Article(print) World Affairs Online2007

Ten years after the Asian financial crisis: the fragility and strength of China's financial system

In: IDS bulletin, Volume 38, Issue 4 : Asian Tigers: New Vulnerabilities to Crisis?, p. 29-39

Yu, Yongding

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Abstract

Over the past ten years since the Asian financial cisis, the Chinese economy has been performing extremely well. While emphasising the extremely positive growth performance China has had so far, this article also identifies key threats to the country's economic stability in the future. Among the sources of vulnerability are: a still somewhat fragile financial system, in particular banks, despite recent reforms in the system and improvements in some of its key indicators; the excessive liquidity in the economy, which is a major factor behind bubbles and inflation, and a new challenge facing Chinese economic authorities. The article also discusses how China may prevent a crisis from happening, highlighting the role capital controls can play in crisis prevention, and draws lessons on this from the Asian crisis. (IDS Bull/GIGA)

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