Asia tested but not yet found wanting

The Asia File

http://blogs.telegraph.co.uk/asi ... _yet_found_wanting_

by Ben Bland

Ben Bland is a freelance journalist based in Singapore. He will be traveling around the region looking at the impact of business on people, power and politics. He was previously The Daily Telegraph's stock market reporter.

Financial crisis review: Asia tested but not yet found wanting
Posted By: The Asia File at Dec 26, 2008 at 12:31:39
[General] While Europe and the US have been battling with the credit crunch since early-mid 2007, it was only in the second half of 2008 that the financial crisis truly hit Asia.But, with financial institutions strengthened (and more risk-averse) since the 1997 crisis and most governments having saved up large foreign currency reserves, Asia has so far weathered the storm with minimal pain.There have been no major currency collapses despite some fears that the Vietnam Dong was going to go the way of the Thai Baht in 1997 and the problems in South Korea. Only a few small banks have failed, most notably in Indonesia and Mongolia, and stock markets have, for the most part, carried on trading even while indices plummeted day after day.Governments and regulators have learned many lessons from previous crises. They have taken decisive action to limit the extent of the damage by cutting interest rates, injecting liquidity into the money markets and keeping a close eye on banks and stock markets. The extent of the response, outlined in more detail here by the World Bank, has been impressive.But the concern is that the knock-on effects of the financial crisis have only just started to be felt in Asia. The greater challenge will come as Asian economies - many of which are already in recession - continue to slow and demand for their exports in Europe and the US drops off further.Although it remains a taboo subject in Beijing, the more skeptical economists now fear that annual growth could fall below the all-important 7pc level under which China can no longer absorb its ever-growing workforce.If that happens, it could have all sorts of unpleasant social consequences. In Hong Kong and in Singapore, governments have already felt the pressure of the 'thundering herd' - as investors who lost everything after buying minibonds linked to Lehman Brothers, the collapsed US bank, took to the streets in unprecedented fashion.Politicians across Asia are hoping that they can mitigate the inevitable rise in redundancies and drop in living standards to head off any potential unrest. Up until now, most governments in the region have managed to do so. But, as the economic crisis deepens, this task will only get more difficult.