Strengthening East Asia economic cooperation<\/p>\n
By Li Tieying<\/p>\n
This is the second of two articles based on a presentation at
\nthe Indonesian Institute of Sciences in Jakarta on Feb. 16.<\/p>\n
JAKARTA (JP): China, though not directly involved in the East
\nAsia crisis, was affected as well. Now, what lessons have we
\nlearned from the crisis?<\/p>\n
In the first place, developing countries should be very
\ncareful when they open their capital markets.<\/p>\n
China has yet to completely open its capital market and there
\nare still strict capital management and control measures in many
\naspects. This is an important reason why China was not involved
\nin this crisis.<\/p>\n
But globalization and internationalization of production
\ndemands objectively that all countries loosen management and
\ncontrol over their capital markets and that financial
\nliberalization be realized. China is no exception and will
\neventually open its capital market, especially after its entry
\ninto the World Trade Organization.<\/p>\n
However, the world financial system cannot guarantee the
\nsecurity of international finance. The financial systems of
\ndeveloping countries are rather fragile and vulnerable to outside
\nattacks.<\/p>\n
Secondly, therefore, the capital market should be opened in an
\norderly manner and matching policies and measures should be
\nadopted; a set of risk-prevention and early warning systems
\nshould be established.<\/p>\n
Caution should also be taken with foreign debts and the scale
\nof short-term foreign debts should be controlled.<\/p>\n
For the most severely hit countries, factors beyond control of
\nforeign debts and particularly the inability to repay the huge
\namount of short-term debts were the main causes of this crisis.<\/p>\n
In China, the scale and structure of debts are within a
\ncomparatively safe scope, which is why a debt crisis has not
\ntaken place.<\/p>\n
Third, the management of financial institutions should be
\nstrengthened and relations between the banking sector and the
\ngovernment should be straightened out.<\/p>\n
In some countries in East Asia, the lenient, nontransparent
\nand ill-managed financial systems heavily contributed to the
\nlarge number of bad debts. China's experience shows that the
\nlarge scale of policy loans lent to loss-making state-owned
\nenterprises was a major reason for bad debts.<\/p>\n
China's financial reform is now being conducted in an orderly
\nway. The priority is to straighten out relations between the
\nbanking sector and the government, to strengthen the management
\nof the banking sector while reducing intervention from government
\ndepartments and to promote the marketization of the financial
\nindustry.<\/p>\n
Fourth, new and high-tech industries should be the forerunner
\nin the further adjustment of the industrial structures.<\/p>\n
To reiterate, the problem of disproportion of the industrial
\nstructures in the East Asian region is an important reason for
\nthe financial crisis.<\/p>\n
In the mid-1990s, a new round of adjustment of the world
\nindustrial structures, with information technology as the
\nforerunner, unfolded, but East Asia lagged behind.<\/p>\n
The production capacity of traditional labor-intensive
\nindustries is stagnant in East Asia and recent years has seen the
\ntrend of insufficient domestic demand and saturation of the
\nconsumption market. An economic recession would easily take place
\nwithout the pioneering of new industries and a new consumption
\nmarket.<\/p>\n
China is a big industrial country with a sound new and high-
\ntech foundation. We cannot wait for industrial transfer of other
\ncountries and must take initiatives to increase input in science
\nand technology, to develop new and high-tech industries, to
\npromote industrial upgrading and to reduce basically the chance
\nof the happening of financial crises.<\/p>\n
The year 1999 witnessed the recovery of economies in East
\nAsia. The economic situations of the five most severely hit
\ncountries picked up and other economies in this region also
\nimproved.<\/p>\n
There are many favorable conditions for the economic recovery
\nin East Asia, for instance, the high deposit savings rate, the
\ngreat attention paid to education, the high degree of openness to
\nforeign capital and technology, the developed trade networks, the
\nhuge young labor force and the strong cohesion of the society and
\nso on. These \"East Asian characteristics\" will greatly increase
\nthe potential for development of East Asian economies.<\/p>\n
East Asian countries must now make full use of these positive
\nfactors to maintain and consolidate economic recovery. The
\ncountries need to further adjust their macroeconomic policies,
\nstep up adjustment of economic structures, deepen financial and
\nenterprise reforms, increase input in science and technology,
\nimprove productivity, perfect the market mechanism and rules and
\nregulations and eliminate corruption. Only in this way can the
\neconomic development of East Asia have a brighter future.<\/p>\n
One of the profound lessons from this financial crisis is that
\nthe recovery and development of East Asian economies require not
\nonly the persistent promotion of reforms and economic structural
\nadjustment, but also further strengthening of coordination and
\ncooperation.<\/p>\n
Cooperation between China and East Asia began a long time ago
\nand this cooperation has withstood the trials of the crisis.<\/p>\n
China has close economic links with various East Asian
\ncountries and regions. After the crisis, the Chinese government
\nadopted measures to stabilize the economy and to overcome the
\ncrisis, which included efforts to provide aid to the most
\nseriously hit countries through the International Monetary Fund
\nframework and bilateral channels. The Chinese government also
\npromised to keep the exchange rate of its currency, the renminbi,
\nstable; the currency has not devalued during more than two years.<\/p>\n
Of course, we have paid a heavy price for it. To promote
\neconomic development, we have formulated active financial
\nmeasures to increase the issuance of national debt and to
\nstimulate domestic demand. China also continues to expand and
\ndeepen reforms, particularly of the financial system, which will
\nraise the ability to guard against more financial risks.<\/p>\n
The policies of the Chinese government to stabilize its
\ncurrency's exchange rate and to stimulate domestic economic
\ngrowth have paid off. This fully demonstrates the highly
\nresponsible attitude of the Chinese government toward this crisis
\nand its sincerity to cooperate closely with East Asian countries.<\/p>\n
A developed China has also proved to be beneficial to the East
\nAsian region and to the world at large. Some people have
\nexpressed their concern about a developed and strong China, and
\nothers with ulterior motives have spread the theory of \"the China
\nthreat \" -- which the government has repeatedly denied.<\/p>\n
China sincerely hopes and will make unremitting efforts to
\nstrengthen cooperation with other countries, in which the
\nstrengthening of cooperation with East Asian countries is a focal
\npoint in China's foreign relations.<\/p>\n
The primary task for cooperation in East Asia is to further
\ncreate a peaceful environment for smooth economic development. We
\nshould strengthen cooperation in trade, finance, investment and
\nscience and technology and in the financial field.<\/p>\n
Leaders of 13 East Asian countries held an informal summit
\nmeeting in Manila last November, the third of its kind and the
\nfirst in which a joint statement was issued. They have reached
\nmany common understandings on strengthening cooperation. Efforts
\nare needed to consolidate this cooperation mechanism and to
\nimplement concrete economic projects. Cooperation in East Asia
\ncomplements other cooperation in the world and in the Asia-
\nPacific region.<\/p>\n
There are 10 countries in ASEAN that are close neighbors of
\nChina which are important in China's diplomatic strategies.<\/p>\n
China and ASEAN countries are all Asian developing countries,
\nsharing a common cultural background and a strong sense of
\nidentification, and holding similar views on the idea of values,
\nhuman rights, democracy and on many international affairs.<\/p>\n
China and ASEAN countries can complement each other in natural
\nresources, technology and capital and human resources. In recent
\nyears, ASEAN has become the fifth largest trading partner of
\nChina and there is a great potential for further expansion of
\ntrade. There is indeed competition in the export market and
\nproducts, but there are more opportunities for economic
\ncooperation.<\/p>\n
In recent years, China and ASEAN countries have established
\nmany channels for exchange and cooperation, including mutual
\nvisits by head of states, dialogs between foreign ministers,
\nconsultations between high-ranking officials, the ASEAN Regional
\nForum (ARF), non-governmental contacts and so on.<\/p>\n
Mechanisms such as China-ASEAN Cooperation Committee, China-
\nASEAN Scientific Committee, ASEAN Beijing Committee, etc. have
\nbeen established. At the end of 1997, a good neighborly and
\nmutual trust partnership was set up between the two sides.<\/p>\n
Such a cooperative relationship is not only in the interests
\nof the two sides but also conducive to peace, development and
\nstability in the Asia-Pacific region.<\/p>\n
The writer is president of the Chinese Academy of Social
\nSciences and a member of the political bureau of the Central
\nCommittee of the Communist Party of China.<\/p>",
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