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S. Korea, Japan, China agree to create new financing facility against regional crises

By Yonhap

Published : May 3, 2024 - 19:38

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South Korean Finance Minister Choi Sang-mok speaks during a trilateral meeting with his Japanese and Chinese counterparts in Georgia on Friday. (Yonhap) South Korean Finance Minister Choi Sang-mok speaks during a trilateral meeting with his Japanese and Chinese counterparts in Georgia on Friday. (Yonhap)

South Korea, China and Japan agreed Friday to reinforce the regional financial safety net, along with members of the Association of Southeast Asian Nations, by launching a new financing facility program meant to extend greater support in case of a financial crisis, Seoul's finance ministry said.

The agreement was made during a trilateral meeting of South Korea's Finance Minister Choi Sang-mok, Japan's Finance Minister Shunichi Suzuki and China's Finance Minister Liu Kun held during their meeting in Tbilisi, Georgia, according to the Ministry of Economy and Finance.

The trilateral meeting took place on the sidelines of the 27th ASEAN+3 Finance Ministers' and Central Bank Governors' Meeting, which brought together top financial officials, and central bankers from ASEAN and the three Northeast Asian countries.

"We support the establishment of the Rapid Financing Facility with the incorporation of eligible freely usable currencies as its currencies of choice, as a new facility under the Chiang Mai Initiative Multilateralization and its modalities," the joint statement released after the meeting read.

The RFF will be extended without any conditions in case of a crisis caused by such external shocks as a pandemic and natural disasters, officials said, adding that the ASEAN Plus Three nations will revise relevant regulations this year to officially implement the program next year.

The CMIM is a $240 billion pool launched in 2010 that can be tapped through currency swap deals in times of financial crises in the region.

The nations also shared the need to change the CMIM fund into a paid-in capital structure, rather than pledge funding, and agreed to fix a detailed structure by 2025 after an analysis of various models.

During the meeting, the three nations also shared the assessment that the region is expected to grow at a faster clip this year driven by rising exports and solid domestic demand.

"We remain committed to rebuilding policy space lost during the pandemic and strengthening fiscal sustainability, while providing targeted support for the economy.

But they pointed to geopolitical tensions, rising global prices of commodities and raw materials, and growing volatility in the foreign exchange market as near-term challenges.

As longer-term risks, they cited climate change and population aging.

"Against this background, we remain committed to rebuilding policy space lost during the pandemic and strengthening fiscal sustainability, while providing targeted support for the economy," the statement read.

They vowed to further enhance "our cooperation and communication with each other as well as with ASEAN countries in the ASEAN+3 Finance Process to work toward robust recovery and sustainable growth in our region," while reaffirming their commitment to "the open, free, fair, inclusive, equitable, transparent, and nondiscriminatory rules-based multilateral trading system," according to the statement.

ASEAN comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Thailand, Singapore and Vietnam. (Yonhap)