Dozens of experts from China, Japan, South Korea and the Association of Southeast Asian Nations (ASEAN) said at a conference in Shanghai that Asian countries should enhance currency cooperation, setting up an Asian Monetary Fund (AMF), bond guarantee and rating institutions and a research academy.

They noted that the Chiangmai Initiatives, which enabled currency swaps to deal with the Asian financial crisis, will be amended.

The conference was a prelude to the First East Asian Summit, which is scheduled to open in Kuala Lumpur at the end of 2005.

The summit's predecessor is the meeting of ASEAN plus China, Japan and South Korea. Australia and New Zealand will also attend the meeting for the first time this year.

Representatives from all sides agreed that they should boost exchange rate cooperation, enhance coordination and jointly deal with US dollar depreciation and soaring oil prices.

Japanese representatives reaffirmed the importance of setting up an AMF to suppress short-term speculation. Such an institution is also expected to monitor the regional financial situation, boost reform of monetary systems and keep the flow of Asian currencies stable and orderly.

Asian countries could appropriate funds from their foreign exchange reserves to form the AMF, the representatives stated.

"Hot money exists in many Asian countries. The short-term net capital inflow in South Korea last year was equal to its forex reserve increase, and such capital flows are also severe in China and other countries," one participant warned.

The Japanese representatives suggested that currencies in Asia should be pegged to a basket of currencies, including the yen and the euro.

If an Asian monetary zone cannot be established in the near term, the scheme of setting up several monetary subzones should be considered, they suggested. Such zones are an important step in stabilizing regional exchange rates.

Representative Wu Jianming, president of the China Foreign Affairs University, pointed out that the lack of coordination in the forex system puts Asian central banks in a quandary, and that efforts should be made to keep regional exchange rates stable.

Chinese representatives also suggested building an Asian bond market, saying that large companies should be encouraged to issue bonds, including transnational infrastructure construction bonds.

They pointed out that guarantee and rating institutions should be established to underwrite these bonds and to attract European and US investors.

"Currently, the international rating of Asian bonds is not high, so we should have our own rating institutions," China Business News quoted one of Chinese representatives as saying.

Analysts noted that the East Asian bond market grew robustly last year, a trend they hope will continue. They said that the huge amount of foreign exchange reserves should play a more important role in Asian bond market.

Professor Ou Minggang of China Foreign Affairs University said that a relevant study report would be submitted at the East Asian Summit. "Unilateral or bilateral action cannot fundamentally solve the problems," he pointed out. "Across-the-board coordination is needed."

(China.org.cn by Tang Fuchun April 10, 2005)