BEIJING (Reuters) – The global financial crisis is a severe shock for the world economy and China is doing all in its power to tackle it, the country's leaders said on Friday.
Opening a two-day Asia-Europe Meeting (ASEM) of 27 EU member states and 16 Asian countries, President Hu Jintao urged a rapid response to the turmoil, which he said was posing various challenges to the world's fourth-largest economy.
"The global financial crisis has clearly increased the uncertainties and unstable factors in the Chinese economy's development," Hu said.
He was speaking as stock markets worldwide continued to tumble as investors priced in the probability of a long recession in much of the world.
"The global financial crisis has been constantly spreading and worsening, creating a severe shock to global economic growth," Premier Wen Jiabao told the opening of the summit.
The European Union wants China, with the world's biggest stash of currency reserves, to play a full part at a crisis summit that U.S. President George W. Bush is convening next month to help shape global financial reforms and tackle the economic imbalances at the root of the crisis.
French President Nicolas Sarkozy said he hoped the ASEM summit would agree on a joint position for the November 15 talks.
"I have wanted this meeting," Sarkozy said referring to the Bush summit, "and I hope that we can come up with a common set of initiatives so that the same causes don't produce the same effects," Sarkozy told Hu ahead of the formal ASEM sessions.
CHINA'S CONTRIBUTION
German Chancellor Angela Merkel said China was receptive to taking part an international drive for new rules to avert a repeat of the present crisis.
"There's support over here for the idea that we need order in financial markets and a financial market constitution with international character," Merkel, who had earlier met Hu, said.
"I think China will make its contribution to the stabilization of the world economy," she told reporters.
The two days of formal ASEM sessions in Beijing's Great Hall of the People are set to be a regimented march through an agenda covering economic cooperation, climate change and development.
But meetings on the sidelines helped clarify what leaders want other countries to do -- and plan to do themselves -- to seek an escape from an economic slump.
On Friday morning, the ASEAN group of Southeast Asian states agreed at talks with Japan, China and South Korea to upgrade a long-established $80 billion web of currency swap lines among central banks in the region.
The purpose is to allow a country facing a foreign exchange crisis to rapidly call up financial firepower by swapping its currency for those of its neighbors, or for dollars.
The aim would be to sell the borrowed money in the foreign exchange market to stem pressure on the currency under attack and so avert a repeat of the market meltdown that plunged several Asian countries into deep recession a decade ago.
"DISASTROUS CONSEQUENCES"
Asia has fared better during the latest bout of turbulence on global markets. ASEAN's leaders expressed confidence that the group's financial sector remained "solid and sound."
"Nevertheless, precautionary actions are needed to send a clear and unequivocal signal that ASEAN is resolute and better prepared than 10 years ago when the financial crisis hit the region in 1997," ASEAN said after its own pre-summit talks.
ASEAN groups Cambodia, Malaysia, Indonesia, Singapore, Vietnam, Philippines, Laos, Thailand, Myanmar and Brunei.
Governments worry that banks throughout the region will come under pressure as global economic conditions worsen. South Korea, even though it has $240 billion in currency reserves, had to unveil a $130 billion bailout package for its banks on Sunday.
"Leaders at the meeting shared the need of stepping up regional cooperation to cope with the global financial crisis and to coordinate policies," South Korea's presidential office said after the talks with ASEAN that endorsed beefing up the swaps scheme.
Not all the talk over the two days will be financial. The ASEM meeting will also discuss food security and global warming.
Polish Prime Minister Donald Tusk said he wanted countries to reaffirm their commitment to achieving progress in talks on climate change and not use the global credit crisis as an excuse.
"If we give up this process, that could bring disastrous consequences, especially for poor countries," he told reporters.
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