Seven Tigers in World Trade

Korea. Taiwan. Hong Kong. Thailand. Indonesia. Malaysia. China. Japan. FMI (Fondo Monetario Internacional). OMC (Organización Mundial del Comercio). Spain. UE (Unión Europea). Macroeconomic management. Asian Economy. Asian Economic Crises

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1.- THE SEVEN TIGERS: Korea, Taiwan, Singapore, Hong Kong, Thailand, Indonesia, Malaysia

There are seven countries which have an outstanding role in the Asian crises: Korea, Hong Kong, Taiwan, Singapore, Thailand, Indonesia and Malaysia. Their role is not important only in the context of the Asian crises, because we have to remember that they are the countries that have experimented the most important economic and financial grewment in Asia (but Japan and China) the last years.

There are some countries that have similar conditions in the crises process and including them in a same group could be interesting.

A clear example of that are the countries of Thailand, Indonesia and Malaysia.

In these countries the crises was caused by a bad macroeconomic management, which has influenced in the bad situation of their payment balance. The absence of competitivity, the fix exchanging rates in relation to the dollar and the foreign indebtedness provoked hard speculative attacks against these economies. All these phenomenon have created in these countries a disquieting situation.

These countries, including in the group South Korea, have been specially affected by the drop of their indexes and the massive devaluation of their currencies.

Eastern Asia has the 20% of the world commodities exportations and the industrialised countries have an important commercial deficit with these area. In this situation, the depreciation of their currencies could have influence in the importation in the European Union and in the United States (between June 1997 and February 1998 the drop of the indexes in relation to the dollar was: 303% in Indonesia, 105% in Thailand, 87% in Korea 63% in Malaysia, 25% in Taiwan, 22% in Singapore, etc.).

The lost of the international markets and the financial sector trust has provoked the cancellation of great infrastructure projects ( subway in Bangkok, a ditch in Malaysia, etc.).

There are some countries, like Thailand and South Korea, that have asked for help to the International Monetary Fund. This institution has imposed a couple of conditions to these countries in order to help them:

-Macroeconomic stabilization.

-Commercial opening and by capital account.

-Flexibilization of the working market.

We can say that the countries more affected by the Asian crises are Thailand, South Korea and Indonesia, but the situation is serious in all the south-west Asian area.

There are predictions which say that the economy will fall, in 1998, 10 points in Indonesia, 8 points in Thailand and 4 points in South Korea. The situation is so bad that Malaysia, who didn't asked for the IMF help could have a deduction in its GNP.

One of the negative factors of this situation is the dependence between the countries of the area. This factor has made that the crises infected all the countries of the area. One of the most important examples is Japan, who was in charge to give a solution to the problem in the start, has become clearly a part of the problem.

There are two countries that have a special commercial and financial importance in Asia. They are South Korea and Hong Kong (which is not a country yet).

Before July in 1997, all the experts trusted that the economical stability in Hong Kong was guaranteed.

One year and a bit more later, the economic situation has fallen so down that Hong Kong is going to his worst recession in the last 50 years.

In the start of the south-west Asian crises, nobody though that the crises could affect Hong Kong, because it only had a little current deficit and, moreover, it had the guarantee of its great reserve of foreign exchange.

But the situation became worst and the Hang Seng index had the worst drop in all the history and the local government was forced to increase the rates in order to reduce the currency pression, in an instability context.

The high rates reduced the bank lending, reducing at the same time the private wasting and provoking a hard reduction in the ground price. The building sector began to be affected and the quotations of the building enterprises fell down in the 48%.

Moreover, the tourism profits decreased because the number of tourists fell down in the 70%.

The government adopted a couple of measures in order to alleviate the difficult economic situation:

-The suspension, until April 1999, of any selling of public property ground.

-A more important injection of solvency in the banking system.

-A reduction of the building taxes.

-More facilities for the tourists from the continent and Taiwan.

In the future, it seems that the situation of Hong Kong will depend, in short term and in midterm, on three external factors:

-The necessary economic recovery of Japan, which is the 3rd most important market for the products made in Hong Kong and one of the most important destination for the foreign investing.

-The recovery of the continental China economy.

-An eventual devaluation of the Chinese currency. In that case, the fix rate of the Hong Kong dollar in relation to the American dollar probably would be in danger.

In spite of this, the suitable geographic situation of Hong Kong, its excellent transporting and telecommunication structures and the qualified handiwork, are some of the advantages that has Hong Kong in order to initiate the recuperation.

Another country which has an important role in this situation is South Korea. Its situation in the crises is specially interesting because of the importance of Korea in the world economy (we have to say that is the sixth most important commercial country in the world).

The situation of the country has changed very much. Few years ago it had an agrarian economy, affected by a massive poverty and nowadays it's an industrialized and developed country.

Since the early nineties the Korean economy has challenged to some difficulties. The two more important are:

-The simultaneous commercial competence of China, the Asian south-west and Japan.

-The activities of some groups of enterprises (chaebol), which were competitive and internationalized, but they were too extended and too indebted.

Some of the manifestations of the Korean crises have been:

-Devaluation of the currency.

-Disminution of the foreign exchange reserves.

-Rising of the rates.

All this circumstances made the government ask for the IMF help. The reason of the increase of the crises is that the trustless of the markets has discovered serious structural deficiencies (solvency problems in the big enterprises and the most important financial entities).

Many big enterprises asked massively for the banking sector help and the trouble appeared when this kind of help became more expensive because of the devaluation of the Korean currency and the resistance of the international banks to offer solvency to the local entities.

The result of this situation was an important solvency crises of this entities, creating a big number of uncobrable duties and a big disquieting situation.

Summarizing, we can say that the Korean crises it's different to the crises of other countries of the Asian south-west (their crises is in the payments balance). The Korean crises is a crises of solvency of the enterprises and the national financial entities.


The official name of this state is Popular Republic of the China; with an extension of 9.572.900 Km. and a total of 1.250.300.000 inhabitants. (1998). It limits to the North with Korea of the North, Russia, Mongolia, Kazakhstan and the Kirguizistan, to the West with Tadjikistan and Pakistan, to the south with the India, the Nepal, Bhutan, Myanmar, Laos and Vietnam to the East with the Pacific Ocean. The capital of this republic is Pekin, and official hulls it is the yuan.


Agriculture occupies 67% of the active population. The construction of big and small swamps has allowed extending the irrigation area and the flooded lands. The sector is organized in communes that constitute true self-sufficient communities of peasants. The rice, feeding base is the main cultivation (first world producer) and it occupies more than a third of the cultivated surface. Main producer regions are in the valley of Iang-Tsé, Sichuan, Jiangsu and Guangdon (in Xi Jiang's delta) and in Henan. The corn occupies about a third of the cultivated area (main world producer). Potatoes are also important for the feeding. China takes place to great quantity of oleaginous plants, especially soya, peanuts, sunflower, etc. Other cultivation is cane of sugar, cotton, tea, tobacco, etc. In all them the production volume occupies one of the main positions in the world scale. The cattle raising sector, in expansion, is devoted to animals of easy feeding: the pigs (China has the biggest number of heads), the ox and the buffaloes that extend for all the coastal agricultural areas and in the riversides of the big rivers, to the East and Centre-south. Fishing it's also important. China is on the whole the second power, agricultural in wide sense, of the world. It is the third fishing country of the world, fish is very important in the traditional diet. The main fishing ports (Tianjin, Quingdao, Canton, Yantai, Lüda, Xangai) are big centres of preserves and salted to provide to the whole country. The forest exploitation is limited; you exploit firewood, wood (fourth world producer) and paper. The country is rich in minerals, and it has big deposits of coal distributed through the whole territory. Petroleum is in full extension (sixth producer). There are big resources of iron mineral as well as other minerals like copper, silver, gold, uranium, salt, etc. The hydraulic resources are plentiful, however they are not very exploited; practically the whole electricity production comes from the thermal power stations. The heavy industry has been developed in the last years, in a great global effort for a quick industrialization of the country, being created big steel centres. Metallurgy is also very active: aluminium, copper, prays, molybdenum, uranium, etc. The mechanical industry is guided to the automobile, rail, agricultural, naval machinery, electric material and it has had a remarkable expansion the electronic industry. There is also textile industry (wool, silk), chemical industry of base (refineries of petroleum, sulphuric and hydrochloric acid, plastic, artificial and synthetic fibbers) of the construction and related industries (cement, glass), wood, newspaper paper, gas, tobacco, footwear, porcelain, etc. Communications still use the traditional, improved means (boats in rivers and channels, cars thrown by horses and bulls in the northern pages, and mules or camels in the Westerners). But at the same time modern means of highways have been built (generally faulty), and railroads (present in all the counties except in the Tibet). The navigable rivers constitute a way of transport (passengers and merchandises) very used (it highlights the Iang-Tsé and their tributaries). The marine has become the ninth of the world. The main port is Xangai that also has exit to the sailing of the Iang-Tsé. The transport of merchandises is completed by a net of pipelines of 10.400 Km. The most important airport is that of Beijing. Up to 1984 the scale of payments was frankly favourable, but with the opening to the external markets (1985) the imports were shot.


It is well known that China is the most populated country of the planet. Their 1250 million inhabitants in 1998 make that the country gathers near the world population's fifth part. China already has, thanks to its extraordinary progress in the last two decades, the second bigger economy of the orb, measured its GDP in purchasing power parity.

Besides the demographic and economic weight of the country, this raises a great interest among the economists of the development for three additional reasons. It has been able to control with effectiveness the population's growth, in contrast with the thick of Third World. It has had a spectacular success in their strategy of economic reformation from the central planning, contrary to many countries of central and oriental Europe and Russia. And it has reached a situation substantially as for gender equality better than which would agree him in order to their entrance for inhabitant.

2.2.1.- Population and demographic politics:

Between 1962 and 1970 the population from China increased from 673 millions to 830 million inhabitants. In that last year, the rate of demographic growth was very high (2,6%) and the total fecundity reached anything less than about 5,8 children for woman in age of procreating. The government decided in 1973 to begin to apply active political demographic, in order to control the population's growth, as only resource to avoid the economic, alimentary and energy problems that would be derived of a population in strong ascent. Already in 1975, the increase of the average age of the marriage and of the interval among descending, together with the spontaneous decrease of the total number of children, it had reduced the rate of demographic growth to 1,5%. With everything, half of the inhabitants it had less than 21 years, with what was clearly impossible to reach a rate of 1% in 1980, as the government wanted. In 1979 it started the unique son's famous and controversial politics that, added to spontaneous factors (fall of the mortality infantile, growing use of birth-control methods, quick urbanization, access of the women to the labour market, increase of the family rent, growing education of the women), has contributed to contain the demographic growth in a spectacular way. The rate of the population's growth annual means decreased of 2,6% in 1970 to 1,5 % in 1970-90, to 1,1 % in 1990-95 and to 1,05% in 1995, while the rate of total fecundity diminished of 5,8 in 1970 at 1,9 in 1995.

The important fall of the fecundity moved to the gross rate of natality that decreased of 33,4 for thousand in 1970 at 17,1 for thousand in 1995. Since the gross rate of mortality went of 7,6 by thousand in 1970 at 6,6 for thousand in 1995, the substantial fall of the population's growth has allowed China to increase the rent, the production of foods and the energy consumption considerably per capita. It has also contributed to the impressive reduction of the number and of the percentage of poor people (250 millions in 1978 and 70 millions in 1995, 33% and 8%, respectively of the total population).

2.2.2.- Gender imbalances:

The unique son's politics and, more in general, of family planning in China has coincided with an adverse evolution from the gender quotients to the birth. For example, between 1982 and 1993 the number of males in connection with that of girls passed from 108,4% to 114,1%, being the biological maximum of 107%. According to the Chinese official statistics, the quotient between boys and girls was in 1995 of 1l6,57% in the age fringe 0-1 year, of 118,38% in the fringe 0-4 years and of l10,19% in the fringe 5-9 years. Some studies have wanted to see a relationship of cause-effect between the unique son's politics and that distortion in the gender quotients when being born. The more exact analysts (Gu and Roy, 1995) highlight, however that such an imbalance was already given in the China previous to the creation of the Popular Republic and, mainly that registers at the moment in other societies of oriental Asia, in those that there is not political of that type: at the beginning of the nineties, that quotient was almost exactly the same one in China (ll4,2%) that in Korea of the South (114%) and not very far from the one registered in Taiwan (110%).

2.2.3.- Perspectives of economic development:

There is no doubt that the rate of total fecundity in China (1,9 children per woman in age of procreating) it is extraordinarily low for the level of economic development that presents the country. With a GNP per layer (in average dollars) of hardly 620 dollars in 1995, the rate of fecundity is similar to that of countries like Ireland, Australia, Finland, Denmark or Norway that overcame the 14.000 dollars of GNP per layer.

Together with the already low gross of mortality (6,6 for thousand in 1995), the relatively low rate of inborn (17,1 for thousand) it indicates that China is beginning the culmination of the demographic transition that is indispensable for the sustained economic development. Policies of family planning have been essential to avoid the inconveniences associated to the demographic boom. When containing the demographic growth, China has been able to avoid the three main inconveniences of the population's express increase: increase of the dependence rate; deteriorate of the expense in education and sanity for inhabitant; and increase the population's self feeding, even with the falling rates of fecundity.

2.2.4.- Conclusion:

The precedent pages seem to drive to several conclusions on the demographic policies in China. In the first place, the strategy of birth control in China has thrown more lights than shades, in view of demographic challenges of the country. In second term, the distortion of gender to the birth it obeys much more to the cultural preference for the male descendants that the fall of the fecundity, even if this associates to deliberate policies of family planning. In third place, such a distortion has some negative effects, especially in what concerns the social discrimination of girls and women. In sum, the gender inconveniences associated to the Chinese policies of family planning, without being at all worthless, they have been vastly exaggerated.

2.3.- HISTORY:

At the beginning of the 20th century, there was a great reformism movement of radical character, which was annulled by the army. The growing penetration of the western powers and Japan motivated that the secret societies and the popular movements acquire a xenophobic character and the convincing that it constituted the only possible exit for China. The most violent reaction was that of the Boxers, defeated by the Westerners (1900). The hard sanctions ended up to open the country to the European and Japanese capitals. The Chinese government decided, then, to modernize the country. The changes didn't convince the radical modernists or the traditionalist movements. In 1905 Russia was annexed to the southern Manchuria. The coalition Tongmenhui, integrated for republican, modernist groups and secret societies, disclosed the republican idea among the popular classes, organizing diverse disorders. In October of 1911 it was made later the revolt of Wuqang and three months, it was proclaimed the Republic China choosing Sun Yatsen as the provisional president. The monarchic general Yuan Shikai got to be proclaimed first president from China.

The years between 1912 and 1919 constitute years of great confusion. The First World War was a great opportunity to become hard for the national bourgeoisie, jointly with the Japanese capitalism in China. As reaction to the treaty of Versalles, it was created a great patriotic movement against the imperialism, whose participation was based essentially by the proletariat, small urban bourgeoisie, and the national bourgeoisie. It was denominated the ”Four of May movement”, which caused the negative on the part of the government of

signing the treaty. The Chinese Communist Party, been founded in 1921, of which was part Mao Zedong, drove the Chinese revolution; that jointly with Guomindang organized a military expedition to counterattack to those “gentlemen of the war” of the Northeast. After Sun Yatsen's death (1925), the address of the Guomindang was assumed by Chiang Kai-shek, which unchained a strike and killed a great amount of communist, which sews caused another civil war. In 1931 the Japanese army invaded the Northeast of China, where organized the state of Manxukuo (Manchuria). Attacked by Chiang Kai-shek, the communists moved to Shanxi (The Long March, 1934) from where they organized an anti Japanese resistance and an autonomous popular administration. In 1936 Chiang Kai-shek had to accept the formation with the communists of an anti Japanese front, however, along the years 1939-42, the Guomindang attacked, jointly with Japanese, the areas controlled by the communists. In spite of the efforts of the Americans (favorable to the Guomindang), the military situation changed quickly in the whole country in favour of the communist party. The civil war was restarted (April of 1949) and at the end of 1949 the whole continental China, except the Tibet, was in hands of the communists. Therefore the first of October of 1951 was founded the Popular Republic China, with Mao Zedong as the government's president. Now begin a decisive stage in the history of China, known as China Revolution, inside which the Cultural Revolution also took place. This period concluded with Zhou Enlai's death (January of 1976) and Mao Zedong (September of 1976). Deceased the two maximum leaders, Hua Guofeng carried out a political blow. The four representatives of the extreme left (among those was Mao's wife) were imprisoned. A reduced group designated Hua Guofeng as the president.

In 1978-79, the country opened up to the foreign investments that can contribute technology. Coinciding with a movement of the Maoist opposition and of the opponents to Deng Xiaobing's politics, it was adopted, in December of 1982, a new constitution that reestablished the figure of president of the Republic, position that occupied, in June of 1983,

Li Xiannian. By the middle of the eighties the economy obtained certain liberalization, however, in the ideological field policies of controlled reformation continued.

The conflict between Chinese authorities and the Tibetan nationalist movement has worsened, and in 1987 conflicts of considerable magnitude took place. While China has gone manifesting in a reiterated way its aspirations upon Taiwan. Agreements were settled down with Great Britain in 1984 and Portugal in 1985, for the re-establishment of the Chinese sovereignty in relationship to Hong Kong's territories in 1997, and Macao in 1999, respectively. In 1989 there were two strikes of a million people each one, where Deng Xiaobing's resignation was requested, which were violently repressed by the army, causing thousand victims. The facts taken place in the Tiananmen square, represented the victory of the extreme left, which sews the end of the internal reformations behaved and of the opening of the country toward the western states.


The formation of the new economic center of the world:

The Pacific Asian bank (OAP) is the region that has registered the biggest economic growth in the world in the last thirty years. In 1995, among the first 30 exporters of the world they were 9 of oriental Asia (Japan, Hong Kong, China, Korea of the South, Singapore, Taiwan, Malaysia, Thailand and Indonesia, for this order), with a combined proportion in the world exports of 26,1 for 100, that is to say, more than twice as much that the relative weight of each one of the biggest exporters: US (l l,6 per 100) y Germany (10,1 per 100). Other dates on the weight of the OAP in the world trade it plows the following ones: from 1983 the transpacific trade (between America of the North oriental and Asia) it is bigger than the transatlantic exchanges (between America of the

North and western Europe); already in 1991 the first one was to third bigger part that the second; like it is known, the commercial deficit of the United States is owed fundamentally to the debits of its exchanges with Japan, China and the dragons. In that that you refer to the industrial peak of the OAP, be enough to point out that among the 25 bigger companies manufacturers of the world there are 13 in oriental Asia (12 Japanese and a Korean) and only 7 of US. Also, oriental Asia dominates the intensive sectors in manpower (making articles, textile, toys, footwear, umbrella, etc.). Japan and Korea of the South are the big makers of automobiles and of electronic products. The two bigger steel companies of the world are the Korean POSCO (Pohang Iron and Steel Company) and the Japanese Nippon Steel. In naval construction, Japan and Korea of the South two thirds of the world construction of ships are distributed. Taiwan is one of the main world makers of plastic products of petrochemical origin. They are not only, however, intensive sectors in manpower those that are part of the Asian offensive: the Japan is already for before the United States in screens of high definition, robotics and supercomputers.

In what concerns to the financial aspects, six of the biggest commercial banks in the world (and first 9 of the 15) they are Japanese. The reservations in foreign currencies of the Japan are the most important in the world (200.180 million dollars in February of 1996), while those of Taiwan, with a little more than 20 million inhabitants, it is second o'clock bigger than the world (95.000 million dollars in April of 1996). The direct investment and in wallet of the Japan abroad has quintupled from 1985, although it registered a descent in 1989-92: they are very well-known the acquisitions of western companies for Japanese companies in the eighties (CBS and Columbia for Sony, MCA for Matsuhita, the Rockefeller Center of New York for Mitsubishi, ICL for Fujitsu, etc...) as well as the importance of the Japanese capital (and also Taiwanese) in the financing of the federal deficit of the US. Also, the Japan is the first world donor of official help to the development from 1989 (with the only exceptions of 1990 and 1994). Everything it, together with the high saving rates (that overcome 35% of the GDP in Singapore, China, Thailand, Indonesia, Malaysia and Korea of the South, in front of a stocking of 22% in the OECD), he/she makes that the OAP is already one of the biggest financial powers in the planet.

A strong increase of the trade intra-blocks is observed in the three poles of the world economic triad (America of the North, western Europe and oriental Asia): almost half of the world trade it is today composed by exchanges inside the area of the Treaty of Free Trade (Canada, United States and Mexico), of the European Union or of oriental Asia and Australia. The intercontinental exchanges are losing force before the peak of the regional integration.

Finally, another prominent feature of the recent evolution of the international trade is that, like it is well known, the most dynamic area is the built one for some countries of oriental Asia. Although the world exports grew in 1990-96 to a rate annual stocking of 7%, those of China made it to 16% and the six previously mentioned Asian economies increased 12% a year. The forecasts of the World Organization of the Trade (OMC) for the year 1997 they suggest that the world exchanges of goods could increase between 4 and 5%, something more than the previous year. The best commercial behavior in the European Union and the increment of the imports of Latin America, oriental Asia (without counting Japan) and Half East (for increase of the revenues for export of petroleum) they seem to suggest that we attend a modest recovery that however, it is still far from reaching the rhythm of growth of the years of peacefulness 1994 and 1995. To longer term, the estimates vary and they are uncertain. The certain thing is that the commercial exchanges will continue growing more than the world gross interior product, making that the international economy reaches again and even overcome the coecient of export that he/she had before the First World War, and that the consolidation of the commercial blocks (institutional in America of the North and western Europe, informal in oriental Asia) he/she will make grow the exchanges intra-area of those regions. The risk of growing margination of the countries that you/they are not part of them is, therefore, very patent. Be enough to point out that Africa, with more than 650 million inhabitants (the world population's 15%), he/she hardly carries out 2,2% of the world exports.

Therefore, the clear-sighted words are confirmed that, at the beginning of this century, John pronounced there is, president's Theodore Roosevelt secretary of State: the Mediterranean is the sea of the past, the Atlantic it is the ocean of the present and the Pacific the ocean of the future.

3.1.- Myths and realities of the incidence of oriental Asia in the world economy:

The new international competitors from oriental Asia are, in occasions, used as head of economic and social bad trick of the multiple ones that you/they suffer the developed societies of western Europe and America of the North. On one hand, it is affirmed that their peak is responsible for the increase of the unemployment, as a result of the imports of cheap and intensive factories in manpower and of managerial misallocation toward countries of low wages. It is certain that third two parts of the exports of factories of the Third World correspond the four small Asian dragons. Nevertheless, like the UNCTAD, the proportion, points out in the total imports of the Organization of Cooperation and Economic Development (OECD), of the imports coming from the seven dynamic economies of Asia (Korea of the South, Taiwan, Hong Kong, Singapore, Indonesia, Malaysia and Thailand) it has increased certainly of or 6% in 1979 to 9% in 1993, but that last percentage is not enough high to explain phenomenon so wide as the misindustrialization and unemployment. Also, all the countries of oriental Asia, except for Japan, Taiwan and Singapore, have commercial deficit, that is to say that its impact on the rest of the world takes place in competition terms but also of opening of markets. As for the managerial misallocation toward oriental Asia, it is a very recent phenomenon, mainly to the opening of the China. Economies like those of Korea and Taiwan have been traditionally closed, at least partially, to the foreign investment. The countries of the Asian south-east have been more receptive from the eighties, but its quota in the world IDE is still small. For example, of the 65.141 million dollars received in concept of IDE by the Third World in 1993 (on a total of 209.400 millions), 36.481 went to stop oriental Asia; about 26.000 millions to China and only less than 9.000 millions to Indonesia, Malaysia and Thailand, jointly.


Since the start of the financial crises in the Asian south-west in 1997, the economic evolution of this area has showed some disquienting signs like the devaluation of the currencies in Indonesia, Thailand, Malaysia, etc.; reduction of 25% in the Hang Seng index, in Hong Kong; crashes in financial institutions in Japan and the intervention of the International Monetary Fund in South Korea.

This evolution has taken the world economy to a disquiet situation.

The south-west Asian countries (Thailand, Indonesia and Malaysia) crises is essentially in their payment balance. This happens because there is a big commercial competence from China and Vietnam, a great growth of the gross investing, the commercial liberalism and the currency appreciation. All these things became a high deficit by current account in the area.

Moreover their economic policy was, in fact, of a fix exchanging rate in relation to the dollar and their currencies were appreciated in relation to the Japanese yen ( inducing to a decrease of the competitivity in relation to Japan).

We have to add to these reasons the high foreign indebtedness, that was spent in speculation activities or in infrastructure projects that weren't so profitable.

These three phenomenon (high deficit, appreciated currency and high foreign indebtedness in short time) were increased by the fragile financial system of these economies.

By the way, there were all the conditions to make these economies be hurt by speculative attacks against their currencies.

In the other way, the South Korea crises was in its enterprises and local banks solvency, increased by a solvency crises.

The most powerful management groups began making lost and asked for the banks help (local banks and foreign banks).This situation provoked that the duty/capital quotient was higher than 300%.

The banking sector, who financed a great part of the lending, was affected by the enterprises crises, because the enterprises that had their money were making lost, creating a bad situation in the financial sector.

In order to make it clear, we can say that the elements that provoked the Asian crises are:

-The bad gestion and the slight control of the financial institutions, that financed speculation activities or great infrastructure proects, running excessively into debt, without the necessary caution and, sometimes, with corrupt reasons.

-The deflection of goods, increased by a beakeness in the exportations, that provoked solvency problems in their financial institutions.

-A really bad macroeconomic management in the Asian south-west, specially keeping a fix exchanging rate in relation to the dollar, that was going up.

-Some hard speculative attacks from the international markets against the currencies of the area, provoking its devaluation.

-A sudden disminution in the financing or lending offers, that decreased suddenly after many years offering lends to the growing markets without taking cautions.

Moreover, it's important to say that the sixties expansion was made by an extensive way (just concentrating so much capital and so much workers), but the grewment of the productivity has been lower than the expectatives. The social, economics and environmental costs of the grewment and the accelerated industrialization were so high, that make the grewment (that could be arriving to the limit) to be in danger.


At present, the Chinese government, with its first minister Zhu Ronhji in the lead, is on a very difficult position in spite of the fact that it isn't immersed in the hard crises which affects his nearest neighbours.

The privatization of the public sector firm is causing a staff reduction in all that companies and organizations. This labour surplus won't be absorbed by the Chinese economy if, as the economic analysts foresees, this year's Chinese GNP increases to 6.5%, less than the figures considered necessary to absorb that labour surplus, which is an 8%.

In order to achieve that economic growth, some analysts think that the Chinese government could be forced to devaluate hi currency, the renmibi, in order to increase its exports. In this way its economy could be able to upturn little by little, since the national consumption isn't because of the low per capita incomes level. Such devaluation could put in danger the economic stability in Hong Kong, which is suffering its first downturn since 1985, the banking sector reform, its international prestige ( the first minister guaranteed not to devaluate the renmibi) and, basically, it could cause a new competitive devaluation wave in the rest eastern Asian countries, that would get worse the Asian crises.


The role of Japan in the Asian crises has changed since the first moment, when the whole world thought that it was going to be the country to lead the Eastern Asia's economies recovery, until the present, when it is part of the problem.

In the first moment, in July 1997, everybody hoped that the exports increase, due to the Asian currency devaluation, could be absorbed by Japan, the main commercial partner of these countries and also the main destination of their goods. In order to that, many economic agents asked the Japanese government to increase its national consumption, trough a tax reduction and a public expenditure rise. This two measures had to capitalize its financial sector and contribute to rescue his neighbours, as the United States did with Mexico in 94-95.

In the meantime, the Japanese government, with its first minister Hashimoto at the head, was afraid to apply these measures because of the budget deficit, which was as high as 6 % of GNP the last year. Hashimoto wanted to keep the objective he had presented to the public during 1997, which was to reduce it until the 3%.

While the Japanese government didn't decide anything, the situation of its economy fell down to its worst level of the last twenty-five years. In that moment, we could say that Japan was technically in recession. The facts were really worrying: a 0.5 drop of the GNP in 1997 tax year, which starts the 1st April and finishes the 31st May of the next year; the lowest value of the yen regarding the US dollar in the last seven years; a negative GNP growth despite the last tax stimulation plan approved by the government (the seventh since 1992); the price of the shares, the items and the land fell down, due to the domestic consumption drop caused an stock rise which reduced the production( that's why the prices fell down); the highest unemployment level since 1953 (a 3.9% in March 1998); the national debt could rise to 150% of the GNP, in such a way that a 1/5 part of the public expenditure must be destined to its repayment; etc.

The fact is that the tax stimulation plans started by the Japanese government didn't achieve to transfer the amounts of money that the plans gave to the population to a consumption rise, but that money was saved. On account of all these figures and facts, the first minister Hashimoto decided to resign soon after an elections failure in the beginning of August. His successor, Keizo Obuchi, submitted a new reconstruction plan which refused his predecessor's objective to reduce the budget deficit, to encourage the national demand through a 6 billion yens tax abatement and a 10 billion yens public expenditure rise, to face up the financial crises and to act in favour of the yen, which value had been fallen a 10% since January.

In spite of that, the prospects hasn't got better and the investment, the private consumption and the GNP still fell down, in addition to the foreign trade contraction, so the situation is really difficult. Some people bet that the government will let the yen fall down to encourage the exports, what is unlikely to be successfully because the most of the Japanese exports are destined to the countries in recession, as well as it can cause the Chinese currency devaluation, the last unhurted country in Asia.

The last OECD's annual report about the Japanese economy says that its recession isn't finished. This report predicts a 2.5% negative growth in 1998 and a little GNP growth of 0.2% in the next year.

In conclusion, we can confirm that the Japanese economy situation isn't able to lead his neighbours economies recovery as many analysts hoped, what doesn't mean that its role isn't important at present, since the Japan let the yen fall down regard the dollar, China could be forced to devaluate his currency to counteract the effect of that depreciation in its economy. This devaluation will cause, at last, a new devaluation's' wave in the eastern Asian countries.


In our opinion, the Asian crises, which started in July 1997, won't affect hardly the Spanish economy. However, the relationship between the economies of the whole countries in the world and the free trade between them causes that a fact as this one always affect in some kind of way the other countries.

First of all, we must underline that exists an imbalance of trade between Spain (and the rest of the European Union) and the seven tigers since before the crises. It is also important to underline that the 20% of the exports of the world comes from these countries. Now, as a result of the devaluation, this imbalance of trade will grow, but not as much as will do for the United States and Japan, which are the main trade partners of that counties. It will happen because the Asian goods will be cheaper for the foreign buyers, who will usually pay in dollars (its value is on a very high level in regard the Asian foreign currencies). Moreover, the national consumption of the main trade partners of eastern Asian countries will drop because of the rise in the imports. Fortunately, Spain isn't one of the main trade partners of that economies in spite of our presence (Spain and the European Union) is harder everyday, above all trough the direct foreign investment.

One of the most important effects that the Asian crises had in Spain (and Europe) were in the stock exchange. The Asian markets went down (the Hang Seng index of Hong Kong dropped a 25% the 23-11-97 and caused a minicrash in Wall Street) and the uncertainty seized the rest of the world. The most of the not expired loans given by foreign banks in 1997, the 43% exactly, came from Europe. This situation caused a great fear in the Spanish investors and the IBEX-35 dropped (as the rest of the markets). The most affected sector were the banking (Banco Santander, BBV, Argentaria, Central-Hispano and Banesto), not only because of the Asian crises but also the Latin American crises affected them because they had, and still have, a lot of overseas investments. A very important rating company located in the United States reduced these banks' rating the last June because they thought that overseas investments in Latin America weren't really safe. It caused a drop in their shares price. Luckily, this financial turbulence seem to be finished, so this banks' shareholders can sleep quietly (until the next one).


The strong fall of the market indexes, the massive depreciation of the currencies and the crash of the growth of the GDP have been specially patent in Thailand, Indonesia and South Korea, but they have also registered, although in a smaller degree, in other economies of the region.

Because of oriental Asia is responsible for 20% of the world exports of goods, and that the Western developed countries have important commercial deficit with the region, Asian currencies depreciation (between June 30 1997 and January of 1998, the fall of the rates regarding the dollar has been of 303% for the Indonesian rupee, 105% for the Thai baht, 87% for the Korean won, 63% for the Malay ringgit, 55% for the Philippine weight, 25% for the new dollar of Taiwan, 22% for the dollar of Singapore and 13% for the Japanese yen) it will suppose a strong impact of imports in the UE and United States. Also, such a depreciation, joined to the foregone contraction of the internal demand, it will clip the exports to the region of team goods from the industrial countries. According to figures of the OMC, the main countries Asian exporters of factories (Korea of South, Hong Kong, Indonesia, Malaysia, Thailand and Taiwan) made in 1996 imports for a value of 580.000 million dollars, more than 10% of the world imports.

Nevertheless, different forecasts locate, at the moment, the cutting in the growth of the GDP of the developed countries in 1998 in enough less than a point, hypothesis that at last can be too optimistic, especially if the Asian crisis is prolonged or it is increased, and if the cancellation of some Asian direct investments is counted in the UE and US. For example, France has already clipped a half point its forecast of growth for 1998.

Also, the financial globalization makes that the stock exchanges of the world are very vulnerable to the evolution in Asia, as it was demonstrated at the end of October. Many Japanese banks and Westerners have important loans in the region. From the 736.600 million bank loans to oriental Asia (without counting Japan) effective at the end of 1996, 318.300 millions would correspond to financial institutions of the UE, 260.000 millions to Japanese banks and 46.400 millions to American banks.

The loss of trust of the international markets and the cancellation of several big infrastructure projects (Bangkok underground, dam in Malaysia, etc.) surely caused a reduction of the direct foreign investment and in market, as well as of the bank loans and of the commercial credits given to the area.

Together with the Japanese government's passivity that refuses to complete the function of regional locomotive, the main risk, at the beginning of 1998, is a sudden devaluation of the Chinese yuan. Du to the deceleration of the growth in China (9,7% in 1996, 8,8% in 1997 and 8,6% or less in 1998) and the biggest competition in the Asian southeast (whose profile exporter is similar to that of China), the Pekin authorities can be forced to modify the parity of his currency. The deflationary impact of the Asian crises could be even bigger and its market effect, through Hong Kong, impossible to predict, although surely important.

The elimination of subsidies to the export and the quick liberalization of the imports will cause, especially in Korea, serious problems in sectors accustomed to receive strong incentives to its sales in the exterior and to have a practically captive internal market. The indiscriminate opening to the direct investment and in market, as much in companies manufacturers as in banks, can break the strength and the national control of the local capital

Due to potentially chancy situation, in view of the growing economic isolationism in United States (whose Govern is subject to the Congress restrictions has more than enough additional external financing) and Japan (that refuses to be the regional locomotive and of an eventual devaluation of the Chinese yuan, as well as a possible infection of the financial panic to Russia, central and oriental Europe and Latin America (mainly Brazil), the answer of the international community has been up to now insufficient.

It is imposed a coordination of the sanctions of the G-7 certainly to stabilize the rate of the yen and to force Tokyo to raise the Japanese economy by means of a wide program of fiscal stimulation. Also, the western countries should be aware of what is settled in oriental Asia and to promote an increase of the available international financing for the countries of the area, increasing the resources of the IMF (although the performance of that organism leaves a lot that to want), the credits to the export and the bank loans for infrastructure projects. It seems also unavoidable to foment the measures of reformation of the financial system in Japan, Korea and the Asian Southeast.

So any effort to contribute to solve the serious crisis of oriental Asia will be fallow if two additional initiatives are taken:

  • -A bigger implication and the international private creditors' responsibility whose last performance contributed to unchain the crisis, with measures as the forgiving of a part of the debt of the countries with more risk of crashing.

  • -The negotiation of the measures of fiscal and monetary austerity imposed by the IMF in Thailand, Indonesia and, mainly, Korea of the South. It seems clearly excessive to force to those economies to have in 1998 budgetary surplus, to increase types of interest drastically and to reduce, in hardly one year and in a significant way, the imbalance per current counts. If such objectives are not softened, the recessive result will be intense and counteractive.

The Asian crises have shown that the economic globalization even supposes a remarkable external vulnerability in economies, as that of Korea of the South whose integration in the global economy has been more strategic than narrow, at least until principles of the nineties. Be enough to point out that the annual flows of direct foreigner investment, in proportion of the gross formation of fixed capital, they have been lower to 1,2% in South Korea from the seventies (0,5% in 1991-93) and that some sectors, as that of automotive, they have been traditionally protected (the imports of automobiles hardly represented 1% of the internal demand in 1996).

Also, the rescue operations confirm once again that the programs of the IMF turn out to be misadjust, recessive, counteractive and reaped.

The watering this time is of even soaked that in previous occasions. What is in game is the same survival of an original model of development, moved away in many aspects, as the intervention of the State or the insert degree in the world economy, of the dominant neoliberal orthodoxy in other latitudes.


“El FMI y las crisis de Asia oriental, ¿quiebra de un modelo de desarrollo?” Pablo Bustelo (VI Jornadas de economía crítica, 1998).

“La crisis asiática, ¿el principio del fin?” (El País, 12 de diciembre de 1997).

“Hong Kong in 1997-98: de la retrocesión a la crisis económica.” Pablo Bustelo.

“El segundo round de las crisis asiáticas” (Expansión, 6 de junio de 1998).

“Corea del Sur en 1997-98: el rescate del FMI” (Boletín económico de ICE, 1998).

Revista de Estudios Asiáticos” (nº 4, de 1997).

Is there a Right to Reproduce?: The One-Child Family Policy in China” University of York (1997).

“El vaivén del comercio internacional” (Expansión, 17 de septiembre de 1997).

“Asian Development Outlook 1996 and 1997” (Oxford University Press, 1997).

“Japón, en el túnel” (El País, 25 de mayo de 1998).

“Japón, China y la inestabilidad cambiaria” (El País, 29 de junio de 1998).

“Enciclopèdia bàsica catalana”.