G-20 summit lifts Asian stocks

Posted at: AsiaNews
April 04, 2009

There are more positive signs, including rising industrial output in China. The G-20 summit in London marks the end of the “Anglo-Saxon” model in favour of more checks, no tax havens and a greater role for the International Monetary Fund.

Hong Kong (AsiaNews/Agencies) – Stock markets in Asia rose in response to the steps adopted by G-20 leaders against the global recession. China’s industrial sector is also showing signs of recovery.

Japan’s Nikkei 225 Stock Average jumped 1.2 per cent by mid-morning. Shanghai was up 0.9 per cent as Hong Kong gained 0.5 per cent.

China’s Purchasing Manager’s Index (PMI), a composite index that links industrial output to demand, rose to a seasonally adjusted 52.4 in March from 49 in February and 38.8 in November. When the PMI index exceeds 50 it is a sign manufacturing is expanding; when it falls below 50 it means that industry is contracting.

Before leaving for the G-20 meeting Chinese President Hu Jintao said that his 4 trillion yuan (US$ 585 billion) spending programme had “begun to take effect.”

It is too early though to evaluate the impact of the decisions taken by the G-20 in London. But for many, including French President Nicholas Sarkozy, the deal turns the page on the Anglo-Saxon (US and UK) model of free markets by placing stricter limits on hedge funds and other financiers. Indeed the United States acknowledged that this crisis was largely US-made, resulting from the deregulation of the 1990s under President Bill Clinton.

In the British capital leaders also agreed to provide more resources to international institutions (US$ 1 trillion) like the International Monetary Fund (IMF) to help developing countries. They also decided to put more money to boost the financial sector and markets (up to US$ 5 trillion by 2010) and agreed to publish a list of tax havens, a move China initially tried to resist.

In exchange China and other emerging nations like India will get a greater say in how the IMF and the World Bank are run with a possibility of joining their executive boards (the IMF’s current managing director is European).

At the same time the IMF will play a major role in monitoring the world economy.
Special Drawing Rights (SDR) will be enhanced as the IMF’s “international currency” with which it will provide loans.

Despite all the good intentions the meeting at best reduced the effect of the recession; it did not eliminate it.

The Paris-based Organisation for Economic Cooperation and Development (OECD) predicted this week that global trade will shrink 13 per cent this year with a negative impact on employment.

G-20 leaders are set to meet again in September.