Business

Friday January 16, 2009

Don: Asia will save the world from crisis


KUALA LUMPUR: Asia will save the world from the financial crisis because history proves that it can, says the London School of Economics and Political Science’s head of department and professor of economics Danny Quah.

According to Quah, the world economy was stabilised through periods of US slowdown by East and South-East Asia (ESE Asia) and China.

“In 2001, for example, when US growth fell, ESE Asia and China grew by 78% and 34% more than the US,” he said.

When US growth turned negative in 1991, growth in both ESE Asia and China remained positive, Quah said during a talk entitled: Will Asia save the World here on Wednesday night.

Danny Quah

The Asian region now had a banking system that had not been extended aggressively which would work in its favour. “The banking system in this region is well capitalised and there is abundant liquidity,” he said.

“Financial markets respond to trust and confidence and that confidence has been seriously dented.

That’s nothing much we can do now except to pick ourselves up, shake off the dust and resume productivity,” Quah said.

The contribution of ESE Asia and China in the world economy was not limited to boosting world gross domestic product (GDP) but they also helped reduce the absolute numbers of poor people in the world.

“China on its own has brought over 600 million people out of extreme poverty in the last quarter century,” Quah said.

To a question from the floor, Quah said it was highly unlikely that a subprime crisis such as the one in the US would occur in China.

“No, I don’t think that will happen, it is highly unlikely that any bubble is brewing in China,” he said.

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