By Ariana Eunjung Cha
Washington Post Foreign Service
Sunday, October 26, 2008
SHANGHAI, Oct. 25 -- Leaders from Asia and Europe on Saturday called for new rules for and stronger regulation of the global monetary and financial system at the close of a two-day summit in Beijing as China assumed a leadership role in the crisis.
Chinese Premier Wen Jiabao said the world's economic problems had become so massive that measures beyond the many multibillion-dollar bailout packages announced might be necessary to avert further damage.
"We are very glad to see that many countries have taken measures that have initially proved effective. But this is not enough given the current situation, and more needs to be done," Wen said Saturday, a day after dire corporate earnings reports from all over the world pushed Wall Street to a five-year low.
Wen also said stricter regulation might be key to recovery. "Lessons should be learned from the financial crisis, and the responsibilities should be clarified for governments, companies and supervision, respectively," he said.
The Asia-Europe Meeting, last held in 2006, traditionally does not result in any policymaking. The gathering this year, however, took on a new urgency with the world teetering on the edge of a recession.
In a joint statement, the more than 40 leaders in attendance -- including Japanese Prime Minister Taro Aso, German Chancellor Angela Merkel and French President Nicolas Sarkozy -- said they recognized "the need to improve the supervision and regulation of all financial actors, in particular their accountability" and pledged "to undertake effective and comprehensive reform of the international monetary and financial systems."
Although the leaders spoke only of broad principles and did not offer specific proposals, it was clear the groundwork was being laid for a Nov. 15 meeting that President Bush is hosting in Washington.
The Beijing meeting appeared to be a victory for Sarkozy, who has taken the lead in representing his European Union colleagues in pushing for an overhaul of the world's financial systems and the creation of a "regulated capitalism" as soon as possible. Sarkozy has said such steps cannot wait until a new U.S. president takes office.
Bush has said, however, that translating ideas into law "must be a top priority for the next president and the next Congress."
Sarkozy said Asian leaders have joined their European counterparts in expressing a "willingness for the Washington summit to be a place where we make some decisions, and we have all understood that it would not be possible to simply meet and have a discussion. We need to turn it into a decision-making forum."
The major issues expected to be addressed by world leaders in the coming months and years include the International Monetary Fund's role in stabilizing economies, currency reform and measures to help prop up cross-border banks.
The participants in the summit said the IMF "should play a critical role in assisting countries seriously affected by the crisis." Merkel called for the IMF to become a "guard for the stability of the international finance system."
As more developing countries are being hit by the turmoil, the IMF is proposing an emergency program that would double borrowing limits and waive some of the fund's standard conditions for loans. The fund has agreed to lend Iceland $2.1 billion after the country's banking system collapsed.
For the past few weeks, China has stood on the sidelines as country after country became caught up in the financial maelstrom. Many countries have looked to China for leadership as the world's fastest-growing major developing economy. But Chinese leaders offered a standard response: China's first priority was protecting its economy.
China was slow to respond to calls for a meeting to discuss regional measures and was noncommittal about whether it would attend the Nov. 15 meeting, which will bring together the Group of 20 top economic powers and developing nations.
But with news this week that China's growth had decelerated to 9 percent, its lowest rate since 2003, the country's leaders appeared to step up.
On Saturday, Wen emphasized that China would not only attend the U.S.-hosted talks but also play an active role. "I think what we should do to cope with the crisis can be summarized as confidence, cooperation and responsibility," he said.
Shortly before the Asia-Europe Meeting began, China joined South Korea, Japan and 10 Southeast Asian nations in announcing the creation of an $80 billion fund that the countries could use to fight currency speculators.
China also announced that it had agreed to more "timely" phone conversations with Japan, with which it has had a tense relationship over apologies and reparations for atrocities committed during World War II.