China One country which will have a major impact on East Asia’s fortunes is China. China’s reforms and opening up contributed to the excitement and optimism of the Asian boom. A stable China will contribute to confidence in Asia, and encourage investments and growth throughout the region. The Chinese economy does face daunting problems. Non-performing loans of the bank sector are huge. The state-owned enterprises urgently need reform, which will put millions out of work and cause difficult social problems. Foreign investments have slowed down, the economy is experiencing deflation, and the Government is resorting to fiscal pump-priming to boost growth. But there are important positive factors. China’s policies of liberalisation will continue. These market reforms have benefited wide segments of the Chinese population, at all levels of society and government. They are far too entrenched to be reversed. The Chinese people are ambitious, and forward looking, and have high aspirations to improve their lives and strengthen their country. Their dynamism will propel and sustain China’s economic development and modernisation. Singapore: tapping new opportunities In Singapore, we are making fundamental changes to keep ourselves competitive, to tap emerging opportunities and attract foreign investments. When the crisis struck, our immediate priority was to reduce business costs and strengthen our competitiveness. Last November the government implemented a major package to do this. We lowered government taxes, rentals and charges. We also cut wage costs by 15%, by cutting variable bonuses, as well as employer contributions to the CPF – the government-run compulsory savings scheme.

Mr Lee comments on what Singapore and other Asian countries are doing in post-crisis Asia  Speech by Mr Lee Hsien Loong, Chairman of the Board of Directors of The Monetary Authority of Singapore and Deputy Prime Minister, at the Credit Suisse First Boston Investment seminar, held in Singapore on 26 October 1999. *  *  *  Pre-crisis Asia: a mirage? The Asian crisis swept through the regional economies like a huge tidal wave. The euphoria from more than a decade of boom in East Asian economies was abruptly punctured. Overnight, headlines switched from the “Asian century” to the “Asian disease”. Some analysts questioned if the earlier prosperity had been real, or just a bubble. Others attributed the crisis to fatal flaws in the Asian model, which was masked by a classic asset bubble. Asia would not recover, and investors would not return, until these deep flaws were corrected. This pessimism was exaggerated. The transformation of Asia in the last few decades was no mirage. It had sound fundamental underpinnings. Countries maintained high savings and investment rates. Education levels were rising. Economic policies generally became more liberal, outward oriented, and welcoming to foreign investments. Asia had all the ingredients for the takeoff that we witnessed. True, the crisis was a major setback but, compared to a decade ago, the regional economies are still way ahead in terms of development and already, most of them are beginning to bounce back. Undoubtedly, the economies did have serious problems that contributed to the crisis.