. in the case of japan, since financial institutions initially underreported the amount of public funds they needed, the government was not able to inject sufficient funds for capital reinforcement at an early stage. this experience shows the importance of establishing an accounting standard of nonperforming loans and appropriate disclosure. ( 2 ) dispelling the myth that banks never fail the second point is the importance of the recognition within society that, although individual financial institutions could fail, just like non - financial firms, the stability of the financial system can be maintained. if the general public perceives that " banks are fail - safe, " a moral hazard is caused among depositors and banks, leading to the accumulation of risk for the financial system. looking back, there was a myth in japan that banks could not fail. in other words, the possibility of a bank's failure was not considered realistic. in fact, deposit insurance had not been triggered for 20 years, since its establishment until 1991. if we look back further, japan experienced a severe financial crisis caused by a series of financial institution failures in the 1920s. based on this experience, the japanese financial authorities adopted an administrative approach called the " convoy system. " this system strictly regulated competition among financial institutions with respect to interest rate setting and business operations in order to ensure that even financially weak institutions would not fail. the myth that japanese banks could not fail was formed by this " convoy system " and by undue trust in financial authorities. in addition, there was another myth that land prices could never fall. in fact, the business conditions of japanese banks were also supported by this " land price myth. " it was not until the burst of the bubble and subsequent financial crisis that these two myths were debunked. things changed all of a sudden, and the impact of a series of bank failures and the credit crunch in corporate finance on the japanese economy was extremely severe. if there is a myth in china that banks never fail, it is important to dispel it in normal circumstances. at the same time, it is also important to build trust among the general public that financial stability as a whole will be maintained even if individual financial institutions fail. for example, one approach is to encourage financial education, including promoting better understanding of the deposit insurance system among the public. until this year, china had not seen any bank failures since that of hainan development bank in 1998. after baoshang bank was temporarily nationalized this may, there was

that market incentives had been reduced and that we were losing the dividend of efficient uses of resources that such incentives provide. even those observers who derided the more unbridled forms of capitalism became increasingly aware that attempts to tame the market could be costly in terms of economic growth and the average living standards of a nation. over the past thirty years, as many countries have struggled to liberalize their economies and improve the quality of their policies, global per capita income has steadily risen. i recognize that poverty rates are notoriously hard to quantify, but according to a recent study, the share of the world's population living on less than $ 1 per day, a commonly used poverty threshold, has fallen dramatically over the past three decades - - from 17 percent in 1970 to 7 percent in 1998, representing a decline of 200 million people. in addition since 1970, the infant mortality rate has declined by more than half, school enrollment rates have risen steadily over the past thirty years, and literacy rates are up. smith ( 1776 ), vol ii, book iv, chapter v, p 43. world bank ( 2002 ) - - gdp per capita ( constant 1995 dollars ). sala - i - martin ( 2002 ). the $ 1 per day threshold is measured in 1985 dollars on a purchasing power parity basis. world bank ( 2002 ). while, from a global perspective, wealth and the overall quality of life have risen, that success has not been evenly distributed across regions or countries. the economies of east asia are often - repeated success stories. some, including china, malaysia, south korea, and thailand, stand out not only as growing very strongly, but also as having seen the greatest declines in poverty rates. overall, over the past three decades, asia's $ 1 per day poverty rate fell by one measure from 22 percent in 1970 to just 2 percent in 1998. moreover, asia was not alone. per capita incomes in latin america also expanded during the period, and poverty rates fell, although progress was somewhat slower. but, sadly, the story in africa has been quite different. levels of per capita income in that continent have actually fallen. the poverty rate, which in 1970 matched the rate in asia at the time, is estimated to have doubled to 40 percent by 1998. while africa's performance has clearly been subpar, some african countries have had some success. for example, botswana, lesotho, and more recently uganda have made some progress in raising per capita income