By John F. Harris
Washington Post Staff Writer
Friday, July 3, 1998; Page A01

HONG KONG, July 3 (Friday)—Expressing confidence in Asia's long-term economic outlook, President Clinton declared today that the United States will offer more help to the struggling region if its governments tackle the problems of "cronyism, corruption and overextended credit" that he said had caused the current crisis.

"Restoring economic stability and growth will not be easy," Clinton told an audience of Asian and American business leaders at Hong Kong's massive Convention and Exhibition Center. "The steps required will be politically unpopular and will take courage. But the United States will do all we can to help any Asian government willing to work itself back to financial health."

Clinton did not offer specifics on what form such U.S. efforts might take, but he did praise as "potentially quite significant" a number of steps Japan announced Thursday to overhaul its battered banking industry, which has acted as a drag on economies throughout the Pacific region. Financial analysts and brokers were not impressed, however, as the Japanese currency, the yen, fell sharply on world markets.

In the short term, Clinton acknowledged, U.S. markets may have gained a boost from Asia's malaise, as investors fled the region and put their money into the soaring U.S. economy. But he assured the audience that he does not consider this a silver lining. "Our futures are inextricably linked together," he declared, adding that, "over the long run, stable growth everywhere in the world is the best prescription for stable growth in America."

The president made plain that he believes many Asian economies were deflated through irresponsible risk-taking during earlier boom times. "Too many new skyscrapers, now vacant and in default, were built on shaky foundations of cronyism, corruption, and overextended credit, undermining the confidence of investors with sudden, swift and severe consequences," he said. He did not single out any particular country for censure, but the real estate glut he referred to was especially apparent in Thailand, Indonesia and Malaysia.

Clinton also voiced optimism that the United States and China will eventually reach an agreement on market access that would allow China to join the World Trade Organization,_a goal that eluded the administration at last week's Beijing summit. Such an agreement is important, he said, to promote greater openness and the rule of law in the region's economies.

Taking a soft rhetorical line toward Beijing, Clinton said he believes "China is willing to be a responsible international partner" but that it needs time to absorb the "economic transitions" buffeting its social fabric.

Clinton's speech came on the final stop of his nine-day journey through China, and aides said he had spent time polishing it to ensure it would strike a generally upbeat tone. They said he also wanted to make clear his belief that the fundamentals of Hong Kong's economy should ensure it a robust future under the "one China, two systems" policy that Beijing promised the territory.

It was the flickering prosperity of Hong Kong and the Asian Pacific region that dominated today's address, which came two days after this former British colony marked the first anniversary of its reversion to Chinese rule. Aides said Clinton, the first sitting president to visit Hong Kong, had regarded the speech as the second-most important of his trip -- after his address Monday to students at Beijing University on the link between political freedom and economic prosperity.

In remarks that are likely to have special resonance in this region -- and particularly in Hong Kong, where the issue has been hotly debated since last year's reunification -- Clinton also offered an implicit rebuke to politicians who invoke a concept of "Asian values," holding that people in the region value order and prosperity more than democracy and individual freedom.

To the contrary, Clinton said, "political freedom, respect for human rights and representative government are ultimately right and the best guarantor of stability." That has been a consistent theme of the president's China tour, but today Clinton apparently sought to make an encompassing statement about East Asia as a whole and the future of U.S. relations with it.

Clinton said democracy has taken permanent root in Japan, Mongolia, Philippines and South Korea, and he praised the recent democracy drive that dislodged President Suharto from power in Indonesia. On another matter, Clinton referred to the recent tit-for-tat nuclear tests in India and Pakistan and scolded both nations for attempting to "buck the tide of history" -- a tide on which he said nations will be carried to greatness through economic and intellectual leadership, rather than military prowess. By imposing U.S. economic sanctions on both India and Pakistan, the president said, "we don't seek to isolate India and Pakistan, but we do seek to divert them from a self-defeating, dangerous and costly course," and he urged both nations to forswear further testing.

Shortly after his arrival here Thursday night, Clinton said in an exchange of toasts with Hong Kong's Beijing-appointed chief executive, Tung Chee-hwa, that "our ties must grow stronger, and they will. This present financial crisis, too, will pass, if we work together with discipline and vision to lift the fortunes of our neighbors."

"Believe me, there is no one in America who is not eagerly awaiting the resumption of real growth and stability in the Asian economy, and we are prepared to do whatever we can to support it," Clinton said at Government House, the former residence of British colonial governors.

Air Force One arrived here from the city of Guilin, touching down at Hong Kong's glittering state-of-the-art Chek Lap Kok International Airport on the first day it opened to passenger service. The massive facility, which cost an estimated $20 billion to build atop a vast coastal landfill, was dedicated earlier Thursday by Chinese President Jiang Zemin, whose plane was the first to take off from the airport with passengers aboard. Air Force One was the first plane to land carrying passengers, according to White House press secretary Michael McCurry.

Tung, who has worked in New York and Boston and whose children hold U.S. citizenship, made clear in his toast that he also considers the financial crisis the most dire threat to Hong Kong's future. He noted how much things have changed since reunification with the Chinese motherland, even though Beijing has not moved to dominate the territory. "The eyes of the world have not averted their gaze" from Hong Kong since last year, he said. "But they have been transfixed by events we did not see coming, rather than those so confidently predicted by skeptics before reunification."

Appealing to the United States for "continued strong leadership," Tung said, "a stable [Japanese] yen exchange rate and a healthy Japanese economy is essential, not only for the financial stability of Asia but for the world as a whole."

Later today, Clinton met with members of Hong Kong's Legislative Council and held a separate, private session with Martin Lee, Hong Kong's leading democracy advocate, who was the biggest vote-winner in the territory's legislative elections in May. The administration originally had scheduled just one meeting, including Lee in the larger group, but changed the plan after Lee and his supporters protested.

Lee, who met with Clinton at the White House last year, had a 20-minute audience with the president. All the same, White House officials acknowledged that they sought to keep the meeting low-key, fearing a more prominent get-together might offend Beijing and detract from Clinton's primary mission of forging closer U.S.-China ties.

White House national security adviser Samuel R. "Sandy" Berger said afterward that Lee expressed gratitude to Clinton for coming to China and for speaking directly about human rights and democracy -- particularly here in Hong Kong. Berger said Lee told the president that the first year of Hong Kong's transition to Chinese control had gone well but that the pace of democratic reforms should be accelerated,

This afternoon, Clinton is to appear at a news conference, then spend several hours sightseeing with first lady Hillary Rodham Clinton, daughter Chelsea and mother-in-law Dorothy Rodham. Air Force One will then fly them home, with Clinton due at the White House Saturday morning -- Independence Day.

Apart from a busy schedule of official meetings and formal speeches on their China tour, the Clintons made time for excursions to some of the country's most famous sights -- including Xian's 2,200-year-old terra cotta warrior army and the Great Wall north of Beijing.

In Guilin on Thursday, Clinton followed a speech on balancing environmental concerns with economic development by taking a boat ride on the Li River. Along its banks, he saw some of China's most dramatic scenery and probably its most famous natural attraction -- the bamboo-lined peaks that soar above the river and the gigantic limestone rock formations that dot the countryside.