Likewise, Asia should ensure it has its own ‘carbon-fibre curtain’ of policy adaptability and flexibility to manage destabilising movements in the financial system. Despite the inevitable diversification of de facto reserve currencies, the dollar will remain a significant force to facilitate global trade and cross-border capital flows. Thus, it is of primary importance for Asia, in particular the emerging markets, to ensure that economic fundamentals are strong and financial markets are resilient with adequate buffers. At the same time, we need to continuously improve the necessary infrastructure for corporates, businesses and financial institutions to transact in a multi-currency environment. Currently, cross-border trade within the ASEAN region are transacted and settled mostly in dollars despite almost half of ASEAN trade being intra-regional. It makes economic and business sense, that transacting in local currencies would enhance the efficiency of trade and investments, with strong probability of reducing the cost of doing business. In an environment of volatile market conditions, businesses will have more options to choose the currency to transact, providing flexibility and insulation from exogenous shocks. Greater usage of local currencies would be an impetus for the development of the region’s financial markets, consistent with ASEAN’s collective vision for an integrated cross-currency market. Malaysia has been forward-looking in preparing for the inevitability of a multi-currency market: i. We have diversified our international reserves into emerging market currencies in early 2000, including into renminbi assets. We were confident in the diversification benefits given the strength and sustainability of China and emerging markets’ economic growth.

The aftermath of the shifting economic tectonics spurred countries to strengthen regional and bilateral cooperation. The impetus for regional integration in ASEAN deepened, and efforts were made to strengthen the regional safety net through bilateral currency swap arrangements and the Chiang Mai Initiative Multilateralisation. At the global level, the G20 was made the premier forum for international economic cooperation and the leaders involved have indicated their commitment to reforming the international financial architecture. Collectively, countries in this region are resilient with strong domestic savings, current account surplus and high international reserves. The strength and stability of this region could be further enhanced with increased regional cross-border investments, supported by a wide network of regional banks. While some central banks and sovereign wealth funds have taken the lead to invest regionally, the size of these cross-border investments in local currencies pales in comparison with investments in the dollar markets. Nevertheless, re-channeling savings into the region, albeit still small, is a welcome start. China: Roaring Dragon The story of China’s rise in the global economy is a remarkable one. Its integration and increasing influence in the global economy is becoming more pronounced. In 1990 its size was only 1.9% of the global economy. Now it constitutes close to 15%. Rapid growth of a staggering 9.4% between 1978 and 2012 led to this rise. In fact, if one measures the size of the economy by purchasing power parity terms, China is already the largest economy in the world.