From the Pacific Exchange Blog
Many Asian borrowers increased their dollar-denominated debt in recent years amid the extraordinarily low rate environment. Recent volatility has been characterized by capital outflows from Asian economies where such debt accumulated. While emerging Asia remains vulnerable to further capital flight with a majority of external debt in foreign currency, its bond issuances are largely in local currency. Further deepening of bond markets combined with increased local currency debt can insulate emerging Asia from further volatility.
Similar to many countries in Asia, Korea’s household debt increased considerably after the global financial crisis. As of year-end 2014, household debt as a percentage of GDP was 76% and increased 15 percentage points since 2008. Concerns have risen as the growth rate of household debt has exceeded that of income and the broader economy for a prolonged period.
Internet finance in China is growing rapidly and has the potential to significantly alter the structure of the financial system. New firms, many of which are private, are entering China’s mostly state-controlled financial system and offering innovative products and services.
This Asia Focus examines similarities in the process of banking reform in China and Vietnam, analyzes how both countries have dealt with financial crises, and draws lessons from their shared experiences that may be useful for other countries undertaking financial reforms.