ABSTRACT
Following the policy of modernization in China, one of the biggest experiments in liberalization and reforms in its pure form of the 3W Model began in the East Asian countries in the late 1980s and accelerated during the 1990s. Freer trade and capital accounts attracted large foreign direct investment to raise the overall rate of capital formation. The share of net private capital flows in GDP rose from 0.6 percent in 1985-88 to 6.6 percent in 1993-96. East Asia became important in the global context as a major destination for private capital flows, and its share in total capital flows to developing nations increased from 12 percent in the early 1980s to 43 percent during the 1990s.59 A Large investment in export oriented industries taking advantage of low wage costs boosted exports. Economic growth rates nearly doubled from the pre-globalization era. The Asian miracle became the role model of globalization for the other emerging markets to follow. This image was shattered by the sudden eruption of a currency crisis in Thailand in the summer of 1997, which quickly spread to other East Asian economies. The Asian miracle suddenly became the nightmare, evoking global attention and international effort to curtail its further contagion and bring the region back to normalcy.
