Abstract

The East Asian countries that went through the unprecedented Asian financial crisis merely ten years ago in 1997-8, were confronted with the Global Financial Crisis again in 2008. Unlike the previous crisis which had its origins in East Asia, the global crisis began in the United States. The East Asian countries were not direct victims of this crisis but were unable to avoid its indirect repercussions such as decline in exports and in some cases recession. At the same time, the United States and some other countries pointed out strongly that the crisis occurred due to the large scale surplus of East Asian countries. The development of this situation and the Global Financial Crisis once again confirmed the fact that the East Asian regional economy is closely coupled with the United States and other developed economies. The reaction of East Asian countries to the Global Financial Crisis unfolded in three directions. First, East Asian countries pursued self-rescue measures such as expanding foreign exchange holdings and supporting their economy through expansionary fiscal policies.

Secondly, the East Asian countries pushed forward further cooperation among states inside the region, using the experience of cooperation accumulated over the past ten years since the Asian Financial Crisis as a foundation. In other words, while swiftly supplying liquidity they strengthened cooperation among regional countries with the belief that they should refrain from relying excessively on the International Monetary Fund (IMF) as well as on the United States to cope with the crisis. It is also difficult to deny that the regional cooperation following the Global Financial Crisis has been taking place inside the framework of the dynamics between China and Japan. Third, with the Global Financial Crisis East Asian countries have been seeking for a change in global governance as represented in the G20 summit. Consequently a certain level of progress has been achieved in this respect, such as reaching an agreement on the issue of reform of quota and voice in the IMF and World Bank. While conducting self-rescue measures and increasing cooperation among regional countries are reactive measures to the Global Economic Crisis, participation in global governance can be considered to be a more active measure since it seeks to reform the fundamental framework of the international economic order.

It is expected that the future East Asian financial order will reveal both change and continuity regarding the measures undertaken by the regional countries. The Global Financial Crisis reconfirmed the desirable geographic range of regional cooperation and clarified the importance of East Asian regional cooperation. Simultaneously, it also brought change in the focus of regional cooperation, shifting from trade to finance. It is possible to say that the Global Financial Crisis has had a considerable positive effect on the financial cooperation in East Asia.

However, financial cooperation among East Asian countries does have a strong characteristic of responding to an external crisis. The scope of this cooperation has been mainly concentrated on liquidity supply. Cooperation in terms of exchange rates, macroeconomic policies, and the introduction of a common currency has been very limited. The question remains on whether the future East Asian financial order will be able to acquire the internal motivation and capacity for cooperation rather than relying on an external cause as has been the case.

After the Global Financial Crisis, the emerging East Asian financial cooperation reflected the power structure in the region, specifically between China and Japan. It is notable that China now has officially acquired influence corresponding to its expanding national power and is on an equal footing with Japan. When looking at it from an institutional dimension, the Chiang Mai Initiative Multilateralization also reveals how China has reached the equal terms with Japan in East Asian regionalism. The extent of the institutionalization of financial cooperation will be determined at a level that reflects the interests of the two countries.

The full text in Korean is available here