Finance ministers from east Asian countries on Sunday cited rising global asset prices and inflationary pressures and sovereign debt risks' possible impact on capital inflow as the key risks facing their economies.
The ministers from 10 ASEAN members, China, Japan and South Korea also finalized a plan to set up a $700 million credit guarantee fund in a big step to help funnel more of the region's massive foreign reserves into the local bond markets.
In this context, we are determined to remain vigilant on the market developments, to maintain the consistency and stability of macroeconomic policies, and to adopt appropriate exit strategies... they said in a joint statement.
Chinese Finance Minister Xie Xuren, who co-chaired the meeting, showed confidence in the regional economy at a joint news conference with the other ministers but the news conference was overwhelmed with Chinese economic policy.
It was held just minutes after China's central bank raised the proportion of deposits that lenders must keep in reserve at the central bank for the third time this year to mop up excess cash at a time when inflation is on the rise.
The ministers from economies accounting for one-fifth of the combined world economic output met in Tashkent on the sidelines of the Asian Development Bank's (ADB) annual gatherings.
The 13 countries had already agreed in principle to set up the $700 million fund, to which the ADB will also contribute, to provide credit guarantees to corporate bonds being issued in local markets in local currencies.
The main objective of the CGIF is to support the issuance of corporate bonds in our region, and thus contribute to the development of regional bond markets, the statement read, using the acronym for the Credit Guarantee and Investment Facility.
According to earlier statements released by Japan and South Korea, Japan and China will contribute $200 million each to the facility while South Korea will put in $100 million.
The ADB is set to chip in $130 million and the Association of Southeast Asian Nations (ASEAN) members will together take up the remaining $70 million.
The credit guarantee fund is part of a broader Asian Bond Markets Initiative launched in 2003 to avert a repeat of the 1997-98 Asian Financial Crisis, when the region suffered from its reliance on short-term dollar-denominated financing.
The outstanding amount of local currency-denominated bonds issued by the 13 countries reached $14.03 billion at the end of 2009, ADB data shows, but corporate bonds accounted for a relatively small 16 percent of the total.
The ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
(Editing by Mike Nesbit and Yoo Choonsik)