East Asian Economic Integration: China's perspective and policy

Abstract

East Asian economic integration has become a hot topic since the Asian financial crisis. Countries in the region have increasingly moved in favour of closer cooperation and coordination. Various proposals for free trade areas and Asian monetary cooperation have emerged. Regionalism in East Asia has been encouraged by the worldwide tendency to move to regional integration and by increasing interdependence in the region. The Asian financial crisis was a turning point for this awareness. However, institution building for regional integration has been slow, due to lack of political will, different development levels and needs, different opinions on the best mechanisms for cooperation, and contradictions between multilateral and regional arrangements. China was sceptical about regionalism until 1999. At that time, accession to the World Trade Organization, increasing trade and financial flow with East Asian economies and financial system reform and further opening to the world market led China to become more confident about and supportive of regional cooperation and integration in the hope that integration would provide more opportunities for China to realise its comparative advantages and a more secure environment in which to maintain stability. In this paper, the author argues for the need for decision makers in East Asian countries to show greater political will to implement such changes, in particular pointing to the need to develop mutual trust between China and Japan. He also makes some suggestions for speeding up free trade agreement negotiations and monetary integration.