BERKELEY – There has never been a question about the ultimate purpose of the Chiang Mai Initiative (CMI), the system of Asian financial supports created in 2000 in that Thai city. That purpose, of course, is to create an Asian Monetary Fund, i.e., a regional alternative to the International Monetary Fund, whose tender ministrations during the 1997-98 financial crisis have not been forgotten or forgiven.
So far, however, the CMI has been all horse and no saddle. Its credits and swaps have never been activated. The distress following the failure of Lehman Brothers would have been an obvious occasion. Yet, revealingly, the Bank of Korea, the central bank hit hardest, negotiated a $30 billion foreign-currency swap with the United States Federal Reserve, not with its ASEAN+3 partners.
Now, we are told, ASEAN+3 has achieved another great breakthrough, the so-called Chiang Mai Initiative Multilateralization (CMIM), aimed at turning its bilateral swaps and credits into a regional reserve pool. The goal was set in 2005, and last month ASEAN+3 finance ministers negotiated the details. They specified contributions to their $120 billion pool, set down borrowing entitlements, and allocated voting shares.
The agreement on contributions is significant, it is said, because China and Japan will both contribute 32%. In previous regional agreements, like capital subscriptions to the Asian Development Bank, China had always been treated as a second-rate power and asked to contribute less. Indeed, China had shunned Japan’s 1997 proposal to create an Asian Monetary Fund precisely because it worried that it would play second fiddle. That China is now acknowledged as a co-equal means that it will not stand in the way of further cooperation.