Japan, China, South Korea to Meet, Discuss Asian IMF Alternative

Japan, China and South Korea are planning an Asian economic summit in Fukuoka, Yonhap reports. This is unusual considering how belligerent most Chinese and Korean officials are when talking with Japan about anything, but not big news of its own. The interesting thing is what will likely be on the agenda.

Several Asian nations have recently discussed establishing a new $80 billion Asian economic support fund. Basically this is a regional IMF to assist in times of crisis (such as now) and a regional economic watch organization to assist in predicting when crises are likely to occur. The economies of Asia have very different foundations than those of Europe and America. For the most part, when we discuss economic activity we are really discussing Europe and America, with China filling a niche role and Japan being, well, Japan. Japan’s economic underpinnings are radically different as is the Chinese growth model. Neither would look very healthy by Western standards and therefore do not tend to get much IMF attention. The smaller — but collectively meaningful — economies of the more politically and socially chaotic Asian states such as The Philippines, Indonesia, Malaysia and Thailand are in the Asian development/crisis boat, but represent such a small impact on the global economy and are in some cases (i.e. the Philippines) so corrupt and constantly close to collapse anyway that the IMF would be certain to give them a pass, prefering instead to use its available bandwidth on cases which are more significant to the “larger economy” — meaning the West.

This has led Singapore, Thailand, Philippines, Malaysia, Indonesia, etc. and singificantly China, Japan and South Korea to discuss establishing their own Asian economic assistance fund. Of course, the only economies which can afford to underwrite this are Japan, China and South Korea — in that order. It makes sense for these big three who will really foot the bill to meet early and discuss how this fund should play out and exactly what each of them has to gain or lose from such an endeavour. The question of gain and loss are significant to consider as this fund will likely be used to rescue the smaller economies in the region, not the larger ones who will be footing the bill. This also means that China, South Korea and Japan, though definitely each having significantly differing (and often colliding) national interests, can use this fund as a tool to manipulate the smaller Asian nations in times of economic crisis.

The details of the meeting are rather unimportant. What is important is to see whether or not these Asian Big Three decide this early on to assign themselves permanent board and veto rights within the fund’s administration. If they do — and they naturally should, as it is their money in question after all — then they are collectively agreeing to flex this Asian economic assistance fund in their interest. The fun part about this is that they do not have a single collective interest and are, or eventually will be, at odds in the future over this or that issue. As far as national conflicts go — in anything less than an actual shooting war, that is — the board of this economic administration could well see an Asian version of the political drama and comedy seen in the now useless U.N. Security Council, with permanent veto-empowered members differing interests working alternately to either secure common interest or kill any competing interests in administrative deadlock.

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