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ADB President Says a Common Market is More Important than Common Currency

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ADB President Says a Common Market is More Important than Common Currency

(Peoples Daily China)

New York Nov. 7, 2005 In view of ADBs recent debut issuance of RMB bonds in China, and its design of the Asian Currency Unit (ACU), which will be released in mid-2006, we interviewed ADB president Haruhiko Kuroda in New York and the following is the summary of the interview:

When asked on the creation of a common currency in Asia, Mr. Kuroda says a common Asian currency is a long-term plan that can hardly come true in the next 3-4 decades. However, a free trade zone in East Asia will boost the demand for a common currency. The creation of a common currency requires tariff coordination or the formation of free trade zone, plus the coordinated action of national regulatory bodies. In comparison, a common market is easier to develop and will offer better chance for the creation of a common currency.

When asked on the possibility of a second RMB exchange rate adjustment, he replies it is very wise for the Chinese government to depeg RMB from US Dollar and instead peg onto a currency basket. It is more flexible and allows for the gradual appreciation of RMB in the future. He says he believe RMB will surely appreciate further against US Dollar, but declines to forecast on the specific amount or timing.

He also points out the university education in China should be further improved to provide adequate human resource and technology support for East Asia economic integration, as China has now actively participated in the regions economic integration.

Mr. Kuroda also denies the reduction of ADB lending to China. He says there is no roof set for China. With the continued success of ADB lendings in China, and the advance paybacks, the loans outstanding do become less. But that is not the intention of ADB.

He suggests China learn from India in domestic bond market development. ADBs Panda Bond issuance, he points out, will have profound impact on the domestic bond market and catalyze market diversification and product innovation. China is the third regional member, following India and Philippine, where ADB raises local currency funds. He thinks both China and India should focus on the development of the vast domestic bond market to support the private sector growth.

On Sino-Japanese relations, Mr. Kuroda says the close economic ties in between will work positively on the bilateral political relations. He suggests both countries identify common interests and address disputes under the framework of regional/global cooperation. He also says the current high oil price is unsustainable and will fall back to the range of USD35-45.

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