Surging growth and rising interdependence of East-Asian economies during the last two
decades have heightened interest in monetary and financial integration. From 1985 to 2005,
the share of intra-regional trade in total trade for the South-East and East Asian region
(including Japan) grew from 28% to 34%. Around the middle of this period, in 1997, the
rapid propagation of the Thai currency crisis over South-East Asia lent urgency to accompanying
economic integration with steps toward monetary and financial integration and for
jointly improving the quality of financial supervision in the region.
More recently, the sudden drop in Mainland China’s stock markets on February 27, 2007
(–8.8%, Shanghai Composite) that was followed by drops on European (–3.0%, Stoxx 600)
and US (–3.5%, S&P 500) markets, suggests that China has become a key player in the international
financial landscape. On the other hand, when the China market fell 21% over a
four day period in early June 2007, it made hardly any waves in these other markets perhaps
because a domestic policy measure, an increase in the stock transfer tax to “cool” stock
speculation in China, was widely seen as the trigger. Nevertheless, the novelty is that, while
Wall Street still exerts an important influence on the other stock markets, asset price fluctuations
in emerging economies can now spread to the US market. This illustrates the still
growing international financial integration between markets and the important role of East-Asian markets, such as China’s. |
Abstract
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