The protracted weakness in global demand can be expected to persist over the medium term, given the structural nature of the problems confronting several of the major economies. Any setback in the recovery process, or any severe economic contraction in any of these economies, would affect Asia through the trade channel. In addition, the Asian region is also affected by the significant and continuous global policy spillovers. This includes the effects of the implementation by several of the major economies, the fiscal austerity measures, the unprecedented quantitative easing, the unintended consequences of the regulatory reform, the effects from deleveraging arising from the efforts by both the public and financial sectors to reduce their levels of indebtedness, and the effects of resolution of stressed financial institutions. These global policy spillovers are affecting international trade and financial flows. How has Asia managed these fundamentals forces affecting our region? It is the wide ranging actions that have been taken by Asia during the decades before that has well positioned Asia to absorb and manage the effects of these global developments. The strengthening of domestic demand, building resilient financial systems, and facilitating regional financial and economic integration that has been reinforced by growth supporting policies, have contributed to particularly mitigate the effects of slower trade on the regional economies.

Similarly, the development of the domestic financial system particularly the domestic financial markets, the strengthening of the surveillance system and the legal, regulatory and supervisory frameworks, have increased the capacity and capability to manage consequences on access to cross border financing, and from quantitative easing, deleveraging activities, and financial sector resolution in the major economies. In addition,  2  BIS central bankers’ speeches  this has been reinforced by the building of buffers during the good times. Financial intermediaries remain well capitalised with strong buffers, while the international reserves remain sufficient to deal with surges and reversals in capital flows. A more recent development in this decade is greater regional collaboration and cooperation. Asia is well ahead in the areas of surveillance arrangements, financial safety nets, and crisis management. These frameworks and arrangements have been built up during the good times. Information sharing and the establishment of regional arrangements and platforms, including the building of regional financial infrastructures and markets, are not only to facilitate the efficient intermediation of financial resources, but also to safeguard financial stability in the region. This trend paves the way for coordinated policy actions to manage and mitigate the risks and vulnerabilities to the region. Conclusion The global economic and financial environment remains highly dynamic and uncertain. While emerging Asia is unmistakably contributing to reshaping the configuration of the global economy and the international financial system, the fundamental underlying factors driving this global transformation needs to be continually reinforced. It will require our own continuous economic and financial transformation.