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An Asian equivalent to the euro?

Bob Moon May 4, 2006

TESS VIGELAND: Don’t look for this to happen anytime soon, but the economic powerhouses of Asia are setting their sites on a common regional currency, much like the Euro. The finance ministers of China, Japan and South Korea have announced they’re planning to work toward closer coordination of their monetary policies. As Marketplace’s Bob Moon reports, first they’ll have to overcome centuries of rivalry and outright distrust.

There is some symmetry in the idea of a so-called “Asian currency unit.” Ed Gresser follows trade at the Progressive Policy Institute:

ED GRESSER: The Chinese currency is the yuan, and the Japanese is the yen, and the Korean is the wan, and those are all ultimately the same word, a Chinese word meaning “round object.” At least those two, and probably Vietnam as well, used Chinese coins until about 400 years ago. So for most of their history, Asia did have a common currency.

Deep divisions created by centuries of conflict linger today. But at the Institute for International Economics, Asian expert Marcus Noland says the Asian financial crisis of the late 1990s brought a growing sense of regional identity.

MARCUS NOLAND: The financial crisis really was a spur to the Asian countries regarding themselves as Asians.

For that reason, he says, an Asian monetary union is at least plausible as a distant goal. One day, the Asian currency might even challenge the global supremacy of the US dollar. But . . .

NOLAND: That is very, very difficult to do. To date, for example, we see no real evidence that the euro is supplanting the dollar in any serious way in international finance.

Noland says the big roadblock to the whole idea came up at a regional conference he recently attended:

NOLAND: One of the participants from one of the smaller economies in Southeast Asia said, basically, “Who are we fooling? This is not going to go forward. It will only go forward if China takes the leadership.”

But Noland says the Chinese delegate insisted his county is dealing with enough of its own problems.

Former Undersecretary of State Richard McCormack says it took the Europeans a long time to agree on the euro, and relatively speaking, that was easy:

RICHARD McCORMACK: Asia is even more diverse than Europe, by orders of magnitude. And so the time it will take them to move from where they are now to a common currency, we’re talking decades.

In New York, I’m Bob Moon for Marketplace.

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