Asia feels crisis as Brown seeks Gulf help

Business Materials 2 November 2008 01:38 (UTC +04:00)

Two Asian powerhouse economies felt the sting of the global financial crisis on Saturday as India cut its main short-term lending rate and China said it was bracing for a slowdown, Reuters reported.

Prime Minister Gordon Brown traveled to the Gulf in an appeal to oil-rich states to pour money into stabilizing the world financial system and help afflicted countries.

Other countries took steps to shore up their own economies. Russia moved 170 billion rubles (3.96 billion pounds) from a national fund to a state bank, and Russian shares rose in a special Saturday session].

And German Chancellor Angela Merkel urged German banks to tap a 500 billion euro (394 billion pounds) government rescue package. She and Brown will meet in London on Thursday.

The developments in the worst financial crisis in eight decades followed signs in the past week that world markets were stabilising, with interbank rates falling and U.S. stocks posting their best week in 34 years.

But in Shanghai, a senior Bank of China executive said the impact of the crisis on China has started to appear.

China has seen a sharp slowdown in industrial profit growth and fiscal income, Executive Vice President Zhu Min said.

The global economy will likely enter recession next year with the United States, Europe and Japan posting negative growth, he said.

"That will have a huge impact on China," he said.

Zhu also said currency volatility was expected to add further pressure on China's banks, which have enjoyed robust profits for years as the country boomed. Earnings growth is now slowing as the economy cools from the impact of the crisis.

"The uncertainties in the world's currency markets have exposed the Chinese banking sector to higher foreign asset risk," Zhu told a financial conference.