June 15, 2007 (LPAC)--Chinese economists warned of the danger posed by pressure from "unstable, idle international funds" on Asian economies, in a roundtable discussion on the situation 10 years after the last Asian Financial Crisis broke out. The discussion was sponsored by the official Peoples Daily. Asked about the potential for a renewed crash, Prof. Ding Zhijie of the International Business and Economics University said that people must recognize what international capital did in the last crisis, and now "developing countries have become a place for unstable, idle international funds." When "the economic situation and market confidence change," the funds will target these countries, "and crisis will be inevitable." Nations have to be "prepared for any accident or emergency." Prof. Jiang Ruiping of China Foreign Affairs University warned that nations "must strengthen financial supervision, and prevent and restrict the influx of idle international funds," and "not rely heavily on international financial organizations" like the IMF.

"Currently, the scale of international idle funds is even bigger than before, and lacks effective supervision," Jiang said. The only difference was that in the 1990s, Asian currencies were falling, and now they are rising. "Due to the sharp increase of foreign exchange reserves, the East Asian market has more floating surplus funds than American and European markets. Overall, the global economic imbalance makes East Asia become a weak link in the international economic network."

Asked about the potential for "hot money" capital flows abandoning western nations to target Asian capital markets, Xia Bin, Director of the Financial Institute of Development and Research Center of the State Council, said that the U.S. policy of "growth" in the face of its "huge multiple deficits" is "truly a kind of threat to the economic stability of other countries." He equated "hot money" speculation with U.S. government policy, without targeting the City of London. However, he asserted that China must continue to protect its financial system and "must maintain a guard on its financial door, and open up to the outside world according to its current domestic situation." In the 1997-98 crisis, China could escape the devastation which hit Southeast Asia and South Korea because it alone in East Asia had never abandoned its international currency controls and fixed exchange rate policy. Prof. Ding also warned that Asia is far too dependent upon exports and foreign investment. A recession in the U.S. "will become a sword dangling over the head of Asian economies," he said.

However, the economists' proposals for trying to "to stabilize the regional market" were far too weak to amount to anything that could really meet the scale of financial crash the world is now facing.