national wealth as the east asian countries but lower savings ratios. this can be attributed to the cultural differences in the region, where people have a higher propensity of consumption and tend to quickly use up all their salaries. third, family tie is strong in the east asian countries, and families shoulder social responsibilities such as providing for the elderly and bringing up children. fourth, according to the life cycle hypothesis by franco modigliani, more money is saved to meet future pension and healthcare needs as the share of working age population increases. when we study the phases of economic growth, in times of exceptionally high economic growth, most of the incremental income will be saved, resulting in an unusually high savings ratio. china fits in the above - mentioned two conditions for a high savings ratio. japan and the u. s. can also demonstrate the contribution of these factors in determining savings ratio. similar to the u. s., japan is a developed country with high per capita income. the social security systems in the two countries have their respective weaknesses. however, japan ’ s savings ratio is much higher than that in the u. s. this can be largely ascribed to cultural, family value and demographic feature in japan, which are fairly similar to those in other east asian countries. some argue that an inadequate social security system leads to high savings ratio. though logically sound, this argument lacks adequate empirical support. moreover, it is based on the assumption that human behaviors are rational and people increase their savings for future healthcare and pension needs. in fact, such an assumption does not necessarily stand. high savings ratio in oil - producing countries has different reasons. endowed with rich oil resources that far exceed their normal demand, these countries naturally accumulate their wealth in the form of savings. the elementary textbooks on economics always start with “ supply, demand and prices ”, which lead the readers to believe that certain prices ( e. g., exchange rate and interest rate ) can determine the behavior of savings and consumption. however, the fact is that the level of savings ratio is influenced by a wide range of factors, and it can ’ t be adjusted simply by changing nominal exchange rate. factors such as national tradition, culture, family structures, demographics and social security system can ’ t be changed in the short term. as a result, it may take a long time for policies to yield intended impacts. iii. implications of the asian financial crisis for savings ratio in the east asia savings in the gdp are composed of resident

##ze firms are in a much more difficult position than large firms that have deeper pockets and larger buffers. trade tension might be comparatively short - lived when compared to other structural changes like demographic shift and technological disruptions, but these short - term factors could result in a long - term impact to medium - size firms and the structure of the economy through channels such as changes in competition landscape, market dominance power, and investment and employment patterns. of course, the big question now is what roles could policymakers play to support this transition. i see smes capacity building as one key area where the government needs to be actively involved. this includes proactive consultation and coaching, providing incentives for productivity - enhancing investments, prohibiting abuse of market dominance power by large firms, promoting digital adoption, as well as eliminating outdated laws and regulations hindering sme ’ s competitiveness. although enhancing sme competitiveness might not be a direct mandate of a central bank, the bank of thailand has stepped up our policy focus on smes and worked with the banks on a number of initiatives. new digital payment platforms have been developed to lower costs of payment services, enhance payment efficiency, and provide a foundation for information - based lending and supply chain financing. a new database on system - wide sme loans by contract was set up to improve understanding of sme financing behavior and analysis of sme credit risks. we have also expanded the range of foreign exchange hedging products for smes and, recently, taken steps to encourage preemptive rescheduling and restructuring of sme loans to help facilitate their transition during this challenging period. dealing with financial spillovers the second issue for emerging nations in this new global environment is the size and volatility of financial spillovers that result from unconventional monetary policy after the gfc. capital flows, especially portfolio flows, now account for a much larger portion of crossborder flows than current account flows, and have a much larger effect on the exchange rates for ems. these capital flows — a significant portion of which are non - resident activities — are more sensitive to global financial conditions which have been dictated largely by monetary policy stance of aes and global investors ’ sentiment rather than textbook - determinants like macroeconomic conditions in ems and interest rate differentials. moreover, due to the large foreign - exchange activities by non - residents relative to the size of domestic foreign exchange markets and increases in derivatives and algorithmic foreign exchange trading activities, exchange rate could at times act as an amplifier