Mon, May 13, 2002 - Page 17 News List

Delegates say regional recovery underway

ECONOMY Although stronger-than-expected growth figures for the first half helped to raise spirits, some pundits warned that that the recovery may not be very strong

REUTERS , SHANGHAI

Chinese Finance Minister Xiang Huaicheng answers questions following the ADB meeting in Shanghai yesterday.

PHOTO: REUTERS

Asia's policy makers wrapped up a three-day meeting yesterday brimming with optimism that last year's economic woes were over, but institutional investors warned recovery was still fragile.

Asia may be banking too much on a strong global rebound to lift the exports that power regional growth, fund managers said on the sidelines of the Asian Development Bank annual meeting in Shanghai, China's richest city and a stark reminder to neighbors of its vast potential and competitive threat.

A stronger-than-expected recovery in the first quarter may also sap Asia's commitment to the reforms and restructuring essential to preventing a repeat of the crisis that pummelled the region in 1997 and 1998.

"We may be a little more cautious than some others. For one reason, they seem to link a lot of the recovery here on a very strong rebound in the US," Richard Frank, chief executive officer of Darby Overseas Investments, a private emerging market investment firm, said.

"I'm still not so sure we're going to have such a strong recovery in the United States and in turn that would provide less of a pull here," he said.

Most of the ADB's 43 Asia-Pacific members, gathered amid the towering skyscrapers of the thriving Chinese financial hub, extolled a rapid turnaround from last year, when several countries slipped into their second recession in just four years.

"The regional economy is showing resilience," ADB President Tadao Chino said in closing remarks. "In fact, many developing member countries are achieving faster economic recovery than we had anticipated earlier."

Finance Minister Yashwant Sinha from India boldly predicted the world's second-most populous country would eradicate poverty by 2015, while booming China was supremely confident of continuing to lead the pack after escaping relatively unscathed last year.

With growth picking up and financial strains conspicuous by their absence, a spat over an ADB-funded water treatment plant in Thailand drew some attention away from the meeting.

Developed world finance ministers slammed the project for dumping toxins on mussel farms and called on the Manila-based bank to review its lending practices. A contrite Chino, calling the episode very painful, promised to comply.

Asian finance chiefs fretted about their ability to rival China's vast pool of cheap labour, which is sucking in hundreds of billions of dollars of foreign investment.

China accounts for around three percent of global trade now but economists said this could easily double over the next two decades raising China's profile further. It would also make specialisation key for its Asian neighbours.

"China will therefore have a much greater role in the world economy than Korea or Japan. China will have big US companies lobbying on its behalf. Japan doesn't," said David Hale, global economist at Zurich Financial Services.

For its part, Chinese policy makers were keen to be seen supporting regional cooperation.

Chinese Finance Minister Xiang Huaicheng said China would put aside political rifts with Japan in lending its hand to promoting Asian development.

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