response is much nicer. The regulatory response can be at all three levels. First, at an international level. That's why WTO and IMF are pro-globalization. But you cannot be pro-globalization. There must be a regulatory regime to protect the weak one. Like any international rule, IMF and WTO must somehow draft this rule in place. They look like paper tigers now. WTO does. No power, So that's the international level. Then at the regional response. I think of Asia now as individual nations. The nation lost sovereignty in the turmoil monetary rules. We have to be global. So at the regional context we must file some regional response collectively, like Euro has done another. That's why now I am glad that the ministry of the finance and the monetary institute cooperate in Thailand, doing research for that matter, What kind of regional response should we invent to somehow regulate the under-regulated financial activities?
Lastly about China, one country, two systems. China estimated the amount of formal loans now $500 billion compared with $30 billion in Thailand. It's huge. Once you want to have a bang, even the Big Bang implies that the world will be in recession. The U.S, does not want that. So the U.S. begs to China, "Don't devaluate." Very funny. And the yuan is overvalued already. And the U.S. called that Summers, "Please don't devaluate now, because it's going to cause commotion". However, China has several advantages at moment. Their capital accounts are not convertible yet.
So they can control flow of fund. The yuan is not convertible.
China has current account surplus. China foreign investments are from overseas Chinese investment. But the weakness of China, China has over-capacity, industrial capacity, and the weak state in the prices and so on. So there are some weakness. Luckily the capital account is not convertible yet, like India. When you want to go global, you might as well be ready first. You'll have all prerequisites in place and open. We, in Southeast Asia, were gung-ho and we went wild. That's why we suffer. Hong Kong, yes, they've just returned to China. Tung She Wah wants to be embarrassed, devaluate Hong Kong. Hong Kong dollar,60% is held by Guangdong province's people, not by Hong Kong people. Guangdong people hold 60% of Hong Kong dollar.
Hong Kong has no central bank. They have a currency board to run. Every Hong Kong dollar is backed by the U.S. dollar.
They have strong backing. So at the currency board you must have enough dollar to back every penny you issue in your own country. Hong Kong picked the dollar and now have priced themselves out of the market. They are suffering.
They know it. They are facing dilemma, too. China's leaders always say, one country, two systems. We are not going to protect you, Hong Kong. You're on your own. It's such a dilemma, but eventually I think the Hong Kong dollar will have to come down. But Hong Kong is the financial center of Asia. All intentional banks have representatives there.
If something happens, they will withdraw their base and go to Singapore. Then the financial center in Hong Kong will collapse. This will have tremendous implications for Asia. Tokyo is not the financial center. At the moment the Asian financial centers are Hong Kong and Singapore. So think about the intentional implications.
｡?HARA
You referred to the economic problems of China and Hong Kong and as Dr. Pakkasem said, China has many problems. We would like to discuss them further in this afternoon session.
Southeast Asian nations seem to continue to strengthen their own countries despite this currency crisis. I will take up just one example. When Dr. Pakkasem was Director General of NESDB, he thought it was crucial for Thailand to increase the number of young engineers. So he asked the departments in Thai universities and the engineering department of Tokyo University for support and now this joint project is going on. In this way at least the ASEAN nations are still trying to carry out a project for a long-term basis even in currency and economic crisis, like creating basic conditions for making things or nurturing capable people. By adding this comment in the end, I would like to close this morning's session.
