NADI, Fiji -- ASEAN members plus China, Japan and South Korea are considering adding the yuan and yen to their multilateral currency swap deal as they seek to alleviate the framework's reliance on the dollar.
Finance ministers and central bank governors from the countries agreed Thursday to strengthen the framework amid growing concerns about emerging economies awash in speculative money due to accommodative policies around the world. The Association of Southeast Asian Nations and trio are together known as ASEAN+3.
Local-currency contributions to the deal "may be one enhancement option," the countries said in a joint statement, paving the way for the potential addition of the Chinese yuan and the Japanese yen.
It is important that countries receiving support be able to choose the currency they want, Japanese Finance Minister Taro Aso told a news conference.
China has been active in lobbying for greater international use of the yuan. Introducing local currencies spreads out the risk of relying on one currency, People's Bank of China Deputy Gov. Chen Yulu said.
Southeast Asia also shares the desire to reduce foreign exchange risks with the dollar and promote local currencies. ASEAN chair Thailand and Indonesia, which views itself as a major regional player, have promoted the use of Asian currencies along with China.
The Chiang Mai Initiative was established in 2000 following the Asian financial crisis of 1997 to prop up weakening currencies by letting countries exchange local money for the greenback to prevent capital flight. The framework's safety net was doubled to $240 billion in 2014.
Although a swap has never been activated, "it is crucial that the initiative function as insurance," a Japanese government source said. When Thailand's currency collapsed in 1997, Singapore and Malaysia also intervened, but the Thai government could not protect the baht after exhausting its foreign reserves.
"The yen will definitely be adopted before the yuan should Asian currencies be added to the Chiang Mai Initiative," a Japanese government source said, because it is an easier currency to swap. China will face the dilemma of liberalizing its foreign exchange market should it aim for the yuan's adoption.
The countries will also revamp contracts, currently limited to two one-year renewals, in scrapping the three-year maximum on swaps.
"We reaffirm our commitment to uphold the rules-based multilateral trading system and open regionalism, while resisting all forms of protectionism," Thursday's joint statement also said. The statement from December's Group of 20 summit, which U.S. President Donald Trump attended, did not take such a stand against protectionism.