The China-ASEAN freetrade zone and the recent CAR pipeline seem to counter this notion. take a look at China's role during the 1997 Asian economic crisis and how they saved the South Korean Won in 2008.
China had issues with her neighbor from time to time, but the fact remain China has settled all her land dispute with all her neighbor except India. No need to cite stat, but there are many in India's neighborhood view China in a better light than India, SL, BD, PK.
Name one country in the neighbourhood of China where they did not foment trouble.
South Korea, China Sign 38 Trillion Won Currency Swap (Update1)
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http://www.bloomberg.com/apps/news?pid=20601087&sid=awJV0HGibVmw&refer=home
By William Sim and Nipa Piboontanasawat
Dec. 12 (Bloomberg) -- South Korea and China agreed a 38 trillion won ($28 billion) currency-swap arrangement to help ensure financial stability in Asia.
“Strengthening regional financial cooperation is not only beneficial to regional financial stability and economic development, but also a major contribution to global financial stability,” the People’s Bank of China said in a statement.
South Korea wants to secure access to funds to prevent a repeat of the 1997 currency crisis that caused a run on the won and required a $57 billion bailout from the International Monetary Fund. The Bank of Korea is scheduled to release another joint statement with the Bank of Japan on expanding their swap arrangement later today.
“This is a big achievement for South Korea to help stabilize its currency and maintain its external credibility,” said Chun Chong Woo, an economist at Standard Chartered First Bank Korea Ltd. in Seoul. “Still, it won’t have much impact on the markets today because it was already anticipated.”
Under the arrangement South Korea can get access to 38 trillion won worth of yuan from the People’s Bank of China at any time. Under a previous deal, the Korean central bank could only get as much as $4 billion worth of yuan or U.S. dollars during times of crisis.
China’s central bank said it would pursue currency swap arrangements with other countries if is necessary to sustain financial stability in “special circumstances.”
U.S. Agreement
The Kospi stock index has risen 16 percent since a $30 billion swap line was agreed with the U.S. Federal Reserve on Oct. 30, suggesting that the arrangement reassured investors that South Korea would be able to service its debt. Before then the index had lost almost half its value this year. The won has gained almost 6 percent versus the dollar since the deal.
South Korea’s foreign-exchange reserves fell for an eighth month to the lowest level in almost four years in November. Fitch Ratings last month cut its outlook for the nation’s credit rating to negative from stable, signaling that shrinking reserves may pose a threat to the economy’s stability.
Japan may more than double its swap agreement with South Korea to $30 billion from $13 billion, Nikkei English News reported yesterday. Currently, the Bank of Korea can get $10 billion from its Japanese counterpart in the U.S. currency during a crisis and $3 billion in yen any time.
“Korea has already experienced what it can be like when it runs out of reserves and how bad the downside can be for the economy,” said Robert Subbaraman, chief economist at Nomura International Ltd. in Hong Kong. “Korea has been quite proactive in trying to secure greater cooperation in the region.”
Summit
South Korean President Lee Myung Bak meets Japan’s Prime Minister Taro Aso and China’s Premier Wen Jiabao in Fukuoka, Japan, tomorrow to discuss the global financial crisis.
The central banks of China, South Korea and Japan this week announced an agreement to meet in 2009, starting regular consultations to ensure currency stability in Asia.
Finance ministers from 13 Asian nations, including South Korea, Japan and China, agreed in May to create a pool of at least $80 billion in foreign-exchange reserves to be tapped to protect their currencies.
“This cooperation is kind of a regional self-rescue,” said Ding Zhijie, deputy dean of finance at Beijing’s University of International Business and Economics.
To contact the reporter on this story: Seyoon Kim in Seoul at
Skim7@bloomberg.net