By IPS Correspondents
BEIJING, Oct 26 2008 (IPS)

A two-day meeting of European and Asian leaders in Beijing has produced a joint statement pledging a coordinated response to the global financial crisis, but concrete action is seen dependant on the entry of Asia’s emerging economies into global policy-setting institutions.

Saturday's conclusion of the two-day 7th Asia-Europe Meeting (ASEM). Credit: China Gov't

While little specifics were offered on what would replace the Bretton Woods system, that has governed international finance since the end of World War II, European politicians appraised the meeting as a success in drawing the support of Asian countries for reshaping the global economic structure.

"The fact that so quickly all Asian leaders agreed on the principles that we brought to this meeting is a good demonstration of the possibility of reaching a consensus," European Commission President Jose Manuel Barroso told the media.

French President Nicholas Sarkozy – the architect of the plan to overhaul international capitalism and infuse the financial system with more regulation and better risk management – called the meeting very "helpful" for Asia and Europe to tackle the global financial crisis and build up common cause.

"We had discussed nearly all of the topics concerned by the two continents, including the most difficult issues," he said at a press conference at the end of the meeting. Sarkozy is looking to present his plan at the international conference on the financial crisis in Washington that U.S. President George W. Bush has scheduled for Nov.15.

"Financial innovation could help develop the economy, but financial supervision is even more important for the security of the financial system," he said at a press conference on the weekend.

Editorials in the state-controlled Chinese press have listed some very concrete demands as a trade-off for China’s deeper involvement in the financial rescue plan. "We are being called to action as responsible stakeholders but we need to seek our rights," said the ‘21st Century Business Herald’ on Monday.

"We want the U.S. to give up its veto power at the International Monetary Fund and European countries to give up some more of their voting rights in order to make room for emerging and developing countries," the editorial said. "And we want America to lower its protectionist barriers allowing an easier access to its markets for Chinese and other developing countries’ goods."

Renowned Chinese academic Lin Yifu, the World Bank’s newly appointed chief economist, predicted Beijing would stick to its cautious approach in dealing with the global financial crisis.

Speaking at an international forum to mark the 30th anniversary of China’s economic reforms, Lin said China’s "prescription" for the financial meltdown would be to "stimulate domestic demand".

"Relatively speaking, China is a country with scarce capital funds and it is hardly the time for us to export these funds and pour them into a country profuse with capital like the U.S.," Lin told the media on Sunday.

More than 40 leaders from Europe and Asia took part in the weekend discussions in Beijing that focused on the financial crisis. Asian powers discussed the launching of a regional monetary crisis fund to help countries in the continent cope better with global financial turmoil.

On Friday, members of the Association of South East Asian Nations (ASEAN) together with China, Japan and South Korea agreed to an 80 billion US dollar fund of central bank swap lines, intended to provide emergency liquidity to financially troubled nations. The scheme, agreed to be formed by mid-2009, is meant to replace the existing support arrangement of mainly bilateral swaps formed after the 1997 Asian financial crisis and is known as the Chiang Mai initiative.

ASEAN groups the Philippines, Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, Singapore, Thailand and Vietnam. The ten nations together with the three Northeast Asian countries are referred to as the ASEAN +3 grouping.

The plan to create an Asia foreign exchange fund was first agreed upon in May 2006, but negotiations stalled over the contributions made by each country. South Korea, Japan and China had agreed to contribute 80 percent, or 64 billion US dollars, of the total fund, with ASEAN nations pitching in the remaining 16 billion.

The participating nations have many details to iron out, including how much South Korea, Japan and China will respectively contribute, how the fund will operate and how much money can be provided to members.

But as talks in Beijing proceeded, South Korea appeared battered by the financial storm and doubts arose over its commitment to the fund. After stock markets and the currency plunged on Friday, the Central Bank of South Korea announced it would hold an emergency monetary policy meeting on Monday.

Meanwhile, Philippine president Gloria Macapagal-Arroyo called on China to take the lead in convincing other rich nations to give more to the fund.

"China has a tradition of or a track record for being very responsible member of the global economic order," she was quoted as saying. "While it is premature to say what China should do…we are confident China will continue to be a responsible member of the neighbourhood."

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