Without any doubt, the past decade was a crucial period for China's reform and opening up. China was confronted with two most severe external economic challenges during this period. One was the Asian financial crisis from 1997-98. The other is the current world financial crisis.
The crises have not only changed China's relations with the rest of Asia, but also greatly boosted the integration of this region. China now has a much bigger role to play in fighting the global economic woes and enhancing regional cooperation.
In the 1990s, as China's fast-paced economic growth and opening up continued, the country was forced to face the challenge brought by the unexpected Asian financial crisis, which also constituted a great shock to Hong Kong's economy, shortly after the region was handed over to China.
At the moment, many people predicted that China might step into the same crisis, following in the footsteps of some Southeast Asian countries and the Republic of Korea. However, thanks to the prudent financial policies the Chinese government took to prevent the financial risks and the decision not to depreciate yuan, the country not only avoided direct financial shocks, but also succeeded in maintaining its fast economic growth, becoming the "engine" to boost the Asian economy.
During the 1997-98 crisis, although the International Monetary Fund (IMF) got heavily involved in the financially troubled economies, Western countries, especially the United States, took no practical bailout measures. Instead, they focused on criticizing the development mode and value system of these Asian countries.
Under such circumstances, some Asian economic leaders called for the search of regional solutions to deal with the crisis. Malaysian Prime Minister Mahathir Mohammed wanted to carry out the concept of "East Asia Economic Group" that he had long been promoting, and Japan's economic leaders proposed to set up the "Asian Monetary Fund" (AMF).
In line with the guiding principle of being a "responsible country", and within the framework of the IMF, China, via bilateral channels, provided aid worth more than $4 billion to Thailand and other countries, and credit and free medicine to Indonesia and other countries. To maintain regional stability, China shouldered great pressures and paid a great price by not depreciating its currency. This move had played a decisively important role in stabilizing Asia's financial and monetary market.
Such a responsible behavior laid the foundation for China to improve its relations with some Southeast Asian countries. Gradually, China has become an important driving force for Asian regional integration.
In the wake of the Asian financial crisis, especially after China's accession to the WTO, a large amount of investment from Asia flew into China. China, with an ever-enlarging market, cheap but experienced laborers, favorable economic and labor policies, as well as its US dollar-pegged exchange rate, was very attractive to those export-oriented Asian economies. It could be said it was the Asian financial crisis that made China a "world factory" in its true meaning.
During the Asian financial crisis, although China did not give immediate support to the initiative for an AMF, it did actively seek regional resolutions to overcome the financial crisis, namely the formula of "ASEAN plus China, Japan and South Korea," which later evolved into the well-known 10+3 forum.
Since 1997, China has been an active participant in and a firm supporter of the East Asian cooperation process, with the 10+3 as its main channel. It has been proved this process is laying the foundation for the "East Asian Integration". At the meantime, China has actively taken part in the Asia-Pacific Economic Cooperation (APEC), which took shape even before the financial crisis, and East Asia Summit (EAS), which is something between APEC and 10+3.
One decade after the Asian financial crisis, Asia, including China, is being challenged with another financial crisis, only on a larger scale. Can Asian countries deepen their cooperation to fight back? Can China play a bigger role in Asian cooperation?
China, flanked by Europe and the United States, has chosen three ways to fight the global financial crisis.
The first is the overall "self-relief". When the overseas demand is cut by a very large margin, changing the mode of domestic economic growth by stimulating the domestic demand will ensure the "scientific development". China's continuous economic growth will make crucial contribution to the restoration of world economic growth.
The second is active participation in global cooperation. Against the backdrop of the financial crisis, China hosted the Asia-Europe Summit and participated in the world financial summit held in Washington.
The third is regional cooperation. In addition to self-relief efforts and global cooperation, regional cooperation turned out to be more urgent and more important. China had wasted no time to call for further East Asian cooperation - centered around 10+3 - to cope with the financial crisis.
During the 7th Asia-Europe Summit held in Beijing last October, China convened East Asian leaders to have a deep discussion on how to further regional financial cooperation. Also China has tried to push the China-Japan-South Korea cooperation in the face of the financial crisis. On December 13, 2008, leaders from China, Japan and Republic of Korea held the first-ever trilateral summit outside of the "10+3" framework. The trilateral summit had a strong symbolic significance in international cooperation and would inject new impetus into East Asian cooperation.
Stabilizing the worldwide financial market and reforming the existing international financial system are two difficult tasks that can only be done gradually. But regional monetary and financial cooperation is relatively easier. The strengthening of such cooperation will help reform the international financial system.
Regional cooperation could enlarge the roles big Asian powers, China and Japan in particular, can play in international economic institutions. As Germany, UK and France have enhanced their international economic roles via the European Commission, China and Japan can achieve the same goal via the Asian cooperation mechanism, framework and system.
The author, Pang zhongying, is professor of international relations at the Renmin University of China
(China Daily January 5, 2009)