EARLIER this month, China beat Japan in a bid to appoint the head of a new organisation that may one day pave the way for a common currency in Asia.

Mr Wei Benhua, the former vice-head of China's State Administration Of Foreign Exchange, was named the first director of the Asean+3 Macroeconomic Research Office (Amro). This is a Singapore-based regional financial surveillance body that was launched this month.

The news followed a controversial suggestion by Malaysian Deputy Finance Minister Lim Siang Chai that China should take the lead in creating a unified Asian currency - a proposal Beijing has not responded to publicly, but which it likely greeted with quiet pleasure.

With China pushing for a greater role in regional affairs, the prospect of leading one of the most aspirational pan-Asian initiatives - and one once championed by Japan - is attractive.

Already, it is China's currency regime moves that are most closely followed by its Asian neighbours, since the yuan is certain to feature prominently in an Asian monetary unit.

China is thus asserting its voice on the Asean+3 platform, which comprises Asean as well as Japan, China and South Korea.

Its leadership rivalry with Japan was a talking point at a meeting of Asean+3 finance ministers in Hanoi two weeks ago, where China got its way in grabbing the plum appointment at Amro.

One gauge of how seriously Asian officials, especially the Chinese, consider the idea of a regional monetary unit is a recent paper prepared by a high-level group for the Asean+3 Research Group. Its recommendations were tabled at the Asian finance ministers' Hanoi meeting.

It included a survey of about 1,000 government officials, academics and bankers in the Asean+3 countries on implementing a regional currency unit.

Dr Pradumna Bickram Rana from the Nanyang Technological University, who led the team doing the survey, said there was overwhelming backing for the creation of a regional currency unit to support regional surveillance in the Asean+3 group, although a single currency for the region is still a long way off.

Those surveyed said the regional currency unit should comprise a basket of Asian currencies - with the Chinese yuan and Japanese yen having the highest and equal weights. The weighting should be based on the proportionate contributions made by Asean+3 members to the Chiang Mai Initiative Multilateralisation (CMIM), which is a US$120 billion (S$149 billion) crisis fund established in the region.

Japan and China (together with Hong Kong) had each agreed to contribute 32 per cent of this amount. South Korea contributed 16 per cent and the Asean countries, the remaining 20 per cent.

Amro, as the surveillance unit of the CMIM, was also recommended as the agency best positioned to administer this currency, which would include calculating the value of this regional monetary unit and posting it on its website.

The Chinese are likely to be gratified by the findings. The recommended high weighting of the yuan reflects the growing recognition of China's economic clout and its currency's importance.

Just two years ago, Japan had presented itself as a leader in this decade-old idea of a common currency, before the global financial crisis diverted attention from it. Now, China has overtaken Japan as the world's second-largest economy.

China has led the Asian pack out of the financial slump, and is moving quickly to regionalise its currency in Asia. This has included setting up clearing banks in Hong Kong and Singapore to support trade settlement and investment products denominated in yuan.

The yuan may also become convertible and an international reserve currency by 2016, said most global investors surveyed by Bloomberg earlier this month.

Burgeoning intra-regional trade has helped narrow economic gaps between Asian countries. Once-huge barriers to creating a common currency, from political differences to economic diversity, appear less daunting.

While the regional monetary unit will take some time to take off, China's participation will give it a good start.

Dr Chow Hwee Kwan, associate dean of the School of Economics at Singapore Management University, pointed out that 'since the yuan is a key component of the regional monetary unit, the success of its implementation does depend on China's support'.

But even if China has the interest, is it ready to lead such a complex initiative?

Some scholars in China, such as Mr Tong Shijun, who heads the Federation of Commerce in Henan province, believes China 'has the resources and the credibility' to take the lead.

But others say Beijing has to allay its neighbours' suspicions about its growing dominance in Asia.

China and Japan will also have to work out a balance of power in Asia first, starting with the top seat at Amro: Mr Wei will occupy the post for only a year before a Japanese finance official takes over.

But even if China only takes turns at the driver's seat, the journey to achieving a common Asian currency, once little more than a pipe dream, looks set to begin in earnest.

This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Source - The Straits Times (http://www.straitstimes.com/Review/Others/STIStory_671520.html)