It is likely that a renminbi (RMB) area emerges in East Asia.
When RMB was pegged to the dollar, most of ASEAN currencies were also pegged to the dollar. That was because a large part of their trade was denominat- ed in dollar. Since China shifted to a managed floating in 2005, RMB has been appreciating vis-a-vis the dollar, followed by major ASEAN currencies and Korean Won. As a result, they are now trading in effect as if in a single bloc. Martin Hohensee, Deutsche Bank's head of fixed income and credit research, sees the economic case for monetary union in Asia.
What we see now is a move toward an RMB area. In a serious dollar crisis, these currencies may move to a more formal joint floating, as Europe did in the dollar crisis in 1972. Would China then attempt to fix it as RMB area, or consider it as an interim stage in the process toward an Asian currency regime for the entire region? Chinese economists seem to be divided on the issue.
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