Jan. 29 – The Association of Southeast Asian Nations (ASEAN), China, Japan, and South Korea will be able to draw from a foreign exchange reserves pool worth US$120 billion when the Chiang Mai Initiative is finally launched on March 24.
The initiative is a reaction to the effects of the 1997 Asian Financial Crisis on the region and will allow member countries to tap into a network of currency swap transactions to help manage balance of payments and short-term liquidity problems as well as supplement other international financial arrangements. It will also aid in abetting currency speculation because member countries can swap their currencies with U.S. dollars depending on the amount they contribute to the fund multiplied by their purchasing multiple.
The initiative was signed in December and is perceived as the region’s preliminary version of an Asian monetary fund. China’s participation in the fund is no surprise as it holds the world’s biggest foreign exchange reserves estimated to be US$2.27 trillion last year.
Japan follows China at second place with a foreign exchange reserve worth US$1.06 trillion. South Korea holds the sixth place in terms of foreign exchange reserves amounting to US$270.9 billion.
ASEAN members contributed a total of US$24 billion to the Chiang Mai Initiative while the rest was shouldered by China, Japan and South Korea.
