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To pay close attention to the long term impact of subprime crisis on EA

To pay close attention to the long term impact of subprime crisis on EA. Ou Minggang China Foreign Affairs University 12 April , 2008. Ⅰ.the short term impact on East Asian economy of subprime crisis. Financial institutions suffer losses

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To pay close attention to the long term impact of subprime crisis on EA

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  1. To pay close attention to the long term impact of subprime crisis on EA Ou Minggang China Foreign Affairs University 12 April , 2008

  2. Ⅰ.the short term impact on East Asian economy of subprime crisis • Financial institutions suffer losses • East Asian financial markets：more fluctuation and the early crashed bubble • The growth of economy may be slower • The loss of foreign reserve will be larger due to the depreciation of US Dollar

  3. Financial institutions suffer losses The Total Reported Losses of Asian banks (excepting Japan) is 11 billion. The estimated losses on other assets may be 30 billion. Expected Bank Losses as of March 2008 IMF Global Financial Stability Report (GFSR)

  4. Market fluctuation and the early crashed bubbles

  5. East Asian stock markets falling more than NYSE

  6. The growth of economy may be slower • The appreciation of the exchange rate of local currencies against USD and the recession of US and EU are challenges to export • The price of Oil and other resources are pushing the inflation in EA • The relax monetary policy make the monetary policy operation difficult

  7. The trend of exchange rate USD against local currencies in East Asia

  8. The price trend in East Asia economy

  9. Foreign reserves in some economy in EA

  10. Ⅱ.the long term impact of subprime crisis should be pay more attention to • the subprime crisis is the result of relax monetary policy in US since 2001 • The same story is on again

  11. the subprime crisis is the result of relax monetary policy in US since 2001 From January 2001 to June 2003, FED had lowed the federal fund rate continually for 13 times ,make the rate from 6.5% to 1％

  12. The same story is on:

  13. funds to market 11 March 2008,FED provided USD 200 billion liquidity to market other measures

  14. Ⅲ.How to uncouple from US • To escape from the crisis in the next round, early measures of financial cooperation should be take • Financial sector cooperation should be deepened • Monetary cooperation should be strengthened

  15. Ⅳ.Financial Sector Cooperation • government sectors such as central banks, supervision bodies, and financial institutions should be in the process of cooperation • East Asian Financial Association which be put forward in 2006 may be a suitable choice

  16. Ⅳ.How to strengthen monetary cooperation • Make CMI BSA more effective in reducing the foreign reserves, East Asian Monetary Fund (EAMF) may be a suitable choice for CMI BSA • Establish a regional payment and clearing system like European Payment Union in East Asia as the first step • Make formal studies on ACU Or ACI and the roadmap of East Asian Monetary System

  17. Thanks !

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