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Feature: Asian Bankers Call for Closer Regional Monetary Cooperation
A panel of East Asian bankers agreed Wednesday in Hong Kong that there is a need for Asian economies to develop closer monetary cooperation and make the regional financial market less vulnerable to external instabilities and risks.
"We are vulnerable to globalization, that's why we need to cooperate in order to maintain stability and increase efficiency, " Joseph Yam, chief executive of the Hong Kong Monetary Authority, told the final day of the East Asian Economic Summit.
Masayuki Matsushima, executive director of the Bank of Japan, said: "The current global recession and contraction in financial markets argue for immediate steps to support macroeconomic stability."
He said that Asian nations need to increase regional monetary cooperation to fend off external risks and maintain regional financial stability. He called for a closer cooperation among East Asian economies that would go beyond existing arrangements including the so-called Chiang Mai initiative.
The Chiang Mai initiative envisages the formation of a network among the region's central banks which would allow a coordinated response to turbulent financial times.
Matsushima also proposed that foreign exchange transactions in the region be carried out between Asian currencies, and not always through the U.S. dollar, to eliminate the risk associated with the time-zone difference with the U.S.
Liu Tinghuan, vice governor of the People's Bank of China, stressed that efforts should be made to strengthen the Asian currency market, enhance regional technological cooperation and develop bond markets in line with the trend of globalization.
The vice-government, in response to a participant's question, also affirmed that China would maintain the stability of its local currency, the Renminbi, for the time being.
"China held its currency stable during the Asian financial crisis and contributed greatly to the stability of the regional financial market, " said Liu, adding that the central government has no intention to devaluate Renminbi this time.
To strength regional monetary cooperation, central bankers from five East Asian economies agreed that the adoption of a single currency for the region is a "good idea" , but warned the prospects for an Asian common currency are remote.
"It is possible, but only in the long term, given the diversity among the countries," said Matsushima, noting that "hasty, ill-prepared actions are to be avoided.
Rafael Buenaventura, governor of the Central Bank of the Philippines, echoed by saying that "for us to achieve a single currency, we would have to give up political sovereignty. Are we prepared to do that?"
Yam stressed the need for economic convergency before coming to an Asian monetary union. "If you apply the Maastricht criteria to the Asian countries, you will find no convergence at all," the monetary chief said.
Yam also said that for serious efforts at regional monetary cooperation to prosper, there must be strong political leadership to push it. "The smaller economies are looking to the larger ones for action. Without it, the small economies must defend themselves," he said.
The three-day East Asia Economic Summit is scheduled to conclude later Wednesday. The summit, focused on ways to regain stability and growth in Asia, attracted some 800 prominent
participants from politics, business and academy across the region.
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