East Asian financial cooperation has come under the spotlight once again amid the spiraling global financial crisis originated in the United States. The Asian financial crisis in 1997 awakened East Asian countries to the importance of working together in the financial field. Along with deepening regional economic engagement, their interests in this regard have heightened. In the last few years, the countries have come up with a series of concrete visions and plans. Now the ongoing financial turmoil is likely to give fresh impetus to the creation of an East Asian foreign exchange fund.

Today, financial cooperation in East Asia is changing from being crisis-driven to being oriented to the needs of the region's economies. Moreover, the financial crisis has made a greater impact on the East Asian countries' model of economic development rather than their financial sectors. So the countries should take a long-term perspective toward forging sound cooperation in the financial field.

Complicated implications

The implications of the U.S. financial crisis for East Asia are complicated. For China and emerging economies in Southeast Asia, the crisis has rather insignificant consequences for their financial industries, but a major impact on their real economies.

The U.S. financial crisis is largely attributed to the lack of government regulation and the greed of financial rating agencies. Most countries in East Asia are developing countries that have yet to be integrated into the international financial market. Their financial institutions have not suffered heavy direct losses because they have little involvement in the financing process of U.S. financial institutions. Also, these countries have put in place increasingly market-based foreign exchange regimes since the Asian financial crisis in 1997. These reasons explain why the U.S. financial crisis has had only a limited financial impact in the region.

Nevertheless, the U.S. financial crisis has dealt a heavy blow to East Asia's export-oriented economy, a salient feature of the region's development model. Although trade within the region has been on the rise in recent years, most regional trade involves the transfer of intermediate products. Sales of final products still rely on European and U.S. markets. East Asia's export businesses have suffered direly as the U.S. financial crisis spreads to other Western countries and beyond, leading to a fall in their consumption desire and capacity. The lack of credibility also poses a barrier to international trade. If the trend persists, East Asian