The $28trn global reach of Asian finance - article for the Economist - Hong Kong - 10.01.22
As private savings have built up in East and South-East Asia, the region’s financiers now wield heft in far-flung asset markets
THE COUNTRIES of East and South-East Asia are renowned, even envied, for reshaping global supply chains. Less well appreciated is the extent to which they have redrawn the map of global capital flows.
After a buying spree over the past decade or so, the region’s ten biggest economies now hold nearly $28trn in foreign financial assets, more than three times the amount in 2005 and equivalent to a fifth of global assets held by foreigners. Once-staid institutions that are little-known in the West—from obscure Japanese banks and Taiwanese insurers to South Korean pension funds—now wield heft in markets for assets ranging from collateralised-loan obligations (CLOs) in America to high-speed rail lines in Britain.
East Asia has long been recognised as a contributor to the global “savings glut”, a concept popularised by Ben Bernanke, then a governor at the Federal Reserve, in 2005. The scale of Asia’s foreign holdings has only grown since, as the region has become richer and older. The Economist has looked at figures for the gross foreign financial assets for ten East and South-East Asian economies.
We define these as total gross foreign assets excluding foreign direct investment by multinationals; our measure captures investment portfolios and bank lending, among other things. The combined foreign financial assets of our ten countries rose from around $8trn in 2005 to nearly $28trn in 2020, increasing the region’s share in global foreign-held financial assets by five percentage points (see chart 1).
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