ADB encourages more trade in yuan

Promoting trade in yuan would also help strengthen regional economies, said ADB president Haruhiko Kuroda.

He said Asia needed to seek regional co-operation to reduce the impact of currency appreciation that has been linked mainly to the weakening of the dollar.

Because the dollar was likely to depreciate more, he said, concerted action by Asian nations would be better than any measures individual countries could take on their own.

He said Asia needed to present a united front on the issue at forums such as the G20 meeting of the world's 20 biggest rich and emerging nations this week in Korea, and Asia Pacific Economic Cooperation (Apec).

Mr. Kuroda met Thai Prime Minister Abhisit Vejjajiva this week to seek support from Thailand to use the forum of Asean+3 -China, Japan and Korea -to pursue a major change to use the yuan as a trading currency for the region.

The ADB will propose the idea at the next meeting of Asean+3 finance ministers.

But China needs to create more open and flexible financial mechanisms to allow Asian countries to have greater access to the yuan, he added.

Finance Minister Korn Chatikavanij said Thailand supported the ADB proposal, noting that 90 percent of trade in Asia now is conducted in US dollars.

He said Asia could start by applying the currency swap mechanism developed under the Chiang Mai Initiative and later establish a new organisation in Asia to handle the issue.

Mr. Korn acknowledged that it would take time to change the trading currency - but nowhere near as long as the 40 years it took for the dollar to supplant the British pound.

Kiat Sittheeamorn, the president of the Thailand Trade Representative, also supports the yuan proposal. But he said Asia needed to develop its bond market in parallel to the establishment of a new organisation to support wider yuan use.