Pacific Exchanges

In the second episode of our series on the Asian financial crisis, we talked with Gillian Tett, U.S. managing editor of the Financial Times. Gillian was based in Asia at the time of the crisis and witnessed it spread across the region. In the interview, she relays her experience in Asia in 1997 and how it helped her spot warning signs ahead of the 2008 global financial crisis.

Some of her key takeaways include:

• Contagion caused the crisis to spread across Asia. Investors lumped all of Asia's problems together, sometimes without clear connection or rationale.
• Japan is not typically considered to be at the center of the Asian financial crisis, but the crisis drew attention to the country's unresolved banking problems.
• When the Japanese government forced the recognition of bad assets in 1997, it led to a sharp erosion of public faith in the financial system because it challenged existing notions that the government would support banks.
• When it became clear that the Japanese financial system lacked transparency, risky assets could not be priced effectively, and private savers and investors froze all activity.
• Fast economic growth can lead to complacency around risks. Rapid Japanese growth in the 1980s led to the overlooking of mounting risks, a mistake that would be repeated by other countries in the run up to the global financial crisis.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Twenty years ago, a financial crisis emerged across Asia and threatened the entire regional economy. The crisis led to a huge drop in economic activity, a sharp depreciation of local currencies, and massive losses to the stock markets. Drastic action by domestic policymakers and significant international aid halted the crisis, but not before it caused tremendous economic pain across the region.

In the wake of the crisis, countries across the region implemented a broad range of reforms, many of which were successful as Asia returned to rapid growth in the 2000s. However, the influence of the crisis shaped the development of the region throughout the 2000s through to today.

To mark the anniversary, today we launch a new series looking back at the crisis 20 years later. In the first episode, we sat down with David Dollar, a senior fellow at the Brookings Institution. David worked as an economist at the World Bank for 20 years, focusing on a variety of Asian economies. He also served as the U.S. Treasury's economic and financial emissary to China, based in Beijing. David has written numerous scholarly articles on Asian economics and is a frequent public commentator on the region.

David gives a great overview of the Asian financial crisis, including its origins and long-term impacts. Some of the key takeaways include:

• Reliance on cheap borrowing in foreign currencies created financial vulnerabilities across the region that led to the crisis.

• A debt crisis that started in the private sector grew until it became a general macroeconomic crisis, impacting the finances of national governments.

• China played a broadly stabilizing role during the crisis, resisting temptations to depreciate its currency.

• Few emerging markets have opened up their financial systems without undergoing a period of financial instability.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In this episode of our series on financial technology, we sat down with Ning Tang, founder and CEO of CreditEase. Ning has been a leader in the development of China's peer-to-peer (P2P) lending industry and has a unique perspective on the development of fintech worldwide.

Some of the key takeaways from our conversation with Ning include:

• P2P lending in China has helped borrowers overlooked by traditional financial institutions.

• Many Chinese fintech firms were initially reluctant to share data, but data sharing has turned out to be a benefit for the entire industry.

• Regulation of P2P lending has increased as the industry has grown in size.

• As the industry has matured, banks have become essential partners for P2P firms.

• A combination of traditional and alternative data sources work best for making credit assessments.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In this episode of our series on financial technology, we sat down with Jason Loughnane, microfinance specialist with Accion International in Myanmar. Jason is an expert on the potential for mobile payments and other financial technologies to promote financial inclusion in emerging markets.

Some of the key takeaways from our conversation with Jason include:

• Access to mobile payments in Myanmar has grown rapidly as the cost of cell phone ownership has declined.

• Mobile payments have the potential to dramatically improve the efficiency of microfinance projects and expand the geographic range of areas they can service.

• Competition can drive down the price of mobile payments, but it's essential that providers have sustainable business models.

• People often use microfinance loans in surprising ways – and that can be a good thing.

• Myanmar is on track to experience a boom in mobile payments growth over the next five years.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Asia is currently in the midst of a fintech revolution, with new technologies and startups that could disrupt various financial services in economies across the region. In this episode of Pacific Exchanges, CAU analyst Cindy Li sat down with Nicholas Borst and Sean Creehan to discuss their recent paper on fintech developments in Asia.

Some of the key takeaways from the conversation include:

• The payments and lending sectors are facing the highest levels of fintech-driven disruption.

• China has emerged as a leader within the region on both mobile payments and peer-to-peer lending.

• Both Asian banks and regulators are actively experimenting with virtual currencies and blockchain.

• Fintech innovations have the potential to improve access to credit for Asian SMEs and reduce remittance costs.

• A number of Asian economies have established regulatory sandboxes to allow banks and startups to experiment with new technologies.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

Shadow banking has grown quickly in China, driven by regulatory arbitrage and the growing role of non-bank financial institutions in the financial sector. In this episode of Pacific Exchanges, we sat down with our colleague Cindy Li to discuss her recent paper on shadow banking in China.

Some of the key takeaways from our conversation with Cindy include:

• Shadow banking in China differs significantly from shadow banking in the U.S. and other advanced economies.

• Chinese shadow banking has evolved significantly in recent years in response to actions by financial regulators.

• Differentiating between financial innovation and shadow banking is often difficult.

• Wealth management products are a popular investment for individual investors in China, but they come with significant potential risks.

• Shadow banking in China is set to continue growing in size and complexity.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In the fifth episode of our series on financial technology, we sat down with Zhong Wang, Head of Strategy and Overseas Payments for Baidu Wallet and Payment Services. Zhong is a veteran of both Silicon Valley and the Chinese tech industry and is an expert on the retail payments sector in China.

We invited Zhong to speak with us about why innovations in payments are occurring so rapidly in China, the competitive threat that new payment companies represent to banks, and how developments in payments may impact other parts of the Chinese financial system. The conversation covers a number of interesting topics. For example, can new payments technologies help bring financial services to China's large underbanked population? Is there a generation gap between the young and old in terms of adopting mobile payments? Will Chinese payment companies be able to expand to other rapidly developing Asian economies? Zhong also explains what he sees as some of the biggest differences between Silicon Valley and tech companies in China.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In the fourth episode of our series on financial technology, we sat down with Anju Patwardhan, a Fulbright Fellow researching fintech at Stanford University who previously served as the Chief Innovation Officer for Standard Chartered Bank, one of the world's largest and most international banks. Anju is currently researching the potential for financial technology to increase financial inclusion, particularly for small businesses, at Stanford University. She also serves as a Venture Partner for the Fintech Investment Fund of Creditease, one of China's largest fintech firms.

We invited Anju to speak with us about her experiences managing fintech activities at a bank, the potential for collaboration and competition between fintech start-ups and traditional banks, and her research activities at Stanford. This conversation touches on a number of interesting subjects. For example, are fintech start-ups competitors or partners for traditional financial institutions? What's the role of fintech in expanding financial inclusion? Anju also explains how fintech firms are leveraging alternative data sources to improve SME lending.

Find Anju on LinkedIn and Twitter.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In the third episode of our series on financial technology, we sat down with Shuhei Aoki, Executive Strategist at Hitachi and advisor to the President of Hitachi's Information and Telecommunications Systems Company. Before joining Hitachi, Shuhei served as the Director General of Payment and Settlement Systems at the Bank of Japan. He is also an Associate Professor at Shinshu University, where he teaches and conducts research on resource allocation and macroeconomic productivity.

Hitachi is one of Japan's leading industrial conglomerates, manufacturing everything from TVs to tanks and quite likely some of the electronics that power the device you are using to listen today. What Hitachi is not necessarily known for is financial services, but earlier this year they established a Financial Innovation Lab here in the Bay Area.

We invited Shuhei to speak with us about the reason non-financial companies are getting involved in FinTech and how the space is impacting Asia and places like Hitachi's home market of Japan. Our chat covers a number of interesting topics, including the role of cash in an increasingly digital world, how banks view the rise of fintech, and the Bank of Japan's early consideration of a virtual national currency not unlike Bitcoin.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.

In the second episode of our series on financial technology, we sat down with Sacha Polverini, Senior Program Officer at the Bill and Melinda Gates Foundation and Chairman of the Focus Group on Digital Financial Services for Financial Inclusion at the International Telecommunication Union (ITU), a United Nations agency that deals with information and communication technologies.

We invited Sacha to speak with us about the challenge of financial inclusion in Asia and how fintech can make a difference. Asia is at the center of global efforts to deliver financial services to the unbanked. As of 2015, an estimated 1 billion people in Asia lacked access to a bank account. Our conversation covers a number of topics, from how we measure financial inclusion and define its success to the types of technologies that can have the greatest impact on people's lives. Sacha talks about policy successes and experimentation in countries like Kenya and India, the role of both telecommunications and financial firms in promoting inclusion, and how smart policies can pave the way for new financial innovations aimed at serving the poor.

Sacha works at the Gates Foundation's Financial Services for the Poor, a program which aims to foster the development of digital financial services like mobile money in the developing world. At the ITU, he chairs a committee which seeks to bring together government regulators, service providers, and international organizations to share ideas about how to scale up digital financial services globally.

Find Sacha's writing at the Gates Foundation, ITU, and on LinkedIn and Twitter.

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.