Alicia García-Herrero, Chief Economist for Asia-Pacific at Natixis
BY TENGKU NOOR SHAMSIAH TENGKU ABDULLAH
KUALA LUMPUR, Oct 25 — As Kuala Lumpur readies to host the 47th ASEAN Summit from Oct 26 to 28, Malaysia’s chairmanship under the theme “Inclusivity and Sustainability” faces the task of steering the bloc through a shifting global financial order. Among the key attendees are U.S. President Donald Trump, Chinese Premier Li Qiang, and Indian Prime Minister Narendra Modi—a reflection of ASEAN’s central role in today’s trade and monetary realignments.
As host, Malaysia is expected to champion discussions on regional financial stability and alternative liquidity mechanisms amid tightening global dollar access. “A key issue Malaysia can bring to the table is the need for ASEAN to strengthen its own financial safety nets,” said Alicia García-Herrero, Chief Economist for Asia-Pacific at Natixis, in an interview with TNS NEWS.
“I think Malaysia would want to raise the issue of the Fed potentially eliminating repo arrangements. ASEAN needs to discuss alternative liquidity lines,” she explained. Such measures, she argued, are critical to ensure ASEAN is not “caught between two financial systems without adequate buffers.”
García-Herrero warned that the U.S. Federal Reserve’s review of its swap and repo lines could limit ASEAN’s access to the U.S. dollar, a move that could hit regional economies like Malaysia and Indonesia hardest.
“The Fed might actually eliminate these swap lines. The only country in ASEAN that has one is Singapore, while others rely on the so-called repo line,” she said. “There’s potential fragility coming from a weak currency.
Having access to U.S. dollars is very important—not just through reserves but external dollar liquidity as well.” That shortage, she noted, partly explains Bank Indonesia’s reluctance to cut interest rates despite easing cycles in other markets.
If dollar access tightens further, China may seek to fill the liquidity gap. “China might use this opportunity to further push the use of the renminbi (RMB) for trade settlements,” García-Herrero noted.
“We’ve already seen this with Australia’s BHP and Rio Tinto, and some ASEAN economies are starting to use RMB for settlements.” She added that Beijing could expand RMB swap lines across Southeast Asia “to make these countries feel that this is a safe bet,” deepening China’s regional financial influence and gradually eroding the dollar’s dominance.
Turning to the green-technology boom, García-Herrero said ASEAN’s growing role as a manufacturing hub for electric vehicles (EVs), solar panels, and clean-tech products presents both opportunity and risk.
“Frankly, it’s all about bypassing tariffs,” she said. “Whether it’s EVs into Europe or green-tech products assembled in ASEAN for export to the U.S., that’s where the opportunity lies.”
However, she warned that tougher U.S. trans-shipment tariffs could reverse those gains. “Vietnam’s exports are still booming because the U.S. hasn’t been able to identify the trans-shipped items. But if Washington finally succeeds, it would be a big deal for ASEAN—and not a positive one.”
With Trump’s return to the regional stage and global capital flows in flux, García-Herrero said the Kuala Lumpur summit arrives at a defining moment. “The future of ASEAN’s economic resilience will depend not only on growth but on its ability to secure liquidity, diversify trade, and adapt to the new global financial order.”
Alicia García-Herrero is the Chief Economist for Asia-Pacific at Natixis and a Senior Fellow at BRUEGEL. Based in Hong Kong, she advises institutions on macroeconomic trends, capital flows, and financial stability across Asia.
- TNS NEWS