Senior finance officials from Korea, China and Japan concurred on May 4th, 2011, to intensify cooperation to hamper financial crises in Asia. In addition, the three Northeast Asian countries assented to the Association of Southeast Asian Nations to examine the practice of local currencies for regional trade settlements.
During discussions at the annual meeting of the Asian Development Bank in Hanoi, the three finance ministers mentioned they helped enhancing the regional financial security net under the Chiang Mai Initiative Multilateralism program. The CMIM presents a pool of funds which can be tapped through currency swap deals. It started in March 2010 as ASEAN and the Northeast Asia countries, the so-called Asean+3 group, agreed to set aside $120 billion to inhibit financial chaos in Asia.
The CMIM set up a structure to yield liquidity to nations that are feeling misery from a financial crisis and the three Northeast Asian countries agreed on the urgency for it to be utilized pre-emotively when there are symbols of a awaiting crisis. However, the ministers said the details need to be ironed out at the working level. The finance ministers agreed to pursue cooperation with the International Monetary Fund to explore ways to provide pre-emptive emergency liquidity to a country that appears to be slipping into a financial crisis. A finance ministry official said the fact that the ministers from all three countries have agreed in principle on preventive measures was significant. Demand has been growing for the role of CMIM to be expanded to crisis prevention as member nations currently can ask for its help only when financial turmoil unfolds.
Finance Minister Yoon highlighted the prestige of confirming a dialogue channel with the IMF for developed cooperation, while attempting to double the amount of CMIM funds in the future. Regarding the possibility of employing local currencies for regional trade settlement, the Japanese finance minister mentioned this does not tell that Asia has lost self-possession in the U.S. dollar but, he indicated, using local currencies for trade settlements was more suitable. He also said that the matter is currently being delivered at the G20 and that the issue requires more research at the level. Indonesia’s finance minister, co-chaired the meeting, pointed out that the purpose of local currency practice is to inspire the increase of trade volume in the Asia-Pacific region.
The finance officials also assented to manage a study to demonstrate what they called the “regional settlement intermediary” as part of ongoing efforts to expand the Asian Bond Markets Initiative. The RSI is created to show settlement services for cross-border bond negotiation in the region. Analysts express that Asian bond markets are underdeveloped compared to those in the West. They also stated help for the start of the ASEAN+3 Macroeconomic and Research Office (AMRO), an agency to observe the financial situation in member countries and regulate the amount of bilateral currency swaps, if needed. China will lead the agency in the first year and Japan will then do it for two years.
The three ministers also talked about up-to-date inflationary force in Asia. The ministers said the current global inflationary pressure is distinct since it is induced by a deficiency of supply rather than ascending demand. They said they have asked for oil-producing nations to enlarge production. They also partially blamed market speculators, who utilize financial derivative products, for driving up oil prices.
JiMin Park / email@example.com