China, US join forces as world recession looms

Channel News Asia
China, US join forces as world recession looms
Posted: 04 December 2008 1009 hrs

BEIJING: US and Chinese officials joined forces Thursday against the world financial crisis, vowing to ward off the threat of a world recession as major US automakers appeal to be rescued from bankruptcy.

"Jointly dealing with the international crisis is the most pressing task we are now facing," Chinese Vice Premier Wang Qishan said at the start of a US-China economic meeting in Beijing with US Treasury Secretary Henry Paulson.

A cabinet-level delegation from Washington was in Beijing after more data poured out of the United States this week showing the world's biggest economy is diving deeper into recession.

Wang said: "The current top priority is to... restore market confidence as soon as possible, to curb the financial crisis from spreading and to avoid overall global economic recession, and especially to limit the impact on developing countries."

Paulson said that at this meeting of the Strategic Economic Dialogue (SED) "the US and China will focus on how we can work together through international forums to strengthen the global economic system."

Data released Wednesday showed the biggest fall in US private sector jobs for six years, while activity in the service industry fell to its lowest level in at least a decade.

Investors were also waiting on the outcome of a two-day meeting in Washington from Thursday at which the heads of the Big Three auto companies are pleading for a total of US$34 billion to avert bankruptcy and a collapse of the industry.

Stock markets rallied on Wall Street as dealers said investors were looking ahead of the grim data to a possible upturn, but a resulting rally in Asian stocks on Thursday was short-lived.

Japan's Nikkei stock index closed down 1.0 per cent and Sydney ended flat with a loss of 0.03 per cent. However, Hong Kong was 0.7 per cent higher at noon.

The US Labor Department was to release its weekly jobless claims report Thursday and overall employment data Friday and analysts say these could show 325,000 jobs were lost in November.

However, there was some good news, including a survey from the US Mortgage Bankers Association showing strong demand for home loans.

The Dow Jones Industrial Average rose 2.05 per cent and the Nasdaq composite 2.94 per cent, while the Standard & Poor's 500 advanced 2.58 per cent.

Those rises came despite an ADP National Employment Report showing the US private sector lost 250,000 jobs last month, the largest fall since 2002.

Meanwhile the Institute for Supply Management, a trade group of purchasing executives, said its non-manufacturing index fell to 37.3 per cent in November, the lowest reading since the survey began in 1997.

Figures from Japan's finance ministry revealed more grim news from the world's second biggest economy, which is officially in recession. Data showed companies there slashed investment in new factories and equipment by 13 per cent last month, the sharpest drop since comparable records began in 2002.

And Japan's top brokerage Nomura Holdings said it was to cut 1,000 jobs in London after it took over the operations there of failed Wall Street giant Lehman Brothers.

The yen, considered a safe haven in times of financial trouble, rose on Thursday. The dollar dropped to 93.02 yen in Tokyo from 93.29 in New York late Wednesday and the euro slipped to 117.92 yen from 118.55.

And oil slipped to below US$46 a barrel amid concerns that demand for energy will decline as the economic picture worsens.

Recession-hit New Zealand's central bank cut the official interest rate by a record 1.5 percentage points Thursday to a five-year low of 5.00 per cent, to tackle the fallout from the global financial crisis.

Reserve Bank of New Zealand Governor Alan Bollard cited "ongoing financial market turmoil and the marked deterioration in the outlook for global growth."

Dealers said investors were hoping the European Central Bank and the Bank of England would both slash interest rates further Thursday.

- AFP/yb