East Asia’s Counterweight Strategy: Asian Financial Cooperation and Evolving International Monetary Order

This study seeks to explain the origin, process, and prospects of East Asia’s “counter¬weight” strategy in the arena of international finance, and its significant implications for global financial governance. Overall, this study addresses three key questions: (i) What motivated East Asia’s counterweight strategy and the emergence of Asian financial arrangements such as the Chiang Mai Initiative (CMI) and the Asian Bond Fund Initiative (ABFI)? (ii) What are the nature and purpose of the CMI and the ABFI? (iii) What would determine the future trajectory of the Asian financial cooperation and East Asia’s counterweight strategy? The central argument of the present study is that East Asian countries search for counterweight strategies that will enable them to avoid over¬dependence and loss of autonomy by developing regional alternatives even as they maintain collaborative relations with the G-7-centred global financial institutions (e.g. the IMF). Policy makers in East Asia are thus hedging their economic bets about the uncertain prospects of both the creation of regional institutions and the reform of global institutions. My findings also suggest that four key factors, such as regional economic conditions, geopolitical rivalry, the IMF reforms, and the United States and EU reactions would possibly shape the future development of East Asia’s counterweight strategy and Asian financial cooperation.