'Resilient' Asia able to fend off storms

WASHINGTON - Asia is much more able to weather financial storms with lessons learned from the region's financial crisis of 20 years ago, said a senior official at the International Monetary Fund.

"Asian economies have become much more resilient because of the lessons we learned" from the Asian Financial Crisis started in the summer of 1997, said Changyong Rhee, an economist and director of the Asia Pacific Department at the IMF.

"Now we understand the risk from the double mismatch problem - the maturity mismatch and the currency mismatch - and now we understand how to use flexible exchange rates as a shock absorber," Rhee said on Friday on the sidelines of the annual meetings of the IMF and World Bank.

"I think many Asian countries learned a lot," he said, citing currency account surpluses, high levels of foreign exchange reserves and much better fiscal consolidation in many Asian economies.

However, Asia, the fastest-growing region in the world, "should not be complacent," as credit expansions in the region after the 2008 global financial crisis are "quite rapid" and there are several frontier and developing Asian economies which haven't experienced the Asian financial crisis, according to Rhee.

"I wouldn't say that Asia is completely immune from the possibility of a crisis, but definitely Asia is much better equipped, much more advanced now, and they are much more resilient" to potential financial storms, he said.

In Rhee's view, Asia is also in a stronger position to handle the monetary policy normalization in the United States, which has raised interest rates four times since the recent financial crisis and launched the process of shrinking the Federal Reserve's $4.5 trillion balance sheet this month.

Meanwhile, there is uncertainty about trade negotiations and there is some movement toward more protectionist measures in some advanced economies, he warned.

"That's a real risk, but I think the risk is much reduced compared with what we awarded in April," Rhee said, adding that he hoped US President Donald Trump's visit to China in November will deliver positive news to the global economy.

In terms of economic growth and progress in China, Rhee said that "Chinese leaders have done a tremendous job" over the past five years.

He said China alone now accounts for 34 percent of global growth and has become its largest contributor.

The Belt and Road initiative is very important globally and in the region for the low-income and developing countries, said Rhee.

Asia needs more infrastructure investment and its growth model has proved that having the right infrastructure is a key element of economic development, he said.

Xinhua

(China Daily 10/16/2017 page11)