HONG KONG, Oct 31: Economic and monetary cooperation in Asia is hampered by the lack of political leadership by the region’s two heavyweights, Japan and China, Asian officials were told on Wednesday.
When we are looking for political leadership from two economies that are big, not small and not quite open, I am not too optimistic, Joseph Yam, chief executive of the Hong Kong Monetary Authority, told the final day of the East Asia Summit here.
Other regional economies were smaller and more open to the outside world however, which meant we are vulnerable to globalisation in Asia, he said.
The alternative for these countries is to close up their markets and that would undermine the benefits we can derive from globalisation, he warned the summit organised by the World Economic Forum.
In Europe, which was the most appropriate model for Asia, France and Germany took the initiative toward monetary union, said the executive director for the Bank of Japan, Masayuki Matsushima.
In Asia, we need a stronger political leadership, in particular between China and Japan, he added.
He acknowledged it would not be an easy task in view of the large differences between the two countries in almost all systems.
But we have to step up the endeavour to find ground to enhance cooperation, he said, citing the recent visit to China by Japanese Prime Minister Junichiro Koizumi.
The vice governor of the People’s Bank of China, Liu Tinghuan, was less forthright in the debate.
As Beijing prepares to complete its 15-year battle to join the World Trade Organization, it is clear to most analysts that its main priority is China’s integration into the global economy.
But on the issue of monetary cooperation in Asia, globalization has to be looked on as the basis, otherwise the mechanism could not be effective, Liu said, stressing the differences between Europe and Asia. crucial.”
Apart from vastly different political, economic and social systems, relations between the two Asian giants are marked by historical enemity and a reciprocal distrust.
The need for a common response to the Asian financial crisis from 1997-1998 led to the emergence of a regional framework for cooperation, seen last year with the Chiang Mai initiative launched by the ASEAN plus three grouping — the Association of Southeast Asian Nations plus China, Japan and South Korea.
The initiative envisages the creation of a network among the region’s central banks which would allow a coordinated response to turbulent financial times.
For Yam this cooperation leaves aside one essential element of preparing for monetary union conomic convergence.
If you apply the Maastricht criteria to the Asian countries, you will find no convergence at all, the Hong Kong Monetary Authority chief said. How can you achieve monetary union without convergence? I have no answer.
If you can find a solution, you would qualify for a Nobel prize in economics, he concluded.
Under the Maastricht criteria the member countries of the European Union had to converge their economic and budgetary policies in preparation for economic union and the launch of a common currency the euro.—AFP