China, as a member of the Executives' Meeting of East Asia and Pacific Central Banks (EMEAP), is a participant of the fund - the first ever of its kind in the region.

The fund has an initial size of US$1 billion and aims to foster a regional bond market to reduce the excessive reliance of local economies on bank loans and overseas borrowing, which was believed to be a major reason for the 1997-1999 Asian financial crisis.

The fund will also create an investment vehicle for the sizable foreign exchange reserves of the central banks, EMEAP stated.

The new fund will begin operation soon and will first invest in dollar-denominated bonds.

EMEAP said the central banks will then look at whether to extend the fund to include bonds denominated in regional currencies.

"The launch of the fund is of great significance for building a regional bond market and for further financial co-operation in the region," the People's Bank of China stated.

A raft of ideas were floated for Asian financial co-operation in the wake of the financial crisis.

The boldest one was the establishment of an Asian Monetary Fund, which should lead to the birth of a unified regional currency.

But only those schemes supported by every member could materialize.

The most important co-operative project is the Chiang Mai Initiative (CMI), a scheme initiated in 2000 to create a network of currency swaps among China, Japan, South Korea and the Association of Southeast Asian Nations.

The idea of the swaps is to make foreign exchange reserves available at short notice to any member of the group whose currency comes under sudden speculative attack.

(China Daily June 3, 2003)