ABSTRACT
China appears relatively unscathed by the Asian financial contagion. China shares many of the same characteristics that contributed to the financial crises in Korea, Thailand, and Indonesia. These include, most notably, a bank-dominated financial system, weak central bank regulation and supervision of banks, excessive growth of lending, and a large build-up of nonperforming loans. China shares with several countries in the Asian region an excessive build-up of domestic credit. China's short-term insulation does not mean, however, that China has been immune to the adverse consequences of a weak financial system characterized by a rapid build up of nonperforming loans to state-owned enterprises. The parallel roles of the governments in Thailand, Indonesia, Korea, as well as China, in encouraging the lending booms were remarkable, as was the resulting vulnerability of firms that had benefitted from the ability to borrow without limit to a downturn in economic growth.
