Edited by Koichi Hamada, Beate Reszat and Ulrich Volz
Koichi Hamada and Inpyo Lee If goods don’t cross borders, armies will. (Attributed to Frédéric Bastiat) 3.1 INTRODUCTION In ancient times, the Far East, notably China, was a center of civilization and a theater for displays of brilliant military strategies. Now, the Chinese economy is emerging as a dominant player in the world thanks to its sheer size alone. The Japanese economy, with its rapid growth, was hailed as a rising sun. South Korea, Taiwan China, Thailand, and others achieved Asian miracles and then were disrupted by the East Asian crisis but recovered quite successfully. Thus, East Asia—people seldom call it the “Far East” now—has become a dramatic, intriguing, and even threatening area. East Asian countries were notably unconcerned about regional economic cooperation until the late 1990s. The Asian financial crisis of 1997, however, clearly showed that the heightened degree of interdependence in the international economy has increased the need for closer global and regional economic cooperation. Kuroda (2003) suggested a step-by-step plan for financial and monetary cooperation in East Asia: (1) formation of a regional financial safety net, (2) promotion of effective regional surveillance, (3) development of regional bond markets, (4) exchange rate stabilization among regional currencies, and (5) establishment of an Asian common currency. Various efforts for the first to third stages have been taken, with some of them materialized, but the later stages have yet to be realized. After the proposal to create an Asian Monetary Fund was shelved, ASEAN plus China, Japan,...
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