Selected east Asian countries have recently agreed to create a network of bilateral currency swaps and repurchase agreements as a 'firewall' against future financial crises. Termed the Chiang Mai Initiative (CMI), it is aimed at providing countries facing the possibility of a liquidity shortage with additional short-term hard currencies and encompasses all ASEAN countries as well as China, Japan and Korea. We will have to wait and see if and how monetary cooperation in east Asia progresses, but to the extent such regional arrangements help to reinvigorate interest in strengthening the international financial architecture, they could act as stepping stones towards multilateral reforms rather than as stumbling blocks.
