Table of Contents

A New Financial Market Structure for East Asia

A New Financial Market Structure for East Asia

Edited by Yung Chul Park, Takatoshi Ito and Yunjong Wang

This book contends that the East Asian financial constitution lacks an appropriate infrastructure, resulting in inefficient allocation of high savings and an over-inflated short-term debt market. It goes on to point out that despite high savings, East Asia’s dependency on financial centers outside the region is also relatively high, and that there is no strong region-wide network to connect various financial centers in East Asia.

Chapter 16: A New Financial Market Structure for East Asia: How to Promote Regional Financial Market Integration

Gordon de Brouwer and Jenny Corbett

Subjects: asian studies, asian economics, economics and finance, asian economics, financial economics and regulation


16. A new financial market structure for East Asia: How to promote regional financial market integration Gordon de Brouwer and Jenny Corbett 1. INTRODUCTION East Asia’s capacity to secure strong and stable economic growth depends on, among other things, a secure foundation of well functioning financial markets, institutions and systems. In general, the region’s financial markets are relatively weak, undeveloped and unsophisticated, although there are exceptions, notably Japan, Singapore, Hong Kong and Australia.1 The region’s financial institutions are also generally weak, again with a number of exceptions. Not only are the banking sectors of some of the crisisaffected economies still heavily burdened by the fallout from the financial crises of 1997 and 1998, but most banks in China and Japan are overwhelmed by non-performing loans. Furthermore, domestic markets and institutions in the region are not well integrated with each other. This has a bearing on the economic outlook of East Asia. Weak financial markets and institutions impede economic efficiency, economic growth and risk management, making East Asia more vulnerable to adverse economic and financial shocks. Financial weakness and fragmentation mean that the region lacks international influence, and remains reactive rather than proactive to international market and policy developments. The current state of East Asia’s financial markets, institutions and integration provides many big opportunities for significant improvement and deepening. Ultimately, responsibility for this lies with policymakers – officials and politicians – and how they design and enforce market and institutional mechanisms. But it is also incumbent on financial...

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