'World must stop finance woes hurting growth'

Governments must do whatever is needed, and without delay, to limit damage to the global economy from the crisis ravaging financial markets, Chinese Premier Wen Jiabao said yesterday.

Speaking after a summit of 43 Asian and European leaders, Wen also signalled that China would back France's drive for tougher global financial rules at a crisis summit that US President George W. Bush will convene in Washington next month.

"We must use every means to prevent the financial crisis impacting growth of the real economy," Wen told a news conference following a two-day Asia-Europe Meeting (ASEM) of the 27 EU member states and 16 Asian countries.

Wen said China would actively participate in the November 15 summit with a "responsible and pragmatic" attitude.

President Nicolas Sarkozy of France, which currently holds the rotating EU presidency, said he expected concrete decisions to come out of the Washington talks, which had to address the underlying causes of the crisis, not just their effects: "It is simply impossible to talk about taxes and the financial crisis without talking about currencies and the way they interact. All of this is, of course, going to be discussed."

Sarkozy has told Chinese President Hu Jintao that he fears the United States, which is wary of excessive regulation, would be content if the summit produced "principles and generalities", according to a French presidential official.

Wen said the right balance had to be struck between regulation and innovation, but added: "We need financial innovation, but we need financial oversight even more."

Japanese Prime Minister Taro Aso said damage had already been caused. "Since financial products have become global, one country alone cannot supervise them," he told reporters. "We have a lot to think about."

The biennial ASEM forum also addressed issues such as food safety, climate change and the UN's development goals.

But it was the meltdown in global markets that galvanised what is usually a talking shop short on substance.

Leaders woke to news that Wall Street had closed at five-and-a-half-year lows, but the losses in the main stock indexes of around 3.5 per cent were not as bad as expected given that shares in Japan had slumped 9.6 per cent and Europe had sunk 5.4 per cent.

Many economists say the United States and much of Europe are already in recession. Private-sector activity in the 15 nations that use the euro contracted last month at the fastest pace since the currency was launched in 1999, while Britain's economy shrank 0.5 per cent in the third quarter, much more than expected.

Confidence, co-operation and responsibility were the key to ending the malaise, Wen said.

"Confidence means that all countries, especially the developed ones, need to speedily take decisive measures to stabilise the financial markets so as to make people more confident, restore their confidence," the premier said.

He said weakening external demand was hurting China's economy, but not too badly. China's growth slowed sharply to nine per cent in the third quarter from 11.9 per cent in all of 2007.

Beijing was confident it could put a floor under the economy through appropriate policies such as developing the countryside and the vast provinces of western China, he said.

"Our domestic demand still has much potential. As long as our policies are on target, we can maintain steady, relatively fast growth," he said.

European Commission President José Manuel Barroso called for a "comprehensive, global" agreement on climate change based on "shared and differentiated" responsibilities - a coded acknowledgement that rich states must do more than poorer nations like China to curb greenhouse gases.

"Just because we have a financial crisis, it does not mean that the climate change threat has disappeared," he said.

The word last week

• "We must use every means to prevent the financial crisis impacting growth of the real economy" - Chinese Premier Wen Jiabao

• "The danger of a collapse (on financial markets) is far from over. Any all-clear would be wrong" - German Finance Minister Peer Steinbrueck

• "This is a once in a lifetime crisis, and possibly the largest financial crisis of its kind in human history" - Bank of England Deputy Governor Charles Bean

• "They are all worried about the oil price. There are just different degrees of worry" - senior Gulf official