The Underlying Reasons for the Southeast Asian Financial Crisis and the Effects of the Crisis on Our Country

Lu Jianren

Chinese Economy, 1999, vol. 32, issue 1, 40-45

Abstract: The Mexican financial crisis broke out at the end of 1994, reached its most serious stage in the first quarter of 1995, and had basically concluded in the first half of 1995; by the end of 1995 Mexico had shaken off the crisis. The Southeast Asian crisis, on the other hand, broke out in early July 1997, has gone through three high tides, and is showing signs of becoming increasingly severe. In the main, only one countryâMexicoâwas hurt by the Mexican crisis, whereas the majority of the Southeast Asian countries have been hurt by the Southeast Asian crisis. The damage caused by the Mexican crisis was limited to one locality in Latin America, whereas the Southeast Asian crisis has not only directly inhibited economic growth in the East Asian region, it has also affected the United States and Europe and reduced the economic growth rate of the entire world by 1 percentage point. The United States and the International Monetary Fund (IMF) used funds amounting to between U.S. $40 billion and U.S. $50 billion to rescue Mexico from its crisis. This time, however, the IMF used U.S. $57 billion to assist South Korea, and the IMF, the World Bank, and the United States have, up to now, thrown U.S. $113 billion into a rescue action to assist East Asia. This is much more than was used in Mexico, but the amount is far from sufficient. It is estimated that the crisis has already caused bad debts of more than U.S. $100 billion for Southeast Asian banks, and South Korea's bad debts also surpass U.S. $100 billion. The Southeast Asian financial crisis has damaged the countries in that region not only by greatly depreciating their currencies, but also by sharply curtailing their economic growth.

Date: 1999
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