Ever since the recent global financial crisis broke out, experts and officials have taken great pains to identify the causes, hoping to avoid similar crises in the future. Now, as the global economy gradually recovers, comes Sheng's clear and complete analysis of the recent crisis and the Asian financial crisis of the 1990s. In his view, unfettered finance was the core cause of these crises.
But the real picture is far more complex. In reality, governments tend to overregulate and underregulate the financial sector at the same time. This is especially true in Asia, a fact that Sheng implicitly admits. After the Asian crisis and then the bursting of the dot-com bubble in 2000, he explains, the financial world undertook its most thorough overhaul since the 1930s, in areas that spanned accounting, corporate governance, regulation, and national financial sectors. But these measures were not enough to stem the latest crisis. In fact, some of them may have contributed to it.
The financial challenges faced by Asia are especially serious, so Sheng's perspective as an Asian regulator is particularly welcome. "There are very few books about the Asian crisis by senior Asian officials who were in positions during the crisis," he notes. "For posterity's sake, the Asian side of the story deserves to be told." But his most valuable contribution is that he identifies some of the major barriers standing in the way of a sound financial system and points to future solutions. "The key structural problem faced by Asian economies," Sheng writes, "is the legacy of a relatively closed, top-down silo governance structure faced with an open, rapidly changing and complex global market."
This is a premium article
SubscribeSubscribe and get premium access to ForeignAffairs.com.