The goal of economic development is to increase per capita income, reduce poverty, improve people's living standards, improve people's health and education, expand people's opportunities to choose, and realize the transition from traditional society to modern society. In the 30 years since the early 1960s, the average annual real per capita income growth rate of various economies in East Asia has reached 4%-6%, which is about three times that of Latin America and South Asia, and five times faster than that of sub-Saharan Africa. At the same time, the number of people living in absolute poverty (consuming less than $1 a day) fell by half, from 720 million to 350 million, and life expectancy increased from 56 years in 1961 to 71 years in 1990. Several economies have transformed from traditional agricultural societies to newly industrialized economies. The achievements of the East Asian economy in the above indicators have made the East Asian economy in the past 10 years a development model that developing countries in other regions strive to follow.

However, in 1997, a currency crisis suddenly broke out in Thailand and developed into a financial and economic crisis. Moreover, it soon spread to other countries and regions in East Asia, including the four Asian countries that have always been known as development miracles. Xiaolong could not escape this fate. During the crisis, currency and asset values ??in most East Asian economies fell by 30% to 40%, with the hardest-hit economies falling even more sharply. Banks and companies in East Asia are in unprecedented financial trouble. Thailand, Indonesia and South Korea had to request assistance from the International Monetary Fund (IMF). By 1998, all affected economies, including Singapore and Hong Kong, which had relatively good financial and entrepreneurial qualities, fell into severe recession.

The East Asian financial crisis came suddenly and went away quickly. By the time of the crisis in 1999, the economy, exports and GDP had returned to positive growth. Except for Indonesia, which was politically turbulent, the stock market index, which is generally used as an indicator of investor confidence, had also recovered and even exceeded the pre-crisis level. It seems that the East Asian economy has regained its former vitality. However, is East Asia's recovery in economic growth sustainable? Will a similar crisis happen again? What lessons should we learn from this crisis? At present, there is no conclusion in domestic and foreign academic circles. To answer the above questions, we must first understand the causes of this crisis.

The reason why a crisis can break out from one economy and quickly spread to other economies must have different external causes. The integration of the global economy and the inherent instability of international financial markets are the main reasons. In the past few decades, due to the advancement of information and transportation technology, transportation and communication costs have been greatly reduced, and the global economy has become more integrated. From 1985 to 1994, the world's total real GDP growth rate averaged only 3.2% per year, but the growth rate of international trade was twice that, reaching an average annual level of 6.7%. East Asian economies are known for their export-oriented nature and are the main beneficiaries of the rapid growth of international trade. During this period, international financial integration was faster than real economic integration, and international capital flows were more active. The average annual growth rate of cross-border bank loans was 12%, and the average annual growth rate of foreign direct investment was 14.3%. During this period, East Asia's net private capital inflows totaled only US$19.1 billion in 1990, and increased to US$110.4 billion in 1996, a six-fold increase. East Asia's economy was also the biggest beneficiary of international financial integration. one of those.

However, international financial markets are inherently unstable.

(1) The flow of funds is susceptible to sharp reversals due to changes in market expectations and confidence. The five countries most affected by the financial crisis, namely Thailand, South Korea, Malaysia, Indonesia and the Philippines, had net private capital inflows of US$72.9 billion in 1996 and net outflows of US$11 billion in 1997, a difference of US$83.9 billion. Such a huge reversal of capital inflows and outflows is unbearable for small and medium-sized East Asian economies.

(2) The advancement of information technology and the global integration of financial markets enable international capital participants to carry out cross-border flows of large amounts of funds very quickly around the world at an "instant" speed. , providing conditions for international speculative capital to make waves and exacerbating the instability of the financial market. Under the international trend of financial liberalization, East Asian countries lack vigilance and regulatory experience regarding the instability of financial markets and the dangers of international speculative capital operations.

(3) Large international venture capital funds and investment banks operate with high leverage of 20 times or 30 times, and the funds they can mobilize are far greater than the scale that small and medium-sized financial markets can bear, making the small and medium-sized financial markets A few minor flaws can lead to catastrophic attacks by a few international venture capital funds or investment banks. There is no international law to stop and punish the joint speculation by international financial speculators.

The impact of international financial integration and the resulting instability is the same for any East Asian economy. However, the economies of East Asia have been hit by the crisis in markedly different ways. Thailand, Indonesia and South Korea were the hardest-hit countries. Not only did their exchange rates depreciate sharply and their GDP dropped significantly, they also experienced payment crises and had to accept rescue with stringent conditions from international institutions such as the IMF. Malaysia also experienced dramatic currency devaluation, a banking crisis and an economic depression during the crisis, but it was not forced to seek international assistance to meet short-term payment needs. Singapore's currency depreciated, but its GDP growth rate was 1.5% in 1998, and the Philippines' GDP growth rate fell only slightly, to -0.5% in 1998. Hong Kong's real GDP growth rate was -5.1% in 1998, but the currency still maintained its linked exchange rate despite several attacks by speculative capital. Our country's Taiwan Province experienced a mild currency devaluation of 15% in 1997, but its real GDP maintained positive growth during the crisis, reaching 4.8% in 1998. The mainland not only did not depreciate its currency during the crisis, but also maintained a growth rate of 7.8%, making a contribution to the recovery of the East Asian economy that has been praised by the world.

According to domestic and foreign research, the severity of the impact of the crisis on the East Asian economy is closely related to the following phenomena:

(1) The deterioration of trade terms and the occurrence of current account deficits degree. Starting from the second quarter of 1995, the export growth rate of the five most affected East Asian countries dropped rapidly. By 1996, Indonesia's current account deficit accounted for about 3% of GDP, South Korea's was about 5%, and Malaysia's was 6%. About %, Thailand is about 9%. Economies that have been relatively slightly affected by the crisis, such as Singapore, Taiwan and Mainland China, have relatively sufficient current account payment balances.

(2) The degree of dependence of economic growth on the global capital market. Economies that have been hit hard rely more on foreign debt to support their growth, while those that have been hit relatively lightly have less.

(3) The ratio of short-term debt to foreign exchange reserves. The three countries that need to seek international assistance not only have large foreign debts, but also have high ratios of short-term foreign debt to foreign exchange reserves. In 1999, Thailand, South Korea, and Indonesia were as high as 100%, 203%, and 176% respectively, while other economies were at 50%. the following.

(4) The heavily affected economy has inappropriate supervision of the financial sector and crony capitalism prevails.

(5) In the economies that are greatly affected, enterprises have little self-owned funds and rely on high-level leverage financing to maintain development. In 1996, the debt-to-equity ratio of Thai, Korean, and Indonesian enterprises was 185 respectively. %, 325%, and 183%, and other economies are generally below 100%.

(6) The real estate and stock market bubbles in the economies that are more affected are also larger.

However, upon careful study, the above-mentioned phenomena, like the economic crisis itself, are actually "effects" rather than "causes" of the crisis. The above-mentioned different performances of East Asian economies before the crisis were actually the result of their different development strategy choices. Countries that have been severely hit by the crisis, such as South Korea and Indonesia, generally pursue a catch-up strategy of prioritizing the development of capital-intensive industries as the basis for economic growth. Such industries

are not in line with their own economic comparative advantages and have no ability to survive in a competitive market environment. In order to develop these industries, in addition to providing preferential treatment such as tax exemptions, the government often uses administrative power to lower bank interest rates and intervene in the allocation of bank funds. Those who can obtain these cheap funds are generally companies with good relations with the government, so the emergence of crony capitalism is inevitable. Since this kind of industry does not meet the economic comparative advantage, although they can be established with the support of the government, they are not competitive with similar enterprises in developed countries. Therefore, foreign trade is prone to deficit.

Moreover, the profitability of enterprises in competitive domestic and foreign markets is low. The expansion and upgrading of enterprise production can only rely more on borrowing, and the level of corporate leverage financing is bound to be high. At the beginning, these enterprises mainly borrowed from domestic banks, which had limited funds. As the scale of enterprises expanded, they became increasingly dependent on foreign borrowings for support. Foreign direct investment generally tends to take advantage of the local market and comparative advantages. Therefore, industries that are not in line with comparative advantages to be developed as a priority can generally only use borrowings, especially international short-term capital with a relatively large degree of freedom, resulting in short-term foreign debt versus foreign exchange. The proportion of reserves is high. In order to attract the inflow of foreign capital, financial markets had to be liberalized and financial regulations relaxed. A large amount of foreign short-term capital flowed into the real estate and securities markets, forming a financial bubble.

On the contrary, Taiwan and Hong Kong, which are less affected, have a low ratio of foreign debt balance to GDP, large foreign exchange reserves, and a very low ratio of short-term debt to foreign exchange reserves. The key is that they The development of industries better follows their comparative advantages. Therefore, foreign trade competitiveness is strong, trade surplus is larger, and there are more foreign exchange reserves. Their businesses are also more profitable in domestic and international markets. When their companies expand in scale and upgrade technology, their project financing can rely more on their own profit accumulation and less on external funding sources. Therefore, their corporate leverage financing levels are very low, the foreign debt burden of the entire economy is small, they do not need to rely heavily on foreign debt, and they can calmly carry out financial supervision. Singapore's development relies more on foreign direct investment, and foreign investors also choose industries based on Singapore's comparative advantages. Therefore, with a large foreign trade surplus, abundant foreign exchange reserves, and low short-term foreign debt, it is difficult for international speculative capital to find a breakthrough. Most of the most dynamic private and joint ventures developed in mainland China after the reform and opening up are labor-intensive enterprises in line with comparative advantages and have strong foreign trade competitiveness. Therefore, mainland China has large foreign exchange reserves and low short-term foreign debt. Moreover, mainland China The capital account has not yet been opened, the currency is not freely convertible, and international financial speculators cannot attack the RMB.

It can be seen from the above discussion that the integration of international economy and finance is an inevitable trend. One key to seeking advantages and avoiding disadvantages is to select industries and develop the economy based on comparative advantages. This crisis in East Asia has clearly shown that countries and regions that develop their economies based on comparative advantages have good economic indicators, and it is difficult for international speculative capital to find opportunities to attack, and they will suffer less adverse effects when they are affected; On the contrary, if the economy is not developed based on comparative advantages, all economic indicators will be poor, the economy will be weak, and it will be vulnerable to attacks from international speculative capital. Whether the current momentum of economic recovery in East Asia can be sustained, and whether similar crises will occur again in the future, depends to a large extent on whether those economies that deviate from their comparative advantages can change their development strategies and make corresponding changes. reform of government functions and macro policies. In addition, with the integration of international financial markets, large amounts of funds can quickly flow across borders, and venture capital funds and investment banks can operate with high leverage. These conditions provide opportunities for the speculation of international financial speculative capital. When financial giants attack, it will be difficult for any small and medium-sized economy to withstand the impact. Therefore, it is necessary to establish regional monetary cooperation to reduce the possible adverse effects of endogenous instability in the international financial market on small and medium-sized economies.