The Era of Financial Interconnectedness: How Can Asia Strengthen Financial Resilience?
The Asian Economic Integration Report 2017 is ADB’s annual report on Asia’s progress in regional cooperation and integration (RCI). It covers ADB’s 48 regional members and analyzes regional as well as global economic linkages. This year’s special theme chapter, “The Era of Financial Interconnectedness: How Can Asia Strengthen Financial Resilience?” reexamines the region’s ability to absorb financial shocks and avoid instability. The report also introduces an RCI composite index to help monitor and evaluate RCI progress in the region. The Asia-Pacific Regional Cooperation and Integration Index combines six RCI components: trade and investment, money and finance, regional value chains, infrastructure connectivity, movement of people, and institutional and social integration.
The newly-introduced Asia-Pacific Regional Cooperation and Integration Index (ARCII) allows Asian economies to track and monitor the progress of their regional integration efforts across six different socioeconomic dimensions.
Asia remains more financially linked to the rest of the world than to itself.
Amid a slowdown in total inward foreign direct investment to Asia, intraregional investment flows continue to rise.
Firms in Asia are bolstering their status as global investors.
A large part of intraregional FDI is greenfield investment, mainly in manufacturing, while M&As; are more dominant for FDI going outside the region.
Asia’s intraregional trade continued to strengthen, providing a buffer against potential headwinds from global trade and policy uncertainties.
Tourism is growing rapidly in the region, both in terms of the number of tourists and the amount of tourism receipts.
Remittances to Asia declined in 2016, but its impact within the region was varied.
Twenty years after the Asian financial crisis, Asia stands strong—with more flexible exchange rates, higher foreign reserves, healthier financial systems, stronger regulations, deeper capital markets, and better regional financial cooperation mechanisms.
Growing financial interconnectedness can increase vulnerabilities to external shocks, financial contagion, or liquidity risks stemming from cross-border bank lending.
On 25 October 2017, a team of ADB researchers, led by Chief Economist Yasuyuki Sawada, presented the key findings of the AEIR 2017 at Lee Kuan Yew School of Public Policy in Singapore and to international and regional media. See news release.
The Asia Regional Integration Center (ARIC) is an ongoing technical assistance project of the Economic Research and Regional Cooperation Department (ERCD). Following the 1997/98 Asian financial crisis and the contagion evident around the region, ADB was asked to use its knowledge-based expertise to help monitor the recovery and report objectively on potential vulnerabilities and policy solutions. With the ASEAN+3 process just starting, ADB provided technical assistance beginning in 1999—to create the Asia Recovery Information Center, the precursor to ARIC.
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