ASEAN Centre in MGIMO-University the MFA of Russia


Will ASEAN Countries Opt for Yuan Instead of Dollars?

Will ASEAN Countries Opt for Yuan Instead of Dollars?


Indonesia has proposed the use of the Chinese yuan in trade and investments among the members of the Association of  South-East Asian Nations. This was announced by the country’s trade minister Thomas Lembong in the lower house of the parliament

"All ASEAN countries mostly use the US dollar in international payments. However, the cost of imports and services is increasing against the background of the rise in the US currency. This prompts experts to suggest the use of the yuan.

The Chinese currency must be used more widely in the region, as the economy of ASEAN countries is largely focused on China," said the minister. Jakarta is especially counting on transition to yuan in bilateral trade with China. The central bank of the country is already preparing the relevant proposals.

Can the yuan replace the dollar as the main currency within ASEAN?

On the one hand, it is clear that the economic activity in the Asia-Pacific region is growing in spite of the economic problems. But on the other hand, the statement by the Minister of Finance of Indonesia shows that ASEAN countries are considering various backup options in case of financial and economic turbulence, says Ekaterina Koldunova, deputy dean of the Faculty of Political Science at MGIMO and an expert on Southeast Asian affairs.

"It is unlikely that they will rely on the yuan, the minister mentioned the rupee as well. It should be understood that among the countries of Southeast Asia, nobody in his right mind would like to be at the mercy of China. There is already a mechanism of financial assistance — The Chiang Mai Initiative.

It is a multilateral financial and economic institution in East Asia with the main contribution from Beijing. And if the ASEAN countries will resort to any loans from this pool of reserve funds in the case of liquidity problems, it will be primarily from China and then from Japan and South Korea. Another aspect of the problem is that being export-oriented, the ASEAN countries are highly dependent on trade with the US and the EU, so they cannot abandon the dollar quickly."

Southeast Asia is currently going through the process of diversification, looking for some options and cushions that could help the ASEAN countries in the event of a crisis. As an example, we could consider the choice a single Asian currency in the 1990s. The possibility of using the yen was discussed, but it was abandoned after the crisis of 1997, and only a basket of currencies which could serve as the base was discussed. Now one cannot rely on a single currency. The dollar is rising, the euro, as well as the yen, is in a slow crisis and there are no other reserve currencies. The Russian expert believes that the fall in the Chinese stock market and the decline in its economic growth will objectively deter the ASEAN countries from the choice in favor of the yuan only.