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"Advancing by stealth, 10 leading east Asian nations last month agreed to currency swap and to make other arrangements that appear to lay the foundation for a revival of an Asian monetary fund, and maybe for regional monetary and economic union at some point. But these moves are being made in a low-profile way, so as not to alert the US, the IMF and some European governments who strongly opposed the idea of an Asian fund three years ago...
Yet the significance of what was achieved in Chiang Mai by the ten ASEAN countries, plus Japan China and South Korea, should not be underesimated. It represents 'a step in the right direction', commented Japan's former vice-minister of international finance, Eisuke Sakakibara, 'father' of the original AMF plan. China opposed that scheme, fearing that it might lead on to some kind of yen hegemony in Asia. But Chinese finance minister Xiang Huaicheng promised Beijing's support for what was termed the 'Chiang Mai initiative'.
Mr. Sakakibara let it be known during the meetings that his desire is still to see the creation of an Asian monetary fund as such, coupled with agreement on what should be acceptable exchange-rate parities among regional currencies -- possibly linked to an 'Asian currency unit' rather like the European ECU. Such steps would logically lead to full monetary union eventually, and to the creation of a common currency similar to the euro.
The Chiang Mai initiative involves: expanding an existing currency-swap arrangement within ASEAN; concluding bilateral swap and repurchase arrangements among ASEAN countries and Japan, China and South Korea and establishing mechanisms to monitor capital flows within East Asia..."
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Chiang Mai is a northern city in Thailand where the Asian Development Bank met recently, accompanied by mass protests by NGOs. Looks like the fearsome might and power of the Eurobeast, which is just beginning to power up its reserves and flex its financial-industrial muscle, is wonderfully clarifying the minds of the Asiabourgeoisie.
-- Dennis