And following the Big Bang measures, Japanese banks are merging, even across different keiretsu groups, forming two of the world’s largest banking groups.3 There has also been a wave of strategic alliances between Japanese and foreign financial institutions.4  1  2  3 4  The government has nationalised three commercial banks and absorbed three others into the state-owned Krung Thai Bank. Four commercial banks have been sold to foreign investors thus far. Sony, Nissan and NTT have planned to slash 17,000, 21,000 and 20,000 jobs, respectively. Other Japanese corporations such as NEC and Hitachi have also announced large layoff plans. The Daiichi-Kangyo, Fuji and IBJ group, and the Sumitomo-Sakura group. Including Travellers Group and Nikko Securities, Daiichi Kangyo Bank and J P Morgan, and Goldman Sachs and SocGen with IBJ and Nomura. BIS Review 117/1999  2  In Korea, financial sector restructuring is generally on track. Korea took a hands-on approach. The government aggressively bought and disposed of the non-performing loans in the financial system. It pushed for bank recapitalisation. Forced closures, mergers and acquisitions have removed many weak institutions from the financial sector. Korea is also pressing for reform and restructuring of the chaebols. This will take time, effort and political will, as the difficulties with Daewoo show. Restructuring the chaebols involves a wholesale conversion of entrenched social norms and practices. The initial impact is painful for those who depend on the distortions that reforms seek to remove. Benefits are on the other hand more dispersed, less apparent and longer term.

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.