[ By Andy Scott, Managing Editor, China Briefing ]

It began in Thailand and quickly spread through the rest of the emerging economies of Asia. What had been hailed as ?the Asian economic miracle? and a great achievement by the IMF and the World Bank came crashing down in July 1997 when the Thai baht collapsed. Other regional markets followed and by the time Asia had recovered, President Suharto of Indonesia had been forced to step down, growth in the Philippines had all but stopped, and Malaysia had gone through its first recession in years.

Much like the current crisis, the Asian Financial Crisis came about when banks failed after borrowing heavily, leaving corporations starved for credit and having to drastically cut back on operations. Due to that crisis, most Asia banks are now much more cautious in their lending practices, and so, the current problems affecting Asia are less financial than economical. As part of a global supply chain that has for years trumpeted cheap exports from Asia?notably China?to the West, the Asian countries are now faced with dropping sales and increased prices as global trade slows.

The emerging countries of Asia are now trying to get their citizens to be more like the West, buying instead of saving. Consumer spending accounted for 35 percent of China?s economy in 2007, in the United States, consumers account for nearly 64 percent. Concerned about the impact of their export economies, Asian governments are beginning to implement policies to spur domestic spending. Thailand?s central bank has kept its benchmark interest rate unchanged to bolster confidence after two increases since July, while Vietnam?s central bank cut their benchmark interest rate in October by one percentage point to 13 percent in a bid to free up credit for enterprises. The monetary loosening reversed a series of three hikes this year, from 8.25 percent to 14 percent, which had aimed to reduce liquidity and curb the country’s double-digit inflation. ?Local cash-strapped companies will have the opportunity to get bank loans in order to maintain business and promote investment,? the State Bank of Vietnam said in an online statement.

While Asian consumers may remain wary in the face of the global downturn, governments of the region are hoping that consumers turn from saving to spending.

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