News

Monetary cooperation vital to Asia's economy

By Li Yingqing (China Daily)
Updated: 2010-08-20 08:01

Zhao Xiaoyu, vice-president of Asian Development Bank (ADB) stressed monetary cooperation at a recent Kunming financial summit.

Asian currency integration can help foster sustained economic growth and financial stability, both locally and globally, he said.

The ADB vice-president noted that, "Asia and the Pacific have made considerable progress in the last decade. Cross-border connectivity has improved with the addition of several land, sea and air transportation networks."

Zhao also remarked that political support for regional collaboration has increased since the global economic crisis.

"It is time for Asian countries to embark on a new era of financial cooperation and integration," he said.

However, the vice president advised listeners that change would take time.

"Due to the diverse economies of Asia, a common currency or currency union is not presently feasible. It will take decades to materialize."

But Zhao also offered current strategies. He cited information sharing and regional policy coordination - including exchange rate cooperation - as immediate goals.

Major challenges

Zhao admitted that a number of challenges lie ahead. Among the biggest impediments, he said, is Asia's limited financial development.

"The absence of effective regulatory and supervisory frameworks makes financial systems more vulnerable to risks. The lack of liquid and well-functioning bond markets limits the availability of long-term funding for viable and profitable projects."

"Clearly, future monetary and financial cooperation in Asia must be worked out at the national, regional, and global levels," Zhao continued.

"This includes strengthening financial and banking regulations, adopting international prudential norms and standards and promoting the development of local currency bond markets."

China and India

As sub-regional cooperation grows, China and India will take increasingly central roles in fostering financial and monetary collaboration, Zhao said.

"China is quickly becoming an important global center within Asia. As India too enters the world market, its economic relations with China are likely to help drive financial development," Zhao said.

He noted that China will soon host the world's second largest economy, and expects that the renminbi will assume a large role in establishing pan-Asian financial stability.

India will also play a critical part in accelerating economic integration across Asia, said Zhao. The country already has free trade arrangements with ASEAN and South Korea, and is currently negotiating with Japan and China.

(China Daily 08/20/2010 page19)