On Competition And Cooperation Between The Chinese Yuan And The Japanese Yen: In The Frame Of Asian Monetary Integration

The explosion of Asian financial crisis forced Asian countries and districts to realize the significance of regional monetary cooperation, and to visualize and practice Asian monetary cooperation actively. Compared to European monetary cooperation, however, it seems much more difficult to push forward the monetary integration in Asia, which has particularly complex political and economical environment .Thus, it becomes a common issue confronted by Asian countries and districts that how the monetary cooperation can be deepened.This paper investigates the effective way to push forward the monetary integration in Asia, on the basis of study on the relationship between the Yuan and the Yen, which are both key currencies in the region. The competition of the Yuan and the Yen due to strategy and interest intersection is studied firstly, as well as the competence of both sides to serve as"anchor currency"of region. It is shown that neither the Yuan nor the Yen can serve as"anchor currency"independently at present. Following this, the pros and cons of both competition and cooperation between the Yuan and the Yen are discussed. It is shown that not only can the cooperation put China and Japan in a better position, but also create a more advantageous environment for other countries and districts in Asia. Finally, a analysis of setting up subsidiary Currency Area by taking the Yuan and the Yen as the core currency respectively is carried out to discuss the way to avoid competition and promote cooperation. The endogeneity model of the Optimum Currency Area criteria is used to test whether the subsidiary Currency Area of the Yuan conforms to it. The empirical result shows that the subsidiary Currency Area of the Yuan conforms to the endogeneity criteria of Optimum Currency Area, which provides support for the establishment of subsidiary Currency Area as the way to push forward Asian currency integration.