Dozens of experts from China, Japan, South Korea and the
Association of Southeast Asian Nations (ASEAN) said at a conference
in Shanghai that Asian countries should enhance currency
cooperation, setting up an Asian Monetary Fund (AMF), bond
guarantee and rating institutions and a research academy.
They noted that the Chiangmai Initiatives, which enabled
currency swaps to deal with the Asian financial crisis, will be
amended.
The conference was a prelude to the First East Asian Summit,
which is scheduled to open in Kuala Lumpur at the end of 2005.
The summit's predecessor is the meeting of ASEAN plus China,
Japan and South Korea. Australia and New Zealand will also attend
the meeting for the first time this year.
Representatives from all sides agreed that they should boost
exchange rate cooperation, enhance coordination and jointly deal
with US dollar depreciation and soaring oil prices.
Japanese representatives reaffirmed the importance of setting up
an AMF to suppress short-term speculation. Such an institution is
also expected to monitor the regional financial situation, boost
reform of monetary systems and keep the flow of Asian currencies
stable and orderly.
Asian countries could appropriate funds from their foreign
exchange reserves to form the AMF, the representatives stated.
"Hot money exists in many Asian countries. The short-term net
capital inflow in South Korea last year was equal to its forex
reserve increase, and such capital flows are also severe in China
and other countries," one participant warned.
The Japanese representatives suggested that currencies in Asia
should be pegged to a basket of currencies, including the yen and
the euro.
If an Asian monetary zone cannot be established in the near
term, the scheme of setting up several monetary subzones should be
considered, they suggested. Such zones are an important step in
stabilizing regional exchange rates.
Representative Wu Jianming, president of the China
Foreign Affairs University, pointed out that the lack of
coordination in the forex system puts Asian central banks in a
quandary, and that efforts should be made to keep regional exchange
rates stable.
Chinese representatives also suggested building an Asian bond
market, saying that large companies should be encouraged to issue
bonds, including transnational infrastructure construction
bonds.
They pointed out that guarantee and rating institutions should
be established to underwrite these bonds and to attract European
and US investors.
"Currently, the international rating of Asian bonds is not high,
so we should have our own rating institutions," China Business
News quoted one of Chinese representatives as saying.
Analysts noted that the East Asian bond market grew robustly
last year, a trend they hope will continue. They said that the huge
amount of foreign exchange reserves should play a more important
role in Asian bond market.
Professor Ou Minggang of China Foreign Affairs University said
that a relevant study report would be submitted at the East Asian
Summit. "Unilateral or bilateral action cannot fundamentally solve
the problems," he pointed out. "Across-the-board coordination is
needed."
(China.org.cn by Tang Fuchun April 10, 2005)