CCTV.com - CNTV English - CCTV News

Time to unwind stimulus in East Asia

07-22-2010 15:45 BJT

BEIJING, July 22 (Xinhuanet) -- Emerging East Asia is virtually assured of a V-shaped recovery from last year's economic slump. It is still too early to proclaim that the "V" stands for "victory", though. But with the recovery on track, it is now time to unwind the policy stimulus that has helped power the recovery. Whether or not the recovery is sustainable depends heavily on the timing, policy mix and pace at which the economic stimulus is withdrawn.

As governments begin to unwind their policy stimulus, a "money first" strategy - in which policymakers normalize monetary policy first and consolidate fiscal policy later - is appropriate for most of the emerging East Asian economies. Considering the need to rebalance the region's sources of growth, there is merit in normalizing monetary conditions through a judicious mix of currency revaluation and interest rate adjustments rather than through policy rate hikes alone.

The pace at which economies unwind their stimulus should depend on the speed of recovery as well as evolving risks. So, the authorities must ensure that the private sector is strong enough to take over the slack created by the withdrawal of policy stimulus.

The Chinese authorities are carefully pulling back the stimulus by putting a cap on banks' lending, increasing bank reserve requirements and giving the yuan a bit more flexibility. The aim is to contain inflationary pressures, avoid overheating and keep potential asset bubbles (in the real estate sector) in check while maintaining robust growth.

In the Republic of Korea (ROK), Malaysia, Singapore and Thailand, normalization has already begun, and should continue at what appears to be an appropriate pace. And countries such as Indonesia, the Philippines and Vietnam, which are yet to start unwinding their policy stimulus, may need to start soon. In every case, unwinding policy stimulus should be in step with the speed of the region's recovery, yet always mindful of the risks facing the global economy.

With households, enterprises and even governments in advanced economies of North America and Europe deleveraging and restructuring their balance sheets, demand for the products "Factory Asia" makes can no longer be counted on as a primary source of growth. Without shunning globalization or turning inward to "Fortress Asia," developing economies in the region will need to increase cooperation and deepen economic integration, using their huge savings to finance cross-border infrastructure, ease intra-regional trade and investment, and develop more sophisticated financial markets.

Editor:Jin Lin |Source: Xinhua

Hot Videos view more

The celebrations are still continuing as the victorious coach, Joachim Loew, has been honored for his achievement in his hometown of Freiburg.
Germany coach Loew honored in hometown of Freiburg

Chinese men´s national team continued its preparations for next year´s Asian Cup, as they managed a one-all draw against visitors Jordan during a football friendly in Harbin, the capital city of Northeast China´s Heilongjiang Province.
China held to 1-1 draw by Jordan

The defending world champs came into the contest with a perfect 6-and-oh record, but they would be in for a tough first half before opening things up in the second.
USA beat Slovenia 119-76 in quarter-finals

Hot Stories more

UK authorities believe killer of James Foley is a British national

Across the UK the hunt is on for James Foley’s killer, who authorities believe is a British national. As Richard Bestic reports from London, Prime Minister David Cameron cut short his summer break to lead his government’s response.

Israeli war jets renews Gaza strike as truce talks stalled

Three Palestinians were killed and 40 others wounded in the intensive Israeli war jets´ airstrikes on the Gaza city on Tuesday night, shortly before an end of a 24-hour ceasefire in the Gaza Strip,

Missouri police arrest dozens after violent night

As the protests in the town of Ferguson, Missouri turned violent with police facing ´heavy gunfire´ from some ´criminal elements´, cops fired tear gas, stun grenades and arrested 31 demonstrators on Monday night.

Picture in news more

More Video News

Choose TV Program