A $120 billion fund that will offer loans to Southeast Asian countries in economic straits will be ready as early as the end of the year, Chinese officials said in Beijing yesterday.
The fund was established in May by ASEAN (Association of Southeast Asian Nations) and China, Japan and South Korea. Zheng Xiaosong, director-general for international affairs at the Ministry of Finance, said the fund would be a supplement to the International Monetary Fund, which provides financing to members in economic difficulties.
The fund can "offer loans to poorer countries" in the region if "another crisis happened", Zheng told a briefing.
China is a major contributor to the fund. Under the initiative, the 10 ASEAN nations plus China, Japan and South Korea agreed to create a network of currency-swap arrangements among members of the bloc to provide emergency funds in the event of financial crisis.
Japan and China will each contribute $38.4 billion. South Korea will provide $19.2 billion. ASEAN nations will contribute the rest.
The fund is a major force in China's ties with the ASEAN, said Su Hao, an international relations professor at the China Foreign Affairs University.
"The financial crisis makes the ASEAN countries feel that they must go to East Asian countries like China and Japan, rather than relying on assistance from those out of the region, like the IMF, the United States or Europe," he said.
For China, "enhancing ties with ASEAN is Beijing's most important strategic direction in its cooperation with the East Asia region," Su said.
Chinese officials also revealed yesterday that the China-ASEAN Free Trade Area (CAFTA) will be established by early next year. The announcement comes just two days ahead of Premier Wen Jiabao's trip to Hua Hin, Thailand to attend the 15th ASEAN summit and a series of regional summits this weekend.
China and six ASEAN nations (Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand) would charge no tariff on 93 percent of goods exchanged among them, according to the CAFTA agreement.
Zhang Kening, counselor from the International Department of the Commerce Ministry, said that "tariffs will no longer be a barrier" for China's trade with ASEAN countries." Zhang noted that CAFTA would be "the biggest" free trade zone by developing countries.
ASEAN also includes Vietnam, Myanmar, Laos, and Cambodia. The nation-bloc is China's fourth biggest trade partner with a total volume reaching $230 billion in 2008.
CAFTA would cover an area with 1.9 billion people and a total gross domestic product reaching $6 trillion.
Foreign Minister Yang Jiechi, Trade Minister Chen Deming and Finance Minister Xie Xuren will all accompany Wen this weekend.
Xue Hanqin, China's ambassador to ASEAN, is also part of the delegation. She said yesterday that China Import-Export Bank would disburse $1 billion as the first part of its $10 billion development funds, promised by Wen in this April, to Southeast Asia.
"We hope it will help Southeast Asia develop infrastructure and promote balanced development," she said.