In pursuit of stability: evolution of Asia's regional financial architecture

Abstract

ABSTRACTOver the last 30 years, East Asia has progressed from virtually no intergovernmental arrangement in the 1980s to exclusive financial regionalism supported by strong centripetal forces in the aftermath of the Asian Financial Crisis (1997–1998), but this move has not yet produced coherent regional financial architecture. This article examines the evolution of Asia's regional financial architecture of the last three decades and discusses factors that have promoted and inhibited Asia's efforts toward financial regionalism. Since the Global Financial Crisis (2008–2009), the centripetal forces that aided the region's defensive regionalism have weakened, and the crisis has moved the region to seek multiple sources of financial stability from global to regional. On the one hand, given its export-promotion strategy, East Asia still relies heavily on the global financial architecture, and the region's US dollar dependence continues. On the other hand, the Global Financial Crisis has triggered China to seek reform in global financial order and some alternative solutions. For the latter, its monetary authority actively engages in internationalization of its currency, Renminbi, and promotion of the Asian Infrastructure Investment Bank. In this environment, coherent financial regionalism for East Asia is yet to emerge, as East Asian governments continue to search for monetary and financial stability.