Chiang Mai Initiative: a milestone in regional currency cooperation

At the 16th ASEAN Summit held here Friday, the ASEAN members agreed to put the implementation of Chiang Mai Initiative multilateralization (CMIM) at the top of their working agenda this year. As a crucial step to achieve the aim, the ASEAN plus China, Japan and South Korea agreed to launch an independent economic monitoring unit in May, 2011.

In view of fragile recovery from the global financial crisis, the CMIM manifested the region's renewed commitment to remaining resilient against external shocks, creating a milestone towards East Asian financial and macroeconomic cooperation.

Comprising 120 billion U.S. dollars, the CMIM allows each participant to swap its local currency with U.S. dollars for an amount to its countribution multiplied by its purchasing multiplier. It evolved from a network of bilateral currency swaps which the ASEAN Plus Three agreed 10 years ago to establish the CMI agreement, allowing the members to seek emergency dollar funding from within the region.

By what they have developed so far, the East Asian countries succeeded, to some extent, in creating a regional system to counter future financial crisis, in addition to the global mechanism led by the IMF.

Asia had long lacked a mechanism to fend off financial crisis until the 1997-1998 Asian Financial Crisis, which awakened the East Asian countries to the urgency and significance to develop regional monetary and financial cooperation.


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