week in Washington.

Senior officials from the World Bank and IMF pushed at the Peru meeting for an expansion of the club of the world's richest nations - the Group of Eight - to include rich emerging ones like China, India, Brazil, Mexico, Saudi Arabia and South Africa.

The G8, which helps set the course of the world's economy, includes the United States, Canada, Japan and Russia - all APEC members. Other G8 members are Britain, Germany, France and Italy.

Expanding the G8 would dovetail with requests for major developing nations to contribute more resources to the World Bank and IMF in exchange for a greater say in how the two lenders are run.

Smaller emerging countries also want influence. Many are suffering from the turbulence that started with the collapse of the US sub-prime mortgage market.

"We don't want unilateral actions which may affect emerging economies," said Roberto Tan, treasurer of the Philippines. "We would like to strengthen our cooperation in terms of financial solutions for this financial turmoil. We would like to see closer coordination on policy-making," he said.