Chiang Mai Initiative

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Member States of ASEAN Plus Three

The Chiang Mai Initiative (CMI) is a multilateral currency swap agreement between the ten members of the Association of Southeast Asian Nations (ASEAN), the People's Republic of China (including Hong Kong ), Japan and South Korea . It draws from a foreign exchange reserve pool with a value of 120 billion US dollars and was launched on March 24, 2010. This pool was expanded to US $ 240 billion in 2012.

After the Asian financial crisis in 1997 , the ASEAN + 3 countries took an initiative to deal with short-term regional liquidity problems, comply with international financial regulations and facilitate the work of other international organizations such as the International Monetary Fund (IMF). The initiative began as a series of bilateral swap agreements after the member countries met on May 6, 2000 at an annual meeting of the Asian Development Bank in Chiang Mai, Thailand.

history

concept

At the height of the Asian financial crisis in 1997, the Japanese authorities proposed an Asian Monetary Fund to serve as the regional version of the IMF. However, this idea was put on hold after strong resistance from the United States. After the crisis, the finance ministers of the individual members of ASEAN, the People's Republic of China, Japan and South Korea met on May 6, 2000 at the 33rd annual meeting of the Board of Governors of the Asian Development Bank in Chiang Mai to establish a network of bilateral currency swaps . Discuss agreements with the aim of preventing a repetition of the Asian financial crisis in the future. The proposal also implies the possibility of creating a pool of foreign exchange reserves of the participating central banks in order to combat currency speculation. The pool is seen as a self-help to expand IMF resources. After the ASEAN + 3 Finance Ministers Conference, a Joint Ministerial Statement was published on the development of the CMI.

Critics doubted the reasoning behind the initiative. The Asia Times Online wrote in an editorial several days after the meeting: "The idea that the existence of a currency swap agreement or the extensive concept of an Asian monetary fund [...] could prevent the Asian crisis or its worst consequences is wrong and politically damaging" . After the then IMF boss Horst Köhler visited five Asian countries in June 2000, the Asia Times Online condemned his approval of the "poorly thought out and probably never realizable ASEAN plus three [...] currency swap plan". In a 2001 interview with the Far Eastern Economic Review , Köhler said that the CMI would promote regional economic cooperation and development and that he was not against the formation of an Asian Monetary Union .

development

Initially, the Chiang Mai Initiative served as a symbolic act as the countries affected by the Asian crisis recovered. Thailand's export and service sectors grew steadily and the gross domestic product rose from around 40% before the 1997 crisis to around 75%. Nevertheless, the authorities actively intervened in the foreign exchange market to prevent their currency from appreciating in the event of an impact on exports. The result of this approach was rapidly increasing foreign currency reserves. As a result, the East Asian economic market had a foreign currency reserve of 4 trillion US dollars, which made up a total global foreign exchange value of 55%. The accumulation of these foreign currency reserves served as insurance against another crisis. But this was not the result of a conscious strategy to accumulate reserves. Rather, this accumulation of reserves was the result of exchange rate intervention so that the local currency would not gain in value and thus not harm the export sector. Large foreign capital grants create an appreciation of the currency that, if not prevented, can lead to a stock crash. In Thailand, the baht rose in 2006, but the central bank could not prevent it, although it had already intervened and this led to a stock market crash. The accumulated reserves also served to prevent further short-term foreign debts. That is why the respective countries made sure that the short-term debt in relation to the reserves was as low as possible. To make this possible, a managed floating system was used instead of a fixed rate system. These measures made it possible to prevent the worse consequences of these exchange rate interventions.

Although these mechanisms worked, thought had been given to involve the Chiang Mai Initiative even more, so that the bilateral agreements that were agreed at the 10th ASEAN + 3 meeting in 2007 in Kyoto, Japan were converted into a multilateral system.

As of October 16, 2009, the network consisted of 16 bilateral agreements between the ASEAN + 3 countries worth around 90 billion US dollars. In addition, the ASEAN swap agreement had pool reserves of around US $ 2 billion.

Multilateralization

At the 10th meeting of the ASEAN + 3 finance ministers in May 2007, further processes were agreed at the CMI. In February 2009, ASEAN + 3 agreed to expand the original $ 78 billion (2008) in the fund to $ 120 billion. During the meeting of the ASEAN finance ministers in Pattaya in April 2009 , the individual contributions of the individual member states to the pool reserves were determined. Each of the six original ASEAN members (Indonesia, Malaysia, Singapore, the Philippines and Thailand) will contribute US $ 4.770 million, while each of the remaining four members will contribute between US $ 30 million and US $ 1 billion contributes. The Ten Countries planned to meet with their partners, but the summit was canceled due to the Thai political crisis . The start of the multilateral agreement has thus been postponed until a later date. When the heads of state and government of the thirteen countries finally met in Bali in May , the individual contributions from China, Japan and South Korea were concluded. At this summit, Hong Kong was also added as a new participant, whose contribution was counted towards that of China, although Hong Kong "is a separate monetary administration". Hong Kong's participation brings China's total contribution to $ 38.4 billion, equal to that of Japan and South Korea, which contribute $ 19.6 billion. China and Japan remain the largest contributors, each having 32 percent of the total financial contributions, as does Korea. These three countries share 80% of all contributions to the CMIM while the remaining 20% ​​come from the ASEAN countries.

On May 3, 2012, the 15th ASEAN + 3 Finance Ministers and Central Bank Governors Meeting took place in Manila, Philippines, which was supposed to conclude an agreement to expand from the current value of 120 billion US dollars to 240 billion US dollars. ASEAN + 3 also agreed the CMIM Precautionary Line (CMIM-PL), which was modeled on the PPL program within the IMF. It was designed to prevent a financial crisis.

Members

Bloomberg believes members of the CMI held more than $ 4.1 trillion in other foreign currency in 2009.

flag country currency Central bank Gross Domestic Product 2013
(millions in US dollars )		 2013 PPP GDP
(millions in US dollars )		 Financial contribution
(millions in US dollars )		 Maximum Loan
(Millions in US Dollars )
China People's RepublicPeople's Republic of China Hong KongHong Kong China and Hong Kong Renminbi and HK dollars Chinese People's Bank and Hong Kong Monetary Authority 9,300,911 1 14,009,813 2 38,400 3 19,200
JapanJapan Japan yen Bank of Japan 5,149,897 4,778,523 38,400 19,200
Korea SouthSouth Korea South Korea won Bank of Korea 1,258,586 1,687,138 19,200 19,200
IndonesiaIndonesia Indonesia Rupiah Bank Indonesia 946.391 1,314,660 4,770 11,925
ThailandThailand Thailand Baht Bank of Thailand 424.985 701.554 4,770 11,925
MalaysiaMalaysia Malaysia Ringgit Bank Negara Malaysia 327.911 532,515 4,770 11,925
SingaporeSingapore Singapore dollar Monetary Authority of Singapore 286,925 338,551 4,770 11,925
PhilippinesPhilippines Philippines peso Central Bank of the Philippines 284,472 457.314 3,680 9,200
VietnamVietnam Vietnam Đồng Vietnamese Central Bank 155,952 343.024 1,000 5,000
CambodiaCambodia Cambodia Riel National Bank of Cambodia 15,672 39,734 120 600
MyanmarMyanmar Myanmar Kyat Central Bank of Myanmar 57,439 96,812 60 300
BruneiBrunei Brunei Darussalam dollar Autoriti Monetari Brunei Darussalam 16,451 22.305 30th 150
LaosLaos Laos Kip Bank of the Lao People's Democratic Republic 10,262 21,083 30th 150
1 The individual gross domestic products of the People's Republic of China and Hong Kong are US $ 9,020,309,000,000 and US $ 280,682,000,000.
2 The individual PPP GDPs of the People's Republic of China and Hong Kong are US $ 13,623,255,000,000 and US $ 386,558,000,000.
3 Hong Kong's contribution of US $ 4,200,000,000 is included in that of the People's Republic of China.

AMRO (ASEAN + 3 Macroeconomic Research Office)

AMRO is the macroeconomic surveillance unit of the multilateral Chiang Mai Initiative of ASEAN + 3. AMRO is used to monitor and analyze the regional economy and to identify risks at an early stage. Its purpose is to facilitate the rapid implementation of corrective actions and the effective decision-making of the Chiang Mai Initiative.

Individual evidence

  1. ^ Business digest - Asia's nations to double currency swap deal
  2. ↑ a b Phillip Y. Lipscy: Japan's Asian Monetary Fund Proposal Archived from the original on January 21, 2012. (pdf) In: Stanford Journal of East Asian Affairs . 3, No. 1, 2003, pp. 93-104. Retrieved November 6, 2013.
  3. ^ ASEAN, China, Japan, S. Korea Agree on Currency Swap . In: People's Daily , May 7, 2000. Retrieved January 3, 2010. 
  4. ^ Thomas Crampton: East Asia Unites to Fight Speculators . In: The New York Times , May 8, 2000. Retrieved January 3, 2010. 
  5. ↑ Asians will defend their money . In: Manila Standard , May 8, 2000, pp. 1-2. "Countries would lend dollars to each other to help defend the value of their currencies during speculative attacks or other currency problems. The loans would be paid back in local currencies at a fixed rate. It would complement existing international institutions, the statement said, acknowledging likely opposition from the United States if a deal eventually led to an attempt to replace the Washington based International Monetary Fund. Malaysia, which has long urged fellow Asian nations to rely on each other for help, rather than on the West, refused the IMF's treatment and suffered less in the crisis than others. " 
  6. ↑ Chaklader Mahboob-ul Alam: The Chiang Mai currency initiative . In: The Daily Star (Bangladesh) , November 12, 2009. Retrieved January 2, 2010. 
  7. ^ ASEAN Plus Three Cooperation. (pdf; 488 kB) [ASEAN], January 9, 2009, archived from the original on December 18, 2014 ; Retrieved November 19, 2013 .
  8. ↑ Silly scheming in Chiang Mai . In: Asia Times Online , May 9, 2000. Retrieved January 3, 2010. 
  9. ^ IMF revisits the scene of the crime . In: Asia Times Online , June 3, 2000. Retrieved January 3, 2010. 
  10. ^ Focusing the Fund on Financial Stability . In: Far Eastern Economic Review , June 14, 2001, pp. 48-50. Archived from the original on December 17, 2001. Retrieved March 14, 2010. 
  11. ↑ Thailand stock market crash 2006 (PDF; 440 kB) Archived from the original on November 13, 2013. Retrieved on November 13, 2013.
  12. ↑ The Chiang Mai Initiative: Multilateralization: Origin, Development and Outlook (PDF; 565 kB) Asian Development Institute. Archived from the original on December 6, 2010. Retrieved November 18, 2013.
  13. ^ The Agreement on the Swap Arrangement under the Chiang Mai Initiative (as of October 16, 2009) (PDF) Bank of Japan . October 16, 2009. Retrieved January 4, 2010.
  14. ^ Action Plan to Restore Economic and Financial Stability of the Asian Region. ASEAN , February 22, 2009, accessed November 7, 2013 .
  15. ^ Asia set to boost emergency fund , BBC News . February 22, 2009. Retrieved January 2, 2010. 
  16. ↑ ASEAN countries agree on individual contributions to regional reserve pool . April 9, 2009. Archived from the original on April 13, 2009. Retrieved January 3, 2010. 
  17. ↑ Alexis Douglas B. Romero: Planned regional fund faces delay . In: Business World , April 14, 2009. Retrieved on January 3, 2010.  , ISSN  0116-3930
  18. ↑ Agoeng Wijaya: Talks on ASEAN + 3 Crisis Fund Continues Despite Bangkok Riots . In: Tempo (Indonesia) , April 14, 2009. Archived from the original on June 12, 2009. Retrieved January 3, 2010. 
  19. ↑ ASEAN, China, Japan, SKorea finalize crisis pact . May 3, 2009. Archived from the original on December 9, 2010. Retrieved January 2, 2010. 
  20. ↑ Hong Kong SAR joins ASEAN + 3 foreign currency reserve pool , China Central Television . May 4, 2009. Retrieved January 3, 2010. 
  21. ^ A b The Establishment of The Chiang Mai Initiative Multilateralization (Joint Press Release) . December 28, 2009. Archived from the original on December 24, 2012. Retrieved on May 5, 2012. 
  22. ↑ english.mosf.go.kr ( Memento from April 30, 2013 in the Internet Archive ) ASEAN + 3 Finance Ministers and Central Bank Governors' Meeting Successfully Concludes
  23. ↑ ASEAN, Japan, China Form $ 120 Billion Reserve Pool , Bloomberg . December 28, 2009. Retrieved January 5, 2010. 
  24. ↑ Ramkishen S. Rajan: Come closer, all Asians . In: The Financial Express , December 14, 2009. Retrieved January 4, 2010. 
  25. ↑ AMRO . Retrieved November 15, 2013.