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Back words with action

(China Daily)
Updated: 2008-10-14 07:49

The rebound of Chinese shares as well as a number of regional markets on Monday represents a tentative return of market confidence. It shows that weekend efforts by world leaders have helped soothe anxious investors' minds for the moment.

However, to change the tide of a worsening global financial crisis, policymakers around the world need to come up with not only political determination. Concrete actions to unblock the financial system's plumbing are urgently needed if markets are to be jolted out of their panic.

The worst falls for decades in markets of major industrialized nations last week have galvanized participants at the meeting of the Group of Seven and the annual sessions of the International Monetary Fund and World Bank into agreeing on a coordinated global response to the unfolding financial crisis.

Clearly, actions by one country alone can no longer prevent a frozen financial system from doing more damage to an increasingly shaky global economy.

That is why it is high time for developed countries to "take all necessary steps" to unfreeze their battered credit and money markets. And their financial ministers' promise to "take decisive action" to systematically support important financial institutions and prevent their failure has come as a needed boost to market confidence.

In a time of financial crisis, it will be difficult for policymakers to find ways to stop the panic with a long-term perspective. Lack of fast action can often intensify public fears and aggravate the crisis.

Yet, as the rescue actions become global to ensure parallel acts in every significant country can be mutually supportive, it is far more important for policymakers to shape a comprehensive solution with full consideration of its global impact in the long run.

Dropping money from helicopters may save the financial systems in distress for a while. But it will do little to tackle the root cause of the deepening financial market turmoil and the slowdown of the world economy.

To weather the current crisis and pursue sustainable growth, each country has different needs in adjusting its growth pattern.

For China, a fast-growing developing economy that has long relied on export for growth, the predominant task is to boost domestic demand, particularly domestic consumption, to balance its economic growth.

The Chinese authorities had just made this clear at the high-profile meeting of the Communist Party of China that ended on Sunday and focused on putting it into practice.

For policymakers in developed countries, they also need to rethink the growth pattern that has led their economies awry. To halt the crisis, actions in this regard are definitely no less important than emergency measures they have taken so far.

(China Daily 10/14/2008 page8)