Weathering the Asian Financial Crisis: China`s Economic Strengths, Weaknesses, and Survivability

Abstract

The Chinese economy has shown a remarkable resemblance to those of pre-crisis Thailand, Indonesia, South Korea, and Malaysia—being characterized by an asset bubble, high reliance on banking intermediation, poor prudential supervision, and financial system fragility. Yet, China defied common predictions and did not succumb to the financial crisis. What explains China`s ability to withstand a major region-wide financial crisis? This study addresses this complex question and also elaborates on the reform measures China must implement in order to avoid being affected by future financial crises.