Financial architecture for East Asia

The Asian currency crisis has highlighted the problems of East Asian economic systems in a variety of forms. However, economists and policy makers are not fully agree on whether global standards for financial systems would be appropriate for the stable growth of Asian economies. In this article the author of the previous arguments on the guidelines for financial systems, and explore what is appropriate for system design (architecture), new financial systems in East Asia.

What kind of financial market is desirable in the process of economic growth is an important research topic that has often been discussed in the theory of economic growth. In his previous books, some papers positively assessed the impact of the deregulation of financial markets on a country's economic growth, but others have pointed out the negative aspects. It may be true that in an economy where the development of legal systems and transparent accounting of advanced systems and external discipline on private enterprise works well, developing market-oriented financial markets improve efficiency the allocation of resources. Less transparent government intervention in the financial markets and financial transactions based on family ties or geographical sometimes lead to the inefficient allocation of capital due to non-economic factors such as rent seeking and corruption. Looking back over the past experience, however, the deregulation of financial markets in developing countries has not always had a positive impact on economic growth. Therefore, some approaches that differ from the theory Neoclassicist eventually be accepted. Some of them argue that when the legal systems and accounting systems are incomplete and the asymmetry of information or other market failures exist, it would be desirable to regulate financial markets.

The Asian currency crisis revealed latent problems in the financial systems of Asian countries. Krugman and other Western economists have criticized this "capitalism". They point out that, as well as the tacit government guarantees of financial assets, under-development and the immaturity of financial control and various other financial systems leads to inefficiency and hence the allocation of funds exacerbated the crisis. Viewing financial systems in many East Asian countries in terms of legal systems and accounting systems, the protection of shareholders and debtors, much lower than in the UK or America, is still higher than the world average. As for the level of concentration in the stock ownership structure, however, the unique features of East Asia can be seen in a number of countries. The company control by families has the effect of strengthening relations (accretion) with the government and related agencies to staff through lobbying activities on the basis of their economic power. In addition, an excessive concentration of ownership considerably weakens the influence of minority shareholders, who are protected to a certain extent by the law, and undermines the external discipline.

If we take the attitude of the hierarchy of mechanisms based on the market in the financial markets, we will naturally argue that the concentration of ownership in enterprises in East Asia provides a footing to achieve economic growth sustainable. However, the concentration of companies controlling the rights of the shareholders of specific ratios of individual shareholders or parent companies of both good and bad sides. On the one hand, he has created obstacles in this autocratically business conforms to the willingness of some owners, but various agencies that accompany purchase costs between interested parties on the other hand tend to be low. An initiative to reduce the downside risk related to financial systems based on the prestige, geographical or family ties, and so on, is to eliminate the concentration of ownership and creating financial systems based on global standards. At the same time, however, this would lead to the loss of positive characteristics that the financial systems in East Asia have traditionally. It may be helpful to a certain extent, for governments to intervene gently on the financial markets, the continuation of these positive aspects of traditional East Asia while complementing financial systems, the weakest aspects of these systems