Seminar-The Exchange Rate Regime in Asia in 2050: Monetary Unification, Renminbi-bloc, or Status Quo?
Most of the countries in the two most prosperous regions in the world, Europe and North America, have entered into formal arrangements for regional economic cooperation by establishing, respectively, the European Union (EU) on November 1, 1993, and the North American Free Trade Agreement (NAFTA) on January 1, 1994. Within Asia, there has also been a growing consensus for more comprehensive and deeper regional economic integration. The idea of building an Asian Economic Union (AEU) has been gaining strength steadily, and the proposal for an Asian Currency Unit (ACU) has now been on the table for some time. In the eyes of some advocates of Asian economic integration, ASEAN, China, Japan, and Korea must now act forcefully to coordinate their exchange rates in order to create the degree of stability in intra-regional exchange rates required for regional monetary integration.
My conclusion is that monetary integration is unlikely to ever occur but there is a realistic possibility of a Renminbi (RMB) bloc emerging after 2050. The realization of a RMB bloc will depend crucially on Chinese economic policies in the next fifteen years. In any case, regardless of the final outcome in currency arrangement in Asia, Asia should cease discussion on building a common Asian currency, and focus its energy in the medium run on building a regional economic and financial architecture that rests on the twin institutional pillars of an Asian Customs Union and an Asian Monetary Fund.
Wing Thye Woo is Professor at University of California at Davis; Professor at Sunway University in Kuala Lumpur (heading the Jeffrey Cheah Institute on Southeast Asia and the Jeffrey Sachs Center on Sustainable Development); Professor at Fudan University in Shanghai, Professor at the Institute of Population and Labor Economics of the Chinese Academy of Social Sciences in Beijing; Distinguished Fellow at the Penang Institute; and Director of the East Asian Program within the Center for Sustainable Development at Columbia University. His current research focuses on macroeconomic management of
open economies; and on the growth challenges (e.g. the middle-income trap, and the Sustainable Development Goals) of the East Asian economies, particularly, China, Indonesia and Malaysia.