Financial Markets, Institutions, and Integration in East Asia
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
East Asia has enormous scope to upgrade and integrate its financial markets, covering the
spectrum of equity, bond, foreign-exchange, and derivatives markets. Financial markets and
institutions in East Asia tend to be narrow and undeveloped, although there are important
exceptions. Japan dominates the top tier of the region's markets by virtue of its size, but its
markets are not advanced, and many of its private institutions are weak. Although the markets in
Australia, Hong Kong SAR, and Singapore are smaller than those of Japan, they are more
innovative, market-oriented, and technologically advanced. Markets in Malaysia, South Korea,
Taiwan, and Thailand have made substantial progress to varying degrees; but China, Indonesia,
and the Philippines have a considerable way to go in developing the information and governance
infrastructure that financial markets need to function well. For all these countries, there is a clear
role for regional cooperation among policymakers in building capacity in, and links between,
financial markets in East Asia, as well as in encouraging stable speculation and the participation
of nonresident and institutional investors in domestic financial markets. ASEAN+3 is an
important and welcome advance in regional cooperation, but its membership does not span the
depth of experience in financial markets and institutions that exists in East Asia.
The integration of capital markets in the ASEAN+3 countries is discussed, including the
evolution of the markets, and their regulation, since the Asian Financial Crisis (AFC) in 1997,
taking into account its consequences and those of the Global Financial Crisis. The AFC involved
the emergence of a number of mismatches, the experience of which the AFC triggered a series of
changes, including those related to exchange rate regimes and bond markets as well as a swap
arrangements and regulatory reform. Those reforms however were not sufficient to avoid the
Global Financial Crisis (GFC), a decade later, though they did add to the ability of the region to
withstand the global shock. Reforms after this shock included work at global level to strengthen
the banking systems and further development of bond markets. Swap arrangements were
improved and a macro monitoring group set up. The region’s financial markets are still
dominated by banks, and equity and bond markets remain relatively underdeveloped. Financial
systems are less complex in the region but there is growth of shadow banks and new types of
instruments. Exchange rate arrangements are evolving, with the possibility of less reliance on the
US dollar and more use of the RMB for transactions and as a store of value. Overall, much
progress has been made on financial market integration but a lot of work remains. The diversity
of the region provides opportunities in integration but also complicates the process. A number of
forces will drive the next rounds of reform and integration, including the development of new e-
payment systems (led by China), the disruptions to traditional banking services from fintech
(trade finance, for instance), the contribution of crypto-currencies to lower the costs of managing
payment systems, and other uncertainties associated with the shifts in design of supply chains
and with the tensions between the major trading partners. The economies of the region gain can
from continuing to build their financial fundamentals in conjunction with regional support
systems. This approach, an example of a wider trend to ‘global pockets’ of integration, will help
the region manage the risks associated with global economic changes.
