Yam fears renewed trade barriers unless Beijing, Tokyo unite

A lack of co-operation between China and Japan on economic policy could lead to smaller Asian countries retreating behind trade barriers to reduce volatility, Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong has warned.

'We have problems in Asia because many of the economies are small, open and have difficulty in coping with globalisation - we are vulnerable to globalisation,' Mr Yam said.

Asian economies should co-operate in formulating their economic policies to reduce volatility, he said.

He was 'not too optimistic' about the political leadership required for such co-operation coming from China and Japan, the region's two largest economies.

'If we don't have that co-operation that the small, open economies need then in the meantime the small, open economies will have to defend themselves,' Mr Yam said.

One way for Asian economies to defend themselves, he said, would be to join to build one single larger market, but that could be impossible without a common currency.

'The other alternative is for them to close off their markets as you have seen. And this actually works against globalisation and undermines the benefits that we can derive from globalisation,' he said.