Kobe, Japan(January 14, 2001)

Mr. Chairman,

The East Asian financial cooperation is gathering a good momentum of moving forward. Following the agreement on direction and priority for East Asian Cooperation reached by 10+3 leaders in Manila in November 1999, 10+3 finance ministers adopted the Chiang Mai Initiative in Chiang Mai, Thailand last May. The Initiative aims at expanding the present ASEAN Swap Arrangement to all ASEAN member countries and establishing currency swap and repo arrangements among ASEAN plus China, Japan and Korea on bilateral basis. After the Chiang Mai meeting, 10+3 countries immediately began to work on concretizing the Chiang Mai Initiative. The basic framework and principles regarding currency swap and repo arrangements are under discussion and some progress has been made.

The Chiang Mai Initiative marked a substantial step toward financial cooperation among East Asian countries. It is a good beginning for the countries in the region to enhance financial self-help and support mechanism. The objective is to complement existing current international facilities ---- by providing liquidity support for the nations in the difficulty of international payment. According to article 7 of the Chiang Mai Initiative, 10+3 finance ministers also mandated ASEAN secretariat, on top of currency swap agreement, to work on appropriate self-financing vehicle for the region with a view to strengthening the collective capacity against possible future financial crisis.

I would like to take this opportunity to share with you my reflections on the prospect of East Asian Cooperation.

Firstly, the East Asia Cooperation has been initiated by the Leaders' Meeting of ASEAN plus China, Japan and Korea, it has a strong political commitment, thereby creating a solid foundation and impetus for further development.

In the face of the difficulties posed by 1997 Financial Crisis, the leaders of Asian Countries have realized that it is imperative for them ---- through coordination and cooperation---- to strengthen collective capability against crises so as to recover their economies as quickly as possible. In this context, the leaders of ASEAN, China, Japan and Korea took advantage of the 30th anniversary of ASEAN to hold their first informal meeting in Malaysia in late 1997. Since then, leaders of ASEAN+3 met regularly and had in-depth discussions on the issues concerning regional finance, economy, politics and security etc. Specifically, they reached the consensus on the key role of financial stability in sustaining regional economic development. The leaders also shared the conviction that to build a peaceful environment for economic development serves the greatest common interest of East Asian countries. To this end, it is imperative for the East Asian countries to strengthen coordination and cooperation among themselves. In November 1999, leaders of 10+3 issued the Joint Statement of East Asia Cooperation in Manila, which crystallized the direction and priority for the future by highlighting the importance of developing economy through cooperation.

In light of this principle, the concept of regional financing mechanism symbolized by the Chiang Mai Initiative has been moving forward steadily while the cooperation in trade and investment is making headway.

The financial and economic cooperation under 10+3 framework has given a spur to the progress in overall East Asian Cooperation. In November 2000, the fourth 10+3 informal leaders meeting in Singapore agreed to designate two task forces to study the possibility of transforming informal meeting to summit and establishing an ASEAN+ Northeast Asia Free Trade Zone. Moreover, the leaders of China, Korea and Japan agreed to meet regularly on the occasion of 10+3 leaders meeting since 2001.

In short, thanks to the consensus and political commitment of leaders of ASEAN plus China, Japan, and Korea (10+3), the regional financial and economic cooperation has made a steady progress, which will in turn help consolidate and expand common grounds and narrow divergence, thereby providing more political support.

Secondly, given diversified background in history, culture and level of economic development, the East Asian countries must pursue regional cooperation in a gradual and orderly manner, taking into account their unique characteristics.

Compared with other regional cooperative mechanisms, particularly the European economic and monetary union, Asian nations are more diversified in history, culture, political regime, and levels of economic development. Therefore, there is still a long way to go and arduous task ahead for these nations. And they must choose a cooperative pattern suitable to the regional characteristics rather than copy the model of others'.

It is noteworthy that the evolution of ASEAN itself experienced several stages. It started with those countries of similar economic features, then was gradually expanded to more countries. Likewise, the current cooperation among the East Asian countries should also start from the areas where the consensus can be more easily reached, and then spread gradually on the basis of consolidation. Contrast to other regional organizations that started from trade cooperation before their expansion, the East Asian Cooperation started from the financial field where they shared consensus before the comprehensive cooperative relations could be gradually established in the field of finance, trade and investment.

Thirdly, The East Asian cooperation has emerged along with the vigorous momentum of regionalization in global economy, which is consistent with economic globalization.

As known to all, there are two sides to the coin. Globalization is no exception. While having accelerated world economic development, it has also brought about the problem of uneven distribution of benefits, thereby accentuating global economic polarization. As a result of dramatic advancement of modern information technology, the Digital Divide has further widened the income and development gap between the developed and developing countries. Many developing countries found themselves increasingly marginalized in the course of globalization.

Despite some undesirable side effects, economic globalization has become the general trend of the time. History has taught us that if a country shut itself from the world in its development course, it would be quickly left behind by the rest of the world. Integration into the world economy, however, means enormous challenges to take. If a country, the developing country in particular, wants to achieve rapid economic development, it must face squarely the fact that our economies are increasingly intertwined, sciences and technologies are advancing by leaps and bounds, and global competition is getting more and more fierce. Therefore, it is necessary for the countries to implement appropriate strategies to better integrate their economies with globalization, and better coordinate their economic policies so as to maximize benefits from globalization.

Regionalization has emerged along with economic globalization, such as EU, NAFTA, ASEAN plus China, Japan and Korea or 10+3. Many economies have embarked upon regional cooperation for the sake of sharing benefits and avoiding risks. I don't think the emerging regionalization runs counter to globalization. Rather, it means more equal participation and closer cooperation among the economies in a region, which ought to lead to a more reasonable globalized economy. Meanwhile, enhanced coordination and cooperation among different regional cooperative mechanisms will also promote a smooth development of economic globalization.

It is my view that, by strengthening the region's capacity to withstand and prevent financial crisis, the emerging economic cooperation in East Asia is bound to help maintain the financial stability and economic development in this region. Furthermore, by bringing their comparative advantages into full play, it will enable Asian nations to participate in the global cooperation, including their cooperation with the EU, and hence contributing to the orderly progress of globalization.

As the finance minister of China, I have personally participated the negotiations of the Chiang Mai Initiative. Despite the difficult time we share when we have to start something from the scratch and when "all is ready except what is crucial",. I firmly believe that, with the strong promotion of all parties concerned, East Asian cooperation has the full potential to grow into a regional cooperative mechanism by taking a road of its own characteristics, and thereby making our Asian contribution to the orderly progress of globalization.

Thank you for your attention.