By Kim Jae-kyoung
Staff Reporter


East Asian nations, including South Korea, Japan and China, should create a single currency to shield themselves from any volatile movements of the U.S. dollar, according to currency experts.

They said that under the current U.S. dollar-dominated currency system, Asian countries will not be able to maintain regional financial stability and sustain high economic growth.

The idea has been suggested by Korea Institute of Finance economist Choi Gong-pil and Korea Institute for International Economic Policy economist Yoon Deok-ryong in an international seminar on Asian currency integration held in Seoul Friday.

They said that given the current situation in which economic conditions vary in Asia, the most viable way to stabilize the regional financial market is by creating a common currency in Asia.

``Under any plausible scenario, some type of regional currency needs to be developed to promote an environment suitable for financial and monetary cooperation that is, in turn, conducive to capital market development,’’ Choi said in the forum.

He pointed out that the imperatives for regional cooperation to achieve sovereign stability are now strong because markets are too constricted to withstand various shocks. He added that there is also a lack of coordination for bringing together necessary elements to achieve regional stability.

``Asian nations have continued raking in U.S. treasuries _ they depend too much on the U.S. export market and no financial markets able to absorb the current account surplus exist,’’ Choi said.

``If this trend continues, Asian nations will face a growing financial risk caused by a sharp fall in dollar values, thus increasing instability in the global financial system,’’ he added.

Yoon stressed that the key to solving this problem is to create a regional currency, the so-called Asian Currency Unit (ACU), seen as a basket of intra-regional currencies, which he says is the approach taken by Europe.

``First, it is important that we pool our efforts to create the ACU and use it as a parallel currency,’’ he said. ``This would help diversify risks regionally and globally, which would facilitate the global adjustment.

``Second, the ACU can be created by using excess foreign reserves as a special fund that can issue convertible ACUs.

’’Third, the organizing body would monitor and help stabilize the value of the ACU over the intermediate run,’’ he added.

During the seminar, Yu Yongding, president of the Institute of World Economics and Politics in China, said that even if the dollar does not devalue in a big way, East Asia still needs to think about how to deal with their already excessive foreign exchange reserves.

In its earlier report, the Hyundai Economic Research Institute (HERI) also stressed the need for creating a common currency in East Asia to cope with aftereffects of the revaluation of the yuan.

It pointed out that the change in China’s currency system is expected to lead more speculative funds to the Chinese market, which affects financial markets in the region.

``The creation of a common currency is one method for achieving greater efficiency in financial cooperation in Asia and implementing a program against latent financial crises,’’ HERI economist Hwang Dong-won said.

``The acceptance of an `Asian-Euro’ has gradually matured, and has reached a general consensus among Asian countries. In particular, China, Japan and Korea could take the initiative to create a single currency in East Asia,’’ he added.

According to Haruhiko Kuroda, special adviser to the Cabinet in Japan, ``The European experience does suggest that the adoption of a common currency is the last step in the process of regional economic integration, and hence takes a long time.’’

kjk@koreatimes.co.kr