An Asian Monetary Union

Asia has seriously considered closer economic cooperation among its countries for several years now. The suggestion has been made by many Asian leaders—considering everything from an East Asian Free Trade Area to a common currency for the region.

Two factors triggered these aspirations. First was the Asian financial crisis of 1997. It was thought that Asian monetary cooperation would help avert another crisis. Then there was the launching of a common European currency. Asia thought it would need a similar single regional currency to compete with the burgeoning euro.

Where does Asia stand today on these issues? Could the area achieve economic union?How would such a union even be possible, given the diversities of such a vast region?And how would such a union affect world affairs?

Where Asia Stands Today

When Japan first put forth the idea of an Asian Monetary Fund (amf) to help avert further economic turmoil following the Asian financial crisis, the U.S. and Europe opposed the idea. They believed that it might dilute the influence of the International Monetary Fund (imf). So Eastern leaders began working on another plan to further economic cooperation. This began in May 2000 with the Chiang Mai Initiative (cmi), created by the Association of Southeast Asian Nations (asean). The plan called for a network of bilateral currency-swap arrangements between Asian countries. Thus far, it has been implemented with a good measure of success. Japan has made strong swap arrangements with Korea, Malaysia, the Philippines and even China. Asia experts agree that this is a strong foundation for, and probably a precursor to, an amf.

Asians certainly feel justified in seeking an amf. Globalization and economic integration has been the trend this past decade or so: Europe has its Union; North America has nafta; South America has mercosur. Henry C.K. Liu, financial analyst for Asia Times, points out, “Asia needs an Asian system, operated by Asians and for Asia” (Asia Times, July 12).

Asia is making significant headway in economic cooperation. It is on the road to achieving the first level of economic integration, a free trade area (the other three levels are customs union, common market and economic union). Asean would like to see this free trade area—covering asean, possibly including China—operational within the decade.

Up to the Challenge?

Still, Asia will face challenges seeking such integration.

One obstacle, according to political scientist Samuel Huntington, is that “cultural commonality has been the prerequisite to meaningful economic integration”(The Clash of Civilizations and the Remaking of World Order). Asia is home to half a dozen markedly different civilizations and cultures—a diversity far exceeding that of the countries within nafta, mercosur or the EU.

Liu states, however, that “East Asia is quite capable of becoming a common-currency area,” so long as East Asian countries understand their current cultural limitations to regional cooperation and realize that they must pursue it “in a gradual and orderly manner, taking into account their unique characteristics”(op. cit.).

A “cultural commonality” does exist to a certain extent—principles of Eastern religions are shared by many in Asia. Moreover, rising anti-Westernism will help overcome cultural differences within the continent.

Further, political common ground(i.e., the desire to balance a strengthening Europe) will also contribute to making a once-difficult union inevitable. As Europe grows in power both economically and militarily, and as the U.S. dollar declines in strength, Asia will tend to overlook its differences and unite to help balance out an increasingly euro-centric global economy. Perhaps the economic crisis of the late ’90s, together with the addition of another strong currency to the Western world with the euro, has already sparked a certain commonality, igniting the desire to link the economies of this region more closely.

The other factor that could lead to Asian economic unification, despite cultural differences, is the economic strengthening of the Chinese throughout the region (through the economies of the mainland, Taiwan, Singapore and Hong Kong). This would increase “the likelihood of China reasserting its traditional hegemony in East Asia, thereby compelling other nations either to ‘bandwagon’ and to accommodate themselves to this development or to ‘balance’ and to attempt to contain Chinese influence”(Huntington, op. cit.).

To Affect the World Dramatically!

Samuel Huntington wrote, “The economic changes in Asia, particularly East Asia, are one of the most significant developments in the world in the second half of the 20th century”(ibid.; emphasis mine).

Asia’s economic growth in the last half of the 20th century is nothing short of remarkable. During the 1950s, Japan stunned the world as a non-Western nation that was modernizing and developing economically. Soon thereafter, other Asian nations followed suit. The growth rates Asia experienced toward the end of the century were unmatched elsewhere in the world.

In fact, Asian economic development is changing the world! It is altering the balance of power between the East and the West—particularly the United States, as the confidence in the American economy and its dollar wanes. Huntington predicts that by 2020, Asia could account for over 40 percent of the global economic productand have seven of the ten largest economies.

This economic growth could enable Asian states to expand military capabilities and cooperation with each other. This in turn would increase tension between Asian societies and the West.

If Chinese economic growth continues strong, we may see either a bi-polar leadership develop in the region, centered in Beijing and Tokyo, or even a unipolar Asia with a leadership centered in Beijing. In fact, East Asian economic growth is increasingly becoming China-oriented. China strongly support efforts at further Asian economic cooperation (it is currently considering a single currency for the mainland, Hong Kong, Macau and even Taiwan). China has traditionally dominated the region, though. Though the yen remains powerful, watch for the Chinese yuan to take a stronger lead in Asian financial affairs.

In addition, the increasing prospect of a rise of nationalism and militarism in Japan, exacerbated by its economic woes, are certainly worth watching. Japan already had its day in the sun when its empire grew as the colonial powers failed in the early part of the 20th century.

The Bible predicts that Asia will one day unite into the largest military conglomeration that this world has ever seen (i.e. Rev. 9:16). China and Japan will play a large part in the leadership of this great combine—a role that China is already beginning to assume economically and even militarily. Our free booklet Russia and China in Prophecy helps explain this trend (request your free copy).

Traditionally, economic union precedes military union. Thus, because the Bible prophesies of a united Asian military, watch for this growing world power to first work more closely together as an economic bloc.