Economic crisis unites Asian giants

Taro Aso, Japan’s prime minister, Wen Jiabao, the Chinese premier, Lee Myung-Bak, South Korea’s president, said in a joint statement issued after the meeting that Asia was “expected to play a role as the centre of world economic growth in order to reverse the downward trend of the world economy”.

Currency swaps

The three countries, along with the 10-nation Association of Southeast Asian Nations (Asean), had in October agreed to create an $80bn joint fund by next June to avert regional financial turmoil.
  
The fund would supercede the Chiang Mai Initiative, a system of bilateral currency swaps set up after the 1997-98 Asian financial crisis.

However, much of the significance of the meeting was symbolic as China and South Korea refused to have high-level meetings until 2006 with Japan over disputes related to the second world war. 

“Co-operation between … our three countries to overcome difficulties will have real significance as the financial crisis has a big impact on economies around the world,” Wen told Aso before they were joined by Lee.

China, Japan and South Korea have agreed to hold similar meetings every year in the future.

Subramaniam Pillay, an associate professor in international finance with Nottingham University in Malaysia said that the summit was historic.

“Prior to this, the countries had only met on the sidelines of other summits, like Asean summits,” he said.

“It is a good move because these countries are the engines of growth for the rest of east Asia.”

Economic co-operation

Out of the three North Asian economies, South Korea has been hit hardest by the global financial crisis, with the country’s central bank saying that the country is set for its slowest growth in over a decade.

Seoul has committed $130bn to prop up its banking system and another $25 billion in fiscal spending and tax cut plans to stave off a recession.

Japan said on Friday that it will boost its existing stimulus plans and increase its reserve fund for bank rescues to $131bn.

But the package may not be enough to tackle the recession in Japan, Jan Friederich, a senior economist with the Economist Intelligence Unit, told Al Jazeera.

“I think the additional stimulus that Japan has announced is not really that strong. Japan has a very large public debt burden and therefore is quite reluctant to increase that burden much more. It is really not enough to prevent the economy from further recession.”

Tokyo has not said whether it will act to stop a surging yen from pushing the Japanese economy deeper into recession.

China, which is also facing a slowdown of its hitherto surging economy, on Wednesday said it will boost public spending and cut taxes.

Beijing has already launched a four trillion yuan ($586bn) stimulus plan but Liu Mingkang, China’s senior banking regulator, said on Saturday that the country may experience outflows of capital and could face deflation.

Territorial disputes

The Northeast Asian nations also discussed territorial matters.

Aso told the Chinese prime minister that Japan was concerned by the entry of Chinese boats into waters near disputed southern islands known as the Senkaku in Japanese and the Diaoyu in Chinese, a Japanese official said.

Wen said that the territory belonged to China but said that dialogue would solve the issue.

Tokyo had protested to Beijing on Monday after the ships spent nine hours near the islands, which are claimed by Japan, China and Taiwan.

South Korea and Japan are also in dispute over a group of islets which lie near fertile fishing grounds and possible maritime deposits of natural gas.

However, the subject of Japan’s pre-1945 colonisation of Korea and its aggression on the Asian mainland in the first half of the last century have not made the summit agenda.