Currency and Contest in East Asia

Currency and Contest in East Asia: The Great Power Politics of Financial Regionalism

William W. Grimes
Copyright Date: 2009
Edition: 1
Published by: Cornell University Press
Pages: 264
https://www.jstor.org/stable/10.7591/j.ctt7v7wc
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  • Book Info
    Currency and Contest in East Asia
    Book Description:

    Since the Asian Financial Crisis of 1997-98, East Asian economies have sought to make themselves less vulnerable to global financial markets by transforming the regional financial architecture. With Japan as a leading actor, they have introduced initiatives to provide emergency financing to crisis economies, support the development of local-currency bond markets, and better coordinate currency policies.

    In Currency and Contest in East Asia, William W. Grimes builds on years of primary research and scores of interviews with participants and policy analysts to provide the most accurate, complete, and detailed description available of attempts to build financial cooperation among East Asian countries. Adapting realist political economy theory to the realities of contemporary global finance, Grimes places regional issues firmly in the wider context of great-power rivalries. He argues that financial regionalism can best be understood as one arena for competition among Japan, the United States, and China.

    Despite their mutual desire for regional prosperity and economic stability, these three powers have conflicting political interests. Their struggles for regional leadership raise questions about the long-term feasibility of regional financial cooperation, the possible effects of Sino-Japanese rivalry on regional financial stability, and the potential for East Asian financial regionalism to undermine the long-established-albeit waning-global and regional dominance of the United States and the dollar.

    eISBN: 978-0-8014-5867-5
    Subjects: Finance

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. List of Figures and Table
    (pp. ix-x)
  4. Acknowledgments
    (pp. xi-xiv)
  5. List of Abbreviations
    (pp. xv-xvi)
  6. Introduction: The Emergence of East Asian Financial Regionalism
    (pp. 1-9)

    The rise of regional institutions and initiatives in East Asia in recent years is a striking and new phenomenon. On this much, nearly everyone can agree. But what does that mean? Is East Asia the cusp of a regional revolution as governments emerge from decades, if not centuries, of political and economic fragmentation to build a cooperative order based on effective institutions? Or is the promise of a politically coherent East Asia characterized by peace and co-prosperity a dream that cannot withstand the bright light of reality? It is, of course, impossible in 2008 to predict the long-term effects of...

  7. 1 The Strategic Political Economy of Financial Regionalism
    (pp. 10-35)

    To analyze the dynamics of financial regionalism and demonstrate the importance of great power politics in shaping it, we need the right tools. In this chapter I clarify the framework for analysis as well as the specific political and economic contexts in which East Asian states are operating. In doing so, I demonstrate how we can apply the realist logic of great power politics—which was, after all, developed in the context of security issues—to the market-driven world of international finance.

    Economic integration in East Asia coexists uncomfortably with the reality of continued political rivalries and suspicion. There are...

  8. 2 The Rise of East Asia as a Region: Progress and Challenges
    (pp. 36-70)

    Having laid out an analytical framework for analyzing the politics of regionalism, I turn now to a close consideration of East Asia as an economic and political entity. While we should expect great power politics to intrude into even functional areas of cooperation, it is the market-driven logic of economic competition, integration, and growth that provides both the basic impetus for regional cooperation and the negotiating chips that the political process requires.

    To gain a concrete understanding of what is going on in East Asia, we need to answer some basic questions: What is the logic of “East Asia” as...

  9. 3 Lending into Crises: The Chiang Mai Initiative
    (pp. 71-117)

    East Asian financial regionalism was forged in the crucible of the Asian Financial Crisis, as one high-growth economy after another fell victim to severe currency depreciation and credit crunches. Many observers both inside and outside the region attributed the worst of the effects to the slowness, inappropriate design, and punitive nature of the IMF response. So it is not surprising that one of the core elements of financial regionalism has been the effort to create arrangements for emergency liquidity provision—in other words, funding to bail out regional economies caught in currency crises. This is the goal of the ASEAN+3’s...

  10. 4 Currency Management and Contestation
    (pp. 118-159)

    The most ambitious aspect of financial regionalism is currency cooperation. Given the almost total lack of coordination to date, it is tempting at first blush simply to dismiss the whole discussion, with its aspiration of a common currency and regional central bank, as nothing more than regionalist rhetoric. But there is actually a great deal to the debate that deserves our attention. Currency cooperation comes in many forms short of currency union (although the development of a regional currency is indeed part of the ASEAN+3 rhetoric); globally, in fact, voluntary currency union is quite rare, but less ambitious schemes are...

  11. 5 Bond Market Initiatives
    (pp. 160-203)

    The final component of East Asian financial regionalism is to be found in efforts to promote bond market development. The political story in this chapter is significantly complicated by the role of private sector actors. Even more than in liquidity provision and currency policies, bond market development requires governments to cater to private sector actors whose collective decisions will determine the success or failure of the whole venture. Moreover, the strong and conflicting interests of various domestic and transnational financial actors in the outcomes means that the domestic politics of bond market promotion is much harder to isolate than with...

  12. Conclusion: Currency and Contest in East Asia
    (pp. 204-218)

    Financial regionalism is happening in East Asia. Its pace can be slow and its destination is decidedly unclear, but there is no question that cooperative efforts are expanding and that they will be a key component of East Asian economic regionalism and regionalization more broadly. With East Asia as the home of the world’s second-and third-largest economies, not to mention the bulk of world foreign exchange reserves and vast amounts of net savings, it is essential that we better understand where regional financial cooperation is likely to go.

    I have argued that financial regionalism can best be understood in the...

  13. References
    (pp. 219-238)
  14. Index
    (pp. 239-248)