Malaysia, China to discuss ‘Asian Fund’ to cut US dollar dependency

·2-min read
Anwar Ibrahim, left, with Xi Jinping in Beijing on March 31. Photographer: Rao Aimin/Xinhua News Agency/Getty Images
Anwar Ibrahim, left, with Xi Jinping in Beijing on March 31. Photographer: Rao Aimin/Xinhua News Agency/Getty Images

By Anisah Shukry

(Bloomberg) — China is open to talks with Malaysia on forming an Asian Monetary Fund, said Prime Minister Anwar Ibrahim, reviving a decades old proposal to reduce reliance on the dollar.

Anwar said he proposed setting up the fund at the Boao forum in Hainan last week, stressing the need to reduce reliance on the dollar or the International Monetary Fund.

“When I had a meeting with President Xi Jinping, he immediately said, ‘I refer to Anwar’s proposal on the Asian Monetary Fund’, and he welcomed discussions,” Anwar told the Malaysian parliament on Tuesday. Anwar was on a state visit to China last week to steer ties post-Covid.

“There is no reason for Malaysia to continue depending on the dollar,” he added. Malaysia’s central bank is already working on enabling the two nations to negotiate on trade matters using the ringgit and renminbi, said Anwar, who doubles as finance minister.

The Malaysian leader’s comments come just months after former officials in Singapore discussed what economies in the region should be doing to mitigate the risks of a still-strong dollar that’s weakened local currencies and become a tool of economic statecraft.

The dollar’s strength is a headache for Asian nations including Malaysia, which is a net importer of food items. The Bloomberg dollar index reached a record high in September 2022, as the rally in the greenback sent the ringgit and other Southeast Asian currencies to multi-decade lows.

Anwar said Tuesday he had initially mooted forming the Asian Monetary Fund during his first stint as finance minister in the 1990s. His idea at that time didn’t gain traction as the US dollar was still seen strong, he said.

“But now with the strength of the economies in China, Japan and others, I think we should discuss this — at least consider an Asian Monetary Fund, and, secondly, the use of our respective currencies,” he said.

Anwar also revealed to lawmakers the breakdown of the record 170 billion ringgit ($39 billion) investment China had committed to Malaysia. This includes an initial investment of 2 billion ringgit this year in Zhejiang Geely Holding Group and Proton’s automotive high-tech valley project, which will increase to 32 billion ringgit.

Rongsheng Petrochemical Co. will also increase their activities in Pengerang, Johor with an 80 billion ringgit project, Anwar said. Rongsheng is one of China’s biggest refiners.

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