BEIJING, Jan. 5 -- East Asia financial cooperation has moved from a bilateral to multilateral leap over the past decade. At the end of 2009, 10+3 financial ministers and central bank governors as well as the Hong Kong Monetary Authority chief executive announced the formal signing of the Chiang Mai Initiative (CMI). Hence, the multilateral currency swap scheme has materialized by multilateralizing CMI a network of bilateral currency swaps in the region.
The establishment of a multilateral foreign exchange (Forex) reserve not only helps to integrate East Asian financial resources and improve the regional common response to financial risks, but is also significant for maintaining the steady growth of regional economy and spurring the multilateral process of East Asian cooperation.
For a very long period of time, the East Asia region has been short of a capacity to resist financial risks. The Chiang Mai Initiative set forth in 2000 for the first time gave expression to the urgent, common desire for enhancing bilateral cooperation within the region to jointly address financial risks. As of the late 2008, the 10 ASEAN countries plus China, Japan and the Republic of Korea (ROK), driven by the CMI, signed 16 bilateral currency swap agreements with a total size of 840 billion U.S. dollars.
After the outbreak of global financial crisis, East Asian nations felt a greater pressing need to work together to cope with the crisis, that is, to re-integrate financial resources from the previous bilateral currency swaps while increasing the size of funds to respond to the crisis in a bid to address problems arising from short-term liquidity in the region. Along with the institution of 120 billion dollars regional Forex reserve, the East Asian financial cooperation was transformed from a bilateral to multilateral leap.
The establishment of multilateral Forex reserve is conducive to maintaining regional economic stability and growth and spurring the transformation of economic structure in East Asia. The region has long since relied mainly on external markets to achieve economic growth, but this growth pattern cannot guarantee the stable economic development because of greater risks it faces.
East Asia, however, is at a critical period of industrialization at present, and some developing nations in the region are undergoing a critical period of structural change, and so it is imperative to maintain stable growth in the region. Obviously, the East Asia region cannot cut itself off from economic ties with the outside world for the sake of ensuring the stabilization of its economic growth; it can maximize the eradication of external risks and increase income from external sources only by means of setting up a dynamic, open-ended economic development set-up.
To attain this objective, the first and foremost task is to safeguard the stability of the regional financial system whereas the building of a multilateral Forex reserve is a viable and most efficient means to this end.
The leap from a bilateral to multilateral integration in East Asia will have an exemplary effect. And the region, nevertheless, can hardly match the European Union (EU) and North America in the process of regional integration. So, how to attain the integration objective in East Asia and enable all regional economies to benefit from beyond the realm of bilateral cooperation is a vital topic placed before the East Asia countries.
The advancement of multilateral financial cooperation in East Asia offers a very good inspiration or much enlightment for people around the region to think of. First, the institution of regional Forex reserve is brought about by an endeavor of each East Asian nation to alienate part of the national interest and assume more responsibilities. Secondly, the materialization of multilateral financial cooperation in East Asia fully proves that the East Asian nations can transcend their disparities to pursue or seek their common good.
(Source: People's Daily Online)
