Chapter 11: Why financial crisis may come to China but not Taiwan
11. Why ﬁnancial crisis may come to China but not Taiwan James W. Dean1 INTRODUCTION If the East Asian ﬁnancial crisis of 1997–8 sparked One Great Debate, it was a debate over ‘Asian’ versus ‘Western’ capitalism. Or, more precisely, it sparked a debate about whether the root cause of the crisis was a failure of Asian capitalism or a failure of Western capitalism (Dean, 2000a, 2000b). Western economists were prone to vacillate, and the most inﬂuential of them changed his mind mid-crisis (Krugman, 1998a, 1998b, 1999). In my own case, it took a trip to the People’s Republic of China (hereinafter called China), followed by a stop in the Republic of China (hereinafter called Taiwan) to clarify my mind. Both Taiwan and China embrace so-called ‘Asian’ capitalism – in Taiwan’s case, perhaps not so closely as the hardest-hit crisis countries, Indonesia, South Korea, Malaysia and Thailand – but in China’s case much more closely. Had practising the evil arts of Asian capitalism been suﬃcient to trigger a crisis, China should have been Asia’s leading candidate for Armageddon. Taiwan too should have been brought low, much like its arch-rival, South Korea. But the two Chinas survived, while the Southeast Asian ‘tigers’ did not. This chapter will argue that the two Chinas averted crises precisely because of their distinctive, ‘Asian’ suspicion – paranoia might be more precise – of Western capital markets. Neither was seduced by the sirens of Tokyo, Wall Street and Frankfurt. But there the similarity ends. While Asian capitalism in...
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