Asia and Crises

So across Asia, governments have taken measures to allay disquiet. In China the stockmarket has lost two-thirds of its value since last October; the property market is wobbling and growth is slowing. These trends all predated the latest panic. But the government has had to go further to shore up confidence. It tried to revive the stockmarket by abolishing a tax on share-buying and investing in the market itself. Japan, despite the giddy plunge of the stockmarket from October 8th-10th and the bankruptcy of a middling life insurer, Yamato Life, is confident that its financial system, recapitalised at massive public expense a decade ago, is robust enough to survive the latest shocks.
Japan’s money markets have gummed up far less than those in America and Europe. Even so, at a time when its economy is almost certainly in recession, the authorities are taking few risks. Backed by $1 trillion of reserves, the Bank of Japan has promised unlimited dollar funds to the markets. And the government has announced measures to support regional banks. It has also promised not to sell its remaining shares in the country’s biggest banks for the time being, and eased conditions for companies to own shares in each other as a way to support the stockmarket.
This year South Korea’s won has sunk more than any other Asian currency. The country’s current account, in surplus for many years, has slid into deficit. Banks have made a high number of loans in proportion to their deposits. Households are deep in debt and so are many smaller companies (many in dollars). In a radio address on October 13th President Lee Myung-bak insisted that the banks were sound and pointed out that the currency was backed by far larger foreign reserves than it was a decade ago. He begged South Koreans to cut down on foreign spending and energy use, and to increase spending at home.
In India, the closeted banking system is not heavily exposed to the financial crisis. Its most adventurous bank—ICICI—is the only one so far to cause jitters. Long lionised for financial sophistication, the bank is now associated with Western financial sophistry. After its share price halved in a month, it had to send text messages to its depositors reassuring them that their money was safe. Statements of support from the Reserve Bank of India, India’s central bank, and the rating agencies have helped restore confidence.
Indonesia’s government intervened more drastically, halting share trading for three days after sharp falls in share prices and the rupiah. When the stockmarket reopened on October 13th, the government strengthened its guarantee of bank deposits to deter a run on banks.

(Article reference: http://www.economist.com/world/asia/displaystory.cfm?story_id=12437723)