Integrating the finances of East Asia

Some observers have recently lamented that East Asia suffers from a lack of financial integration. While financial transactions between economies in East Asia and the rest of the world have increased over time, it is argued that capital is channelled between East Asia, on the one hand, and London or New York, on the other, rather than between East Asian economies themselves.2 Given the memory of the abrupt withdrawal of funds from the region five years ago, the perception of such a pattern of capital flows contributes to a sense of financial vulnerability. For some observers, the official efforts to further financial cooperation, as exemplified by the network of swaps agreed among the ASEAN Plus Three countries,3 represent an attempt to lessen such vulnerability. This special feature seeks to assess financial integration in East Asia in the international bond market and the international syndicated loan market. On this basis, East Asia’s finances are more integrated than is often appreciated. While firms headquartered outside the region figure prominently in the roles of bookrunners and loan arrangers, regional funds and banks are very well represented among the underlying investors, in the case of bonds, and among syndicate members, in the case of loans.