BEIJING - PRIME Minister Lee Hsien Loong on Friday called for a measured response to the ongoing global financial crisis, cautioning against an over-reaction that might cause more alarm and uncertainty.

Financial authorities should keep in close contact, he added on the opening day of the Asia-Europe Meeting (Asem) in Beijing - a summit of 45 members, but with seemingly only one issue on their minds.

A statement issued after the leaders' meeting expressed their concern over the spreading malaise. But they struck an upbeat note by saying that with decisive and timely measures, they have 'full confidence' that the crisis can be overcome.

Yet, there was a feeling that Asem was but a preview to the real big pow-wow in Washington DC next month. That is when the world's top 20 economies gather for a summit called by US President George W. Bush to discuss the crisis.

The Asem leaders, who do not include Mr Bush, seem to acknowledge as much, noting in their joint statement that they support the Washington summit.

But leaders here wasted no time to fire the topic to the top of the agenda, with Chinese President Hu Jintao setting the scene from the get-go in his speech during the opening ceremony, devoting significant chunks to the crisis.

He assured the world that China is doing all it can to help counter the financial meltdown.

But as Asian stock markets continued to plummet on Friday and the world looks to China for help, Mr Hu reminded all that his country is not immune to the crisis.

'The global financial crisis has clearly increased the uncertainties and unstable factors in the Chinese economy's development,' he said, adding that China's economy is also facing uncertainties.

'China's sound economic growth is in itself a major contribution to global financial stability and economic growth.'

The crisis has led to calls for a common Asian fund. Thailand, for example, has proposed a US$200 billion fund by Asian governments to boost trade, among others.

Philippine President Gloria Arroyo also suggested a US$10 billion fund. But China and Japan - the two countries expected to put up most of the money - have been lukewarm to the ideas.

PM Lee stressed that it is important to engage the international financial institutions, which have the resources and knowledge to help governments manage this crisis.

'We welcome commitment by World Bank to provide increased lending, equity investments and safety net programmes. We also support IMF's commitment to fast track disbursement of its emergency financing facilities,' he said, referring to the International Monetary Fund.

Regional arrangements should also be promoted, he added, such as the upgrading of the Chiang Mai Initiative - a facility mainly for bilateral currency swaps - which Asean, China, Japan and South Korea agreed on Friday morning on the sidelines of Asem.

What the world must do now, he said, is to find a new balance.

'How to make up for reduced demand in the US? How can major Asian economies - China, India and Japan - consume more?' he said.

And while this macro-economic adjustment will be a long drawn-out process with structural and political repercussions, he urged the governments to strengthen their economies in the meantime.

'Continue to maintain free trade, pursue regional integration and push for globalisation,' he said. 'Then the world economy can gradually be restored to good health and sustainable prosperity again.'

Mr Lee, who is here on a five-day official visit, also had bilateral meetings on Friday with Philippine President Gloria Arroyo, Polish Prime Minister Donald Tusk and Dutch Premier Peter Balkenende.

He will attend the second, and final, day of the Asem summit on Saturday before leaving for Xi'an in western Shaanxi province for the second leg of his visit.

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