A high level of bad debt is a regional affliction that can turn a few bank failures into a chain reaction. The security-obsessed KMT valued stability above all. It still has painful memories of the waning days on the mainland, when its attempts to print money to finance the war against the communists triggered hyperinflation that hastened its retreat. It has usually kept a miserly hand on the money supply since then. To prevent leakage of precious hard currency, the government early on introduced strict capital controls to prevent Taiwanese companies from taking on cheap foreign-currency loans for speculative projects.
Capital is like blood.
Without easy access to cheap capital, they have never been able to chase market share with massive investments, like the expansion-mad Korean conglomerates, or chaebol. Instead, they have had to finance growth from cash flow, which made them concentrate on profits. In South Korea and Japan the average return was in single digits. In the region's boom times, this financial conservatism limited Taiwan's growth and drew criticism. The largest Korean company is 16 times as big as the largest Taiwanese firm, he notes, and for Japan, the figure is 80 times.