The Asian Development Bank (ADB) will issue an Asian currency unit (ACU) in March and float ACU-denominated bonds. For the East Asian economies which are getting increasingly close in trade and investment areas this is a bold attempt at further boosting the regional economic cooperation in East Asia.
In the last 30 years, the East Asian economy has made up a growing proportion in the world economy, becoming one of key engines in driving world economic growth. However, compared with the United States and European Union, East Asia's financial status does not match its influence on the world economy.
After the painful experience of the East Asian financial crisis East Asian countries began to eye regional currency financial cooperation as one of the ways to ensure safer and more effective economic growth. While they were discussing plans for East Asian currency financial cooperation, the product of EU economic integration -- euro was born. The euro set an example for regional currency financial cooperation and inspired the decision makers in East Asia to speed up cooperation. In terms of substantive transactions such as trade and investment the East Asian economy enjoys no less close ties than Europe. What East Asia lacks is a currency financial cooperation system that matches the substantive transactions.
The ACU proposed by the ADB is another bold attempt after major East Asian regional financial cooperation projects such as Chiang Mai Initiative and Asian Bond Fund. According to the ADB the ACU is not physical paper currency that can be used on site of transaction. Rather it is a kind of virtual currency whose value is determined taking into considerations factors such as currencies of the 13 East Asian countries, domestic GDPs and trade scale etc. The currencies of China, Japan and the Republic of Korea (ROK) will have the most significant weight in the ACU. Under the current plan that has been released China's yuan will weigh the most, followed by the Japanese yen and ROK won.
The immediate function of the ACU is to measure the relative stability of currencies in the region. But the ADB obviously also eyes its potential functions. The ACU directs regional currency financial cooperation toward the most sensitive exchange rate policy area. Masahiro Kawai, who is responsible for the ACU work as special assistant to the ADB president, said the ACU stands as a clear banner for regional economic cooperation. If the East Asian Economies launches policy cooperation within the framework of the ACU, currency fluctuations against each other within the region will be limited to certain extent. To enrich the function and influence of the ACU as well as drive the development of regional bond market the ADB is also prepared to launch ACU-dominated bonds.
Whether it is the original intention of launching the ACU or the formation method used, the ACU reminds people of the predecessor of the euro �C European Currency Unit. From the European Currency Unit to the euro Europe spent 20 years' effort. For the ACU to evolve into an Asian version of euro it obviously needs more time. Judging from the economic level huge differences exist in the development of regional economies, which lay down various obstacles for reaching a broad consensus on cooperation. Moreover, many historical issues that remain unsolved also weaken the will of the peoples and governments in the region to cooperation.
Nevertheless, all East Asian countries hope to realize further integration of East Asian economies. East Asian countries will eventually find the best way of cooperation whether in the form of regional financial currency cooperation linked by the ACU or other forms, which will add vigor to the stability and prosperity of the East Asian economies and seek more favorable competitive position in the world.
The article written by Zhang Bin, associate research fellow with the Chinese Academy of Social Sciences, is carried on the third page of People's Daily, Feb. 6, and translated by People's Daily Online