Asian and European leaders on Thursday discussed solutions for stemming the financial chaos sweeping the world, one day ahead of a regional summit in Beijing that will tackle the financial woes.

"The current world economic situation is grim and complicated," Chinese President Hu Jintao said in meeting with Indonesian President Susilo Bambang Yudhoyono on Thursday morning.

"The emerging markets and developing countries are confronted with financial risks, weak foreign demand and mounting inflation," he said, referring to the ongoing financial crisis triggered by US credit crunch.

Hu and Susilo agreed on jointly responding to the crisis and ensuring financial stability and the economic soundness in Asia.

While delivering a speech at Peking University in the afternoon, Susilo called on every nation to mobilize their available resources and negotiate about a solution for the financial turmoil.

The same subject was brought up repeatedly at a series of leaders' meetings and speeches on Thursday, as the upcoming Asia-Europe Meeting(ASEM) summit provided a timely opportunity for the region's leaders to meet face-to-face to seek solutions to the crisis.

"We sink together or we swim together," European Commission President Jose Manuel Barroso told a press conference on Thursday afternoon.

The financial turbulence, which broke out amid the globalization drive, was transnational and thus requires more international efforts, said Barroso while giving a speech at the National School of Administration.

He also stressed China's significant contribution to the world economy.

"We need a coordinated global response to reform the global financial system. We are living in unprecedented times, and we need unprecedented levels of global coordination," the former Portuguese prime minister told reporters after landing in Beijing.

With the largest gathering of Asian and European leaders due on Friday, a string of foreign dignitaries had streamed into the Chinese capital since Tuesday. These included Japanese Prime Minister Taro Aso, President of Republic of Korea (ROK) Lee Myung-bak and Indian Prime Minister Manmohan Singh.

French President Nicholas Sarkozy was among those arriving on Friday.

Launched in 1996 as an informal dialogue mechanism, ASEM now included 45 members, a body representing more than 50 percent of the world's gross domestic product.

The European side is represented by 27 European Union nations and the European Commission. The Asian members count 10 countries of the Association of Southeast Asian Nations (ASEAN) plus China, Japan, ROK, India, Pakistan, Mongolia and the ASEAN Secretariat.

With the world preoccupied with the financial turmoil, the two-day summit will also draw the leaders' attention to other topics of energy, climate change and food security.

China will put forward a proposal on building an eco-city network in Asia, while France, which holds the rotating European Union presidency, will present a statement on climate change.

The biennial summit also offered host China an opportunity to step up relations with other ASEM members as the country's top leadership was engaged in intensive one-on-one meetings on Thursday.

Premier Wen Jiabao gave a red-carpet welcome to German Chancellor Angela Merkel before their 90-minute talk in the Great Hall of the People in downtown Beijing.

"China and Germany are reviving their relations," Wen told Merkel, citing the record bilateral trade volume and active cultural and people exchange.

He proposed the two countries respect mutual concerns, expand common ground and enhance their coordination on global issues, such as the ongoing financial chaos.

Merkel's visit was widely seen to mend a yearlong period of soured ties, frayed by her meeting with the Dalai Lama in September 2007.

"Cooperation with China is of utmost importance" for Germany, Merkel told reporters after the talks.

On Thursday, China and Singapore signed a free trade agreement to bolster their economies, which President Hu Jintao said signaled that "economic ties between the two countries have entered a new stage."

On the ASEM summit sidelines, the Chinese leadership will on Friday meet one-on-one with Aso, who was paying his first visit to the country since taking office last month.

They are scheduled to attend a celebration marking the 30 year anniversary of the China-Japan friendly relations treaty.

Chinese Foreign Ministry spokesman Liu Jianchao said on Thursday evening "there wasn't any anti-US sentiment within ASEM," in response to a question on why the United States was not included in the upcoming summit.

"All ASEM members value their cooperation with the United States, particularly in the face of the current financial crisis," he said.

The leaders of the G20, which groups major industrial countries and big emerging economies, will meet in Washington D.C. on November 15 to cope with the economic crisis.

(Xinhua News Agency October 24, 2008)