HKMA's Genberg dismisses 'decoupling' theory

The idea that increasing inter-regional trade in Asia could offset the impact of the recessions in the US and Europe - the so-called 'decoupling' theory - is ill-founded, said Hans Genberg, executive director of Hong Kong Monetary Authority (HKMA) yesterday. That's because a large proportion of the bilateral exports within the region is ultimately supported by demand from the US and other developed economies, he said.

Genberg, who made his comments during a presentation given at the Asia Risk 2008 conference in Hong Kong, also called for shared policy responses to the financial crisis from Asian central banks and governments.

He added that monetary policy efforts in Asia were almost exhausted and fiscal measures are required to combat the downturn in liquidity and sentiment. But he said fiscal responses should be "co-ordinated, targeted and temporary".

Asian banks, which have shown little need for capital