IMF/World Bank conference provides reassurance for Asia

The opening yesterday of the annual conference of the World Bank/International Monetary Fund in Hong Kong could not have been better timed from the point of view of the Asian nations. For China, it provided an audience of the world's financial elite, just days after the 15th Congress of the Communist Party endorsed policies on reforming its state sector which will require substantial new international investment. For the badly-mauled tiger economies of south-east Asia, it brought reassurances from the world's leading financial officials of their faith in recovery and future growth at a time when the one thing they need is confidence. The conference was opened by Chinese premier, Mr Li Peng, who took the opportunity to reaffirm that China would grow at 7 per cent a year in the first decade of the next century and that it would join the world's rich nations by the middle of the next century.

China is hosting the annual meeting for the first time, in the same waterfront convention centre where it re-assumed sovereignty over Hong Kong on July 1st. For Mr Li, the applause of 3,000 delegates was an endorsement of China's economic policies, and of the care which Beijing has taken in keeping its promise to allow Hong Kong to continue to operate independently as a major world financial centre. "By the middle of the next century, China will achieve all-round modernisation and become a prosperous, democratic and culturally-advanced socialist country," he said. World Bank president, Mr James Wolfensohn followed Mr Li to plead for more openness in countries like China. "Financial markets are demanding more information disclosure," said Mr Wolfensohn. "They are making swift judgments about the quality and sustainability of government policies based on that information. We have seen that, without sound organisation and supervision, a financial system can falter, with the poor hurt most." For 17 years the World Bank has been the strongest supporter of China's economic reforms, investing $28 billion and providing expertise and advice which has helped shape domestic policy on agriculture, education, infrastructure, the environment and price reform. Now Mr Zhu Rongji, as the architect of China's economic restructuring, is looking to the world's investors for the funds he needs to reform failing stateowned enterprises. In promising a "new investment system in which the roles of the government and the enterprises are separated", Mr Zhu hinted that the Chinese were taking seriously the calls for greater openness.

He committed China to "increase the transparency of the trade regime, protect intellectual property rights and improve trade and investment environment."

US Treasury Secretary, Mr Robert Rubin gave an upbeat assessment of south-east Asian nations' chances of getting their economies back on track when he spoke to reporters yesterday. The collapse of the Thai baht in August triggered currency turmoil throughout the region and the IMF put together a $17.2 billion bailout package - in which China participated - in return for a programme of economic discipline by Thailand.

Mr Rubin said that the US, Japan and the IMF planned to meet regional finance officials soon to discuss policy choices. China was also expected to take part.

IMF managing director, Mr Michel Camdessus predicted a turnaround in south-east Asia though he warned markets would take time to regain confidence in Thailand. He said the economic outlook for the world was favourable, with steady growth and low inflation.

Warning Asian industrialists to start planning for the introduction of the euro, European Economic Affairs Commissioner, Mr Yves-Thibault de Silguy told delegates to a conference on European monetary union held on the fringes of the World Bank/IMF annual meeting: "I have no doubt that the euro will be introduced on January 1st, 1999. The EU minister also warned about the need for cutting structural employment by tackling high-cost social security schemes in Europe. "Euro or not, we have to take action at structural level and this means more flexibility in labour market entry and exits," he said. Mr de Silguy added: "Economic and Monetary Union is the final step in creating a truly single European market."