Honolulu: Asia-Pacific leaders will call on countries on Sunday to do what they can to prop up economic growth, rallying around the common threat from Europe’s debt crisis despite divisions over trade and currency policies.
Fresh off a rare success in securing agreement on the outlines of a regional trade deal, the heads of the 21 nations that make up the Asia-Pacific Economic Cooperation (Apec) forum will turn their attention to the more immediate problem of preventing contagion from Europe.
After talks on Sunday, leaders are expected to release a statement expressing concern that Europe’s unresolved debt troubles will spill over into the Asia-Pacific region.
US President Barack Obama and Chinese President Hu Jintao shake hands during the Apec Summit in Honolulu, Hawaii 12 November 2011. Reuters.
Unlike the United States, where the Federal Reserve has already cut interest rates to near zero, many Asian economies have room to reduce benchmark borrowing costs to try to spur faster growth. Most of them also boast healthy public finances, giving them more leeway to boost government spending.
“We’re not going to see massive growth out of Europe until the problems are solved,” US President Barack Obama said. “And that will have a dampening effect on the economy. But if we can at least contain the crisis, then one of the great opportunities we have is to see the Asia-Pacific region as an extraordinary engine for growth.”
But that engine is slowing down and inflation-wary Asian leaders don’t necessarily want to rev it back up. China is reluctant to unleash another huge stimulus package like the one it launched in 2009 because of concern over wasteful spending.
China’s economic growth will likely dip below 9% next year for the first time in a decade. That would still be four times faster than the US economy is likely to grow.
Although leaders will put on a show of unity, the Apec summit revealed some growing rifts, particularly between the two biggest players, the United States and China.
A senior White House official said Obama cautioned China’s President Hu Jintao that Americans were growing increasingly impatient and frustrated with the pace of change in China’s economic policy.
Obama and Hu met on Saturday, and White House spokesman Jay Carney said Obama was “very direct” with the Chinese leader about the currency and trade issues during their meeting.
The United States has long complained that China keeps its yuan currency artificially weak to give its exporters an advantage. China counters that the yuan should rise only gradually to avoid harming the economy and driving up unemployment, which would hurt global growth.
Hu was quoted by Chinanews.com in Beijing on Sunday as saying a big appreciation in the yuan against the dollar would not help US trade and unemployment problems.
“The trade deficit and unemployment problems are not caused by the yuan exchange rate. Even a major appreciation of the yuan would not resolve the problems facing the United States,” Hu said in comments echoed by China’s foreign ministry.
Apec corporate executives meeting in Honolulu expressed some frustration with China as well, although most said they preferred a soft approach to avoid unsettling business relationships.
“Even among friends there are sometimes disputes and there are moments of tension,” said John Lechleiter, chief executive of drug company Eli Lilly. “I hope that as these things arise, they can be dealt with diplomatically.”