By Dune Lawrence
Oct. 24 (Bloomberg) -- Chinese President Hu Jintao said maintaining his country's economic growth rate, the fastest among major economies, is the best way to combat a credit crisis that threatens a global recession.
``The fundamentals of the Chinese economy have not changed,'' Hu said at the opening of a biennial summit of Asian and European leaders today in Beijing and after China reported its slowest growth in five years in the third quarter. ``We must first and foremost run our own affairs well.''
The two-day Asia-Europe Meeting, known as ASEM, is the first between Asian leaders since bank failures, plunging stock markets and weakening currencies amplified fears that the world is headed for a prolonged economic decline. China was pressed ahead of the meeting to get more involved in combating the crisis by attendees, including European Commission President Jose Barroso.
``It is an obligation for us to work together,'' French President Nicolas Sarkozy said during a speech at the opening ceremony, where he appealed for support for European efforts to ease the crisis. ``Europe needs Asia, it needs Asia's growth, Asia's intelligence and its creativity.''
China is seen as key to any global response because it has the world's fastest-growing major economy and $1.9 trillion of currency reserves, an amount larger than Canada's gross domestic product.
Credit Freeze
Credit markets have frozen worldwide amid $660 billion in mortgage-related losses that have forced central banks to pump $2 trillion into bailouts for failing financial institutions. The benchmark MSCI Asia Pacific Index has plunged 49 percent this year.
China ``appreciates'' measures taken by other countries and pledged to coordinate policy to help cope with financial turmoil, Hu said. China also called for increased international cooperation to create a ``fair and equitable'' global financial system and urged the International Monetary Fund to increase its surveillance, according to a statement from the Ministry of Finance.
A draft agreement from summit leaders on the financial crisis echoed China's wishes, saying the IMF should ``play a critical role'' in assisting countries affected by the crisis, according to a copy published by Reuters.
China has also agreed with 10 Southeast Asian nations, along with Japan and South Korea, to finalize a proposed $80 billion fund to shore up Asian exchange rates by the end of the year, Surin Pitsuwan, Secretary General of the Association of Southeast Asian Nations, said in an interview with Bloomberg Television.
China's Response
The ASEM meeting is one of several in the coming weeks that will focus attention on China's response to the crisis.
President George W. Bush has invited leaders from the Group of 20 industrialized and developing nations -- including China - -to attend a Nov. 15 summit in Washington, 11 days after the U.S. presidential election.
Finance ministers from the Asia-Pacific Economic Cooperation group gather in Trujillo, Peru, starting Nov. 6. APEC's heads of state get together in Lima on Nov. 22. The G- 20's finance ministers and central bank governors convene in Sao Paulo beginning on Nov. 8.
Thailand has proposed that China ease currency-conversion restrictions to facilitate the pooling of reserves and create a $350 billion fund to protect the region's currencies and buy stocks and bonds, said Thailand's Deputy Prime Minister, Olarn Chaipravat, in an interview in Bangkok on Oct. 22.
``The message of this initiative is for China to consider whether or not China would open up its banking system and allow the strongest currency in the world, which is the Chinese yuan, relative to anybody, to be the rightful and anointed convertible currency of the world,'' he said.
Crisis Lessons
Lessons from the Latin American debt crisis and Asian financial crisis are that mechanisms must be put in place rapidly to aid vulnerable markets, and China is one of the few countries with resources to play a leadership role, wrote Citigroup Inc. Senior Vice Chairman William Rhodes in the Financial Times.
China will be forced to take proposals from other Asian countries seriously, said Steve Tsang, a fellow in modern Chinese studies at St. Anthony's College, Oxford, U.K.
``If the region is financially destabilized, it will have more of an impact on China'' than the banking crisis in the U.S. and Europe, where a slowdown in consumer spending may choke off demand for Chinese products, Tsang said.
To contact the reporter on this story: Dune Lawrence in Beijing at dlawrence6@bloomberg.net
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