(Economic Watch) Reflecting on the Asian Financial Crisis, what are the implications 25 years later?

　　China News Service, Beijing, August 20 (Reporter Xia Bin) Twenty-five years ago, a sudden Asian financial crisis brought a series of problems such as currency devaluation, deflation, and bankruptcy to many parts of the world, which has affected the world economy. and social development causing severe trauma.

　　At present, the world is changing and the impact of the epidemic is superimposed. Countries are generally faced with the risks of weak recovery, high inflation, and violent fluctuations in the financial market. If the risks continue to accumulate and strengthen, it may evolve into a global economic crisis and a long-term economic recession.

　　Reflecting on the Asian financial crisis deserves attention.

Recently, the China Development Research Foundation held an international seminar on "Learning from History: Retrospect and Enlightenment of the 25th Anniversary of the Asian Financial Crisis". Many economic and financial experts who have held important positions in the Central Bank of China and the Ministry of Finance participated in the seminar and gave their opinions.

　　Dai Xianglong, former governor of the People's Bank of China, once participated in the formulation and implementation of major measures taken by the country to deal with the Asian financial crisis. He believes that, looking back at the Asian financial crisis at a new historical point, the global financial risks mainly caused by the United States are expanding.

Specifically, the shortcomings of the existing international monetary system are increasingly prominent; the risk of financial dishonesty of the US government is spreading; the US has launched the "Indo-Pacific Economic Framework" to implement the "Asia-India Strategy", which has expanded financial risks in Asia.

　　In order to resolve the above risks, Dai Xianglong's suggestions include continuing to promote international currency diversification; urging the US government to gradually reduce the national debt ratio to less than 70% through the G20 leaders summit and its finance ministers and central bank governors' meetings, which is equivalent to 25 years. speed up the construction of China's modern finance, enhance China's ability to prevent and resolve the global financial crisis; continue to promote the "10+3" financial cooperation, and establish regional institutional arrangements to deal with global financial risks.

　　Lou Jiwei, a member of the Standing Committee of the National Committee of the Chinese People's Political Consultative Conference and former Minister of Finance of China, pointed out that the structural weakness of the country and region itself is the most fundamental cause of the crisis.

In particular, excessive leverage, excessive reliance on external debt, inflated asset prices, and maintaining an excessively high domestic currency exchange rate have resulted in an imbalance in the balance of payments.

"If these structural weaknesses are not addressed in time, a crisis will break out sooner or later. Targeted external attacks will only make the crisis earlier and more tragic."

　　He mentioned that it is necessary to adhere to opening to the outside world and fully realize the convertibility of the local currency under the current account.

The full liberalization of the capital account needs to be carefully evaluated. Generally speaking, the advantages of mature market economies and economies in financial centers will outweigh the disadvantages.

Allowing "hot money" to flow quickly across borders is not good for any developing country.

　　"Global cooperation is even more needed now." Lou Jiwei appealed that after the 2008 financial crisis, the world's representative countries reached a consensus on win-win cooperation.

Since 2018, the situation has changed dramatically, with trade frictions, technological decoupling, and even the politicization of industrial subsidies. This year, geo-military conflicts have occurred.

Looking back at the Asian financial crisis and the world financial crisis, numerous analyses and studies have shown that the crisis could have been avoided if all parties had taken early measures.

"But history has no ifs. Looking back at history today is just a reminder to all parties to accept the lesson. No matter how difficult it is, we must retake the road of win-win cooperation."

　　According to Zhu Min, the former vice-governor of the People's Bank of China and vice-chairman of the China Center for International Economic Exchanges, once all crises occur, they are global crises, such as the Asian financial crisis and the 2008 global financial crisis.

　　Judging from the current global situation, Zhu Min bluntly said that inflation and commodity prices are at a high level, which has a great impact on the real economy. The United States has experienced a technical recession for two quarters, the US stock market is at a century high, and global government debt is also at a century high.

　　Zhu Min further said that high debt, high stock market, and high bubbles, in this case, the financial vulnerability is actually very high, and the risk of policy crisis is also increasing.

In this case, he felt that the possibility of external malicious attacks could not be ruled out, and changes in the Fed’s interest rate could easily lead to fluctuations in external funds. “Today, these risks are actually accumulating and at high levels, so we must be highly conscious. ."

　　Zhu Guangyao, former Vice Minister of Finance of China, said that on the occasion of the 25th anniversary of the outbreak of the Asian financial crisis, we review the process of overcoming the crisis in order to take history as a mirror and prepare for possible new financial crises.

The signing of the Chiang Mai Initiative is a milestone achievement for the 10+3 countries (ASEAN, China, Japan and South Korea) to strengthen regional financial cooperation.

"Faced with possible challenges in the future, we should further improve the level and efficiency of regional financial cooperation, especially to improve the availability of the Chiang Mai Initiative's multilateralization." (End)