The Jakarta Post
In an effort to help protect currencies in the Southeast Asian region against global headwinds, Indonesia has proposed a broader use of the Chinese yuan in the ASEAN region in order to better synchronize with China as ASEAN's largest trading partner.
Trade Minister Thomas Lembong said on the sidelines of the 47th ASEAN Economic Ministers (AEM) meeting in Kuala Lumpur that he shared the views of other economic ministers of ASEAN member countries to strengthen regional currencies by using more Chinese yuan than US dollars.
'['¦] we should be pushing for a harder, broader use of China's renminbi in regional trade and finance,' he told reporters on Saturday.
Thomas said, however, that the proposal was still in the early stages of discussion and that he was conferring with the coordinating economic minister at home.
Most ASEAN member countries have seen their currencies weaken against the US dollar, with some being undervalued.
Malaysia's ringgit has emerged as Asia's worst-performing currency, hitting a 17-year low to 4.18 ringgit per US dollar.
The rupiah, meanwhile, is the second worst performer with an exchange rate standing at almost Rp 14,000 per US dollar, the lowest level since the 1998 Asian financial crisis.
Indonesia is also experiencing massive investment outflows in which foreign investors recorded a total of Rp 4.29 trillion (US$310.2 million) in net sales last week. Year-to-date foreign transactions reversed course from net purchases of Rp 15 trillion in April to net sales of Rp 4.38 trillion on Aug. 14.
Separately, the Asian giant, China, has cut its yuan rate against the US dollar to keep its exports competitive.
Applying a similar measure, ASEAN member Vietnam has seen its currency weaken 1 percent to 21,890 dong to the US dollar.
Vietnam's central bank has also widened the trading band in which the dong can be traded above or below to 3 percent from 2 percent.
Thomas stated that a broader use of the yuan would be highly relevant for ASEAN as an American-style economic cycle was not necessarily well synchronized with the East Asian economic cycle.
'['¦] East Asia's economic cycles are much more like China's economic cycle, so if for example, much more East Asian trade and finance was in renminbi, then our monetary policy would be more influenced by Beijing rather than Washington,' he said.
On a separate occasion, Malaysian International Trade and Industry Minister Dato' Sri Mustapa Mohamed, who is chairing the AEM event, said it made a lot of sense for ASEAN countries to use more yuan as China was one of the largest trading partners for ASEAN.
According to data from the ASEAN Secretariat, China has become the largest trade partner outside the region with total trade amounting to 14.5 percent of ASEAN's total trade last year.
The US, meanwhile, only made up 8.4 percent of total ASEAN trade, the data shows.