How Finance Is Shaping the Economies of China, Japan, and Korea (Columbia Business School Publishing)
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This volume connects the evolving modern financial systems of China, Japan, and Korea to the development and growth of their economies through the first decade of the twenty-first century. It also identifies the commonalities among all three systems while accounting for their social, political, and institutional differences.
Essays consider the reforms of the Chinese economy since 1978, the underwhelming performance of the Japanese economy since about 1990, and the growth of the Korean economy over the past three decades. These economies engaged in rapid catch-up growth processes and share similar economic structures. Yet while domestic forces have driven each country's financial trajectory, international short-term financial flows have presented opportunities and challenges for them all. The nature and role of the financial system in generating real economic growth, though nuanced and complex, is integral to these countries. The result is a fascinating spectrum of experiences with powerful takeaways.
the large increase in short-term foreign liabilities were further compounded by heavy losses sustained by Korean investors who bought large amounts of foreign securities when the global financial system was in turmoil. Of $117 billion invested at the end of 2007, more than half evaporated during 2008 due mostly to the collapse of the financial markets they had entered. Worse yet, more than 80 percent of these investments were hedged against currency risk. Since they had bet against depreciation
that are not subject to similar constraints. When a sudden reversal in capital flows occurs, even well-regulated and sound banks in emerging economies are likely to face solvency risk as they are denied access to external wholesale funding markets. This risk is one of the main reasons why many emerging economies hold “excessive” foreign exchange reserves and may need to intervene in the foreign exchange market and impose capital controls. Since holding large amounts of reserves in emerging
data. dEconomic freedom are 2009 summary ratings, as published in the source’s 2011 report. Each country’s summary rating is compiled from forty-two distinct pieces of data, available in the source. Hong Kong had the highest rating, 9.01 out of 10. The average for the entire list of 141 countries was 6.64. Loan and deposit interest rates were regulated, entry was limited, and government policy and administration guidance were extensive. In other words, the financial systems in all three
bonds led to a gradual process of deregulating interest rates. The need to recycle current account surpluses in the form of net capital flow abroad led to a gradual decontrol of international financial transactions. (For an analysis of these early years of deregulation, see Lincoln 1988, especially chapters 4 and 5.) The second half of the 1980s was a heady time in Japan. The Nikkei Average (the most widely followed stock index) tripled from 1985 to a peak on the final trading day of 1989. Urban
investors have become large players in portfolio ownership of equity and in trading on the Tokyo Stock Exchange. A wave of consolidations dramatically changed the banking industry and led to the formation of four large financial holding companies that include banking, securities, and insurance. Nonetheless, in a variety of ways the Japanese financial system has undergone relatively little transformation. The predominant flow of money from savers to borrowers continues to be through the banking