Asia looks to G20 pledge to revive trade

BEIJING (AP) — The G20 summit’s promise to Asia of money to help credit-starved exporters and a bigger voice in global finance should help the region revive growth, business leaders and economists said Friday.

The London summit on the financial crisis ended Thursday with a promise of $250 billion from major governments to pump up global trade credit, which has shriveled as lenders hoard cash, worsening a double-digit drop in Asian exports.

Many of the region’s export-dependent economies have tipped into recession not only because demand from the West has crumbled amid the global slump but also because financing for trade has become scarce.

“Short-term financing is important now for the world economy to grow and trade to take place,” said Li Wei, an economist at Cheung Kong Graduate School of Business in Beijing.

In Southeast Asia’s biggest economy, Indonesia, where industries from textiles to auto parts have been paralyzed by a lack of credit, the money should play a role in restoring normal production, said Sofyan Wanandi, head of the Gemala Group, a conglomerate.

“This should really help,” he said. “The most important contribution will be tackling problems within the banking system, so it works normally again.”

In India, where trade is 35 percent of the economy, the money should help textile and diamond exporters that have been hit by falling demand, said Amit Mitra, secretary general of business group FICCI.

“They are under a severe cash crunch,” he said.

Hong Kong and Singapore, both major traders, should benefit as easier credit helps to boost exports, analysts said. In Hong Kong, exporters are avoiding taking large orders for fear cash-strapped buyers cannot pay.

There was also optimism that Asian economies would be helped by the summit’s promise to triple the resources of the International Monetary Fund to $750 billion and to create a $250 billion IMF fund to help members’ foreign reserves.

China, the world’s third biggest economy, should benefit as the measures restore demand in export markets, said Standard Chartered economist Stephen Green.

China’s economy is expected to grow by at least five percent this year, though that would be a dismal performance compared with the past few years. A drop in exports has already thrown at least 20 million people out of work.

Beijing also succeeded in its campaign for more influence in managing the global economy, winning a pledge at the summit to give developing countries a bigger role in the IMF and other finance bodies.

That might make Asian governments more willing to turn to the Washington-based group for help in a crisis, said Cheung Kong’s Li.

He said that would free them to spend more of their foreign reserves instead of saving for emergencies.

Asian leaders have been reluctant to deal with the IMF since the 1997 financial crisis, when reforms recommended by its experts prompted a public backlash.