It is hard to locate top economists, bankers, traders or money dealers in Asian capitals these days. They are all attending seminars on the effects of the introduction of the euro - an international event which the Taiwanese trade director said ranked second in importance only to the Y2K computer issue.
Asia is waking up to the fact that in two weeks' time the number of major world currencies will increase from two to three, the US dollar, the Japanese yen and the euro. The main effect on most Asian currencies will be a change in the composition of their foreign exchange reserves, most of which are currently held in dollars.
The euro is expected to make ground on the dollar as time goes by. Most analysts have been generally upbeat about the consequences for the Asian economies, believing that the launch of the euro will have a significant impact on trade and investment. Demand for the single European currency is already starting to pick up in what has always been a dollar zone, said Mr Etienne Reuter, head of the European Commission's office in Hong Kong.
Nowhere has the study of the euro-effect been more intensive than in China. Beijing economists believe that the euro will benefit China's economy in the long run, though it could give European economies an edge in the short term. China in particular welcomes the euro as a way of ending the dominance of the dollar in the world economy, according to Chinese vice-premier Mr Li Lanqing.
The greater stability in European exchange rates will reduce the cost of trans-national deals, said Mr Zhu Min, director of the Bank of China's Institute of International Finance. He told a seminar in Beijing that it will be much easier for China to deal with a unified European Union, and that the new currency will improve the structure of China's foreign currency reserves.
Beijing will inevitably switch some of its foreign exchange reserves, valued at $140 billion (£94.5 billion), into the euro as time goes by, said Mr Zhu, though he cautioned that it would be prudent to wait up to two years to see how the euro performed. European currencies already account for 19 per cent of China's reserves, with 62 per cent denominated in dollars and 8 per cent in yen. Eventually this could become 35 per cent in euros, 50 per cent in dollars and 15 per cent in yen, say analysts.
China has already announced that the People's Bank of China will from the start hold a substantial sum in euros to conduct foreign trade with countries in the euro zone. About 13 per cent of China's exports went to the EU last year, and this will rise to 15 per cent in 1999, according to the official news agency, Xinhua.
Trade between China and the 11 nations which will use the euro was worth $43 billion yuan (£3.5 billion) last year. An integrated EU market will provide more fund-raising opportunities for Chinese companies and financial institutions, said Mr Qiu Yunlun, director of the Institute of European Studies. The EU accounts for 44 per cent of China's total foreign government loans. "Those sort of loans may increase as a result of the launch of euro," Mr Zhu said.
"It will no longer be necessary for Chinese enterprises to open offices in all EU countries, with a single office serving the needs of all EU members," said Mr Zhou Wenming, a senior official of the International Trade Institute in Beijing. Hong Kong is unlikely to follow Beijing's example. Its currency, the Hong Kong dollar, is pegged to the US dollar and it holds 90 per cent of its reserves in the greenback. The dollar peg has also been the backbone of the `one country, two systems' concept. Mr Joseph Yam, chief executive of the Hong Kong Monetary Authority, said the territory has been well served by its solid link to the US currency but that down the road Asia could follow Europe and introduce an Asian equivalent or `Asian currency unit' to form a financial anchor for the region.
Taiwan, another Asian country with huge foreign currency reserves in dollars, sees distinct advantages in the euro. It will decrease Taiwan traders' exposure to fluctuating foreign exchange rates, said Mr Chen Ruey-long, director general of the Board of Foreign Trade. He told a seminar that it will consolidate the strength of the EU which with a population of 295 million people and an economy of $6.57 trillion, was almost equal to the US States in terms of market size. Taiwanese investors should diversify their business by aggressively exploring European markets, he said.
In South Korea, the Samsung Economic Research Institute warned that Seoul needs to adopt a transaction system using the euro and to adjust the foreign currency composition of its foreign exchange reserves. It urged the government to convert a predetermined amount of foreign exchange reserves into the euro to prepare for a change in the international financial order, such as the possible weakening of the dollar following the launch of the euro.
Tokyo is watching and waiting to see how its new competitor fares in the new year. Analysts there expect the launch of the euro to send Tokyo stocks higher early in 1999 as investors avoid active trading in Europe to steer clear of a possible confusion in the first few weeks.
