On the sidelines of the annual Asian Development Bank meeting in Bali, Indonesia, the Association of Southeast Asian Nations (ASEAN) and its three dialogue partners Japan, China and South Korea formally agreed to establish a liquidity crisis fund worth $120 billion. The Chiang Mai Initiative Multilateralization (CMIM) is designed to provide ASEAN+3 members rapid support to bolster their foreign exchange rates during times of liquidity shortages. The CMIM is an outgrowth of the older Chiang Mai Initiative (CMI), a series of 16 bilateral currency swaps established in the aftermath of the Asian financial crisis, when the plummeting Thai Baht triggered a domino effect throughout the region in 1997. Multilateralization is the key difference between the old CMI and the new CMIM. Previously, a country experiencing unmanageable exchange-rate fluctuations had to ask permission from a particular partner in order to shore up its own currency. Now, a troubled country will be able to access the broader fund as long as it meets requirements established by ASEAN+3. The decision to create the CMIM came as the Western world succumbed to a liquidity crunch and financial crisis in late 2008. Having suffered their own crisis in 1997-1998, the Asians were fully armed with billions of dollars in foreign-exchange reserves, for the most part preventing their banks from falling short of enough liquidity to maintain daily operations. However, the new crisis was of such a proportion as to provide impetus for setting up a more robust regional crisis fund. On May 3, Japan and China (plus Hong Kong) sealed the deal by each offering $38.4 billion to contribute to the fund. Earlier in April, the program received $24 billion from South Korea, $4.76 billion each from Indonesia, Malaysia, Singapore and Thailand, $3.68 billion from the Philippines, $1 billion from Vietnam, and smaller amounts from Brunei, Cambodia, Laos and Myanmar. The deeper impetus for setting up the new fund has to do with East Asia's desire to wean itself from dependence on the Western financial system. Many of the hardest hit countries during the Asian financial crisis were able to stay afloat only by taking emergency loans from the International Monetary Fund (IMF) and other international institutions. These loans came with stringent restructuring requirements for borrowers that put governments at risk of political backlash at home, and were seen as humiliating examples of Asian subordination to American and European dominance. By contrast, the new CMIM scheme will be made available in accordance with criteria established by the ASEAN+3 member states, aimed at providing bridge funds over the short term. Hence, it will be geared toward the specific characteristics of the participating countries and designed to keep the current system intact, avoiding the need for drastic financial renovations or overhauls. Full support for China and Japan was necessary for the CMIM to become more than a pipe dream. Japan and China have 2008 gross domestic products of $5.2 trillion and $4.3 trillion, respectively, and foreign exchange reserves of about $1 trillion and $2 trillion. They are the second and third-biggest economies in the world and the true powerhouses behind any consequential attempt at East Asian regional cooperation. China and Japan are providing the bulk of the CMIM funds and are pursuing additional bilateral currency swaps with Southeast Asian states. Neither country has a current need for the fund — rather, both are seeking to enhance their stature in the region and strengthen alliances. Beijing and Tokyo stand to benefit from greater East Asian cooperation by expanding their influence, preventing the other from seizing the advantage in the region and diminishing the influence of Western governments and institutions. Nevertheless, the nature of the CMIM is not such that the Asians can say goodbye to the IMF and World Bank and the rest of the Western-dominated financial system. The Asian liquidity fund will not supplant these bigger institutions — its purpose is limited to short-term liquidity support. Unlike the IMF, it is not capable of providing loans to stabilize economies with deep structural problems or weaknesses (e.g., to patch up holes in public finances or upgrade infrastructure and boost development). These roles will fall to the traditional international lenders as well as such institutions as the Asian Development Bank, which has recently seen international donors triple its capital base to $165 billion in order for it to increase its lending throughout the region to compensate for the global economic downturn. If the various Asian currency swap arrangements fail to contain a liquidity crunch in the future, or if other economic crises emerge, then Asian states will still have to turn to the IMF and others to be bailed out. Ultimately, this is the reason for China's attempts to increase its quotas and voting rights in the IMF. If Beijing can have greater influence through regional mechanisms while seizing a bigger role in international institutions, it will at last begin to couple its economic clout with political sway. For Tokyo, the goal is to retain its influence in the global financial structure through alliance with the West while not allowing China to take the lead on regional alternatives. The CMIM is a significant but limited step toward greater Asian interdependency, which really translates to greater Chinese and Japanese influence in preventing a future crisis that could force Asia back on its knees before Western financial hegemony.