US economy benefits from Asian development: Bernanke

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(Xinhua)
Updated: 2009-10-20 03:16

WASHINGTON: The US economy "has benefited significantly from Asia's rapid development and integration into the global economy," US Federal Reserve Chairman Ben Bernanke said on Monday.

"The rise of the Asian economies since World War II has been one of the great success stories in the history of economic development," commented Bernanke in his remarks to a Fed conference on Asia and the Global Financial Crisis held in Santa Barbara, California.

"Japan's transition to an economic powerhouse was followed by the rapid ascent of the Asian tigers, and subsequently by China taking a prominent place on the world economic stage," he said.

China and India, which together account for almost 40 percent of the world's population, have seen real per capita incomes rise more than 10-fold and 3-fold, respectively, since 1980.

"As would be expected given the increasing size and sophistication of their economies, the nations of the region have also begun to exert a substantial influence on global economic developments and on international governance in the economic and financial spheres," said Bernanke.

Bernanke also believed that Asian countries played successful roles in tackling the financial crisis.

"The Asian response to the crisis appears thus far to have been effective," he said. "Importantly, the Asian recovery to date has been in significant part the result of growth in domestic demand, supported by fiscal and monetary policies, rather than of growth in demand from trading partners outside the region."

By and large, countries in Asia came into the crisis with fairly strong macroeconomic fundamentals, including low inflation and favorable fiscal and current account positions. Good fundamentals, in turn, provided scope for strong policy responses in many countries.

China, Japan, Korea, and Singapore were among those employing relatively aggressive policy strategies; in particular, China undertook a sizable fiscal program, supplemented by accommodative monetary and bank lending policies, Bernanke said.

"The stimulus packages in China and elsewhere have lifted domestic demand throughout the region, boosting intraregional trade," he added.

The central banker noted that the financial crisis has starkly demonstrated the extent to which the fortunes of the United States, Asia, and the rest of the global economy are intertwined.

He said that these powerful economic linkages, as well as the importance of both the United States and Asia in the global economy, underscore the need for consultation and cooperation in addressing common issues and concerns.

It is widely considered that the international coordination is effective to restore confidence of the world economy. The group of 20 major developed and developing economies (G20) has met three times within a year since last November when the world is in severe financial crisis.

"External imbalances have already narrowed substantially as a consequence of the crisis," Bernanke noted.

Now the world economy is on a path of recovery. The Fed chief warned that policymakers should be cautious to unwind their economic strategies.

"As in the advanced economies, unwinding the stimulative policies introduced during the crisis will require careful judgment," he said.

He suggested policymakers not withdraw policy support too early, which might cut short a nascent recovery. At the some time, he also warned that they have to address the risks of leaving expansionary policies in place for too long, which could overheat the economy or worsen longer-term fiscal imbalances.

In its latest report, the Federal Reserve said it would keep the country's core interest rate at the historical low level "at an extended period."