The Sustainability of Asia’s Debt

Asia has shown the world what success in economic development looks like. From the amazing transformations of Japan, the Republic of Korea, and the other ‘tigers’ in the early 70s, to the more recent takeoffs of the People’s Republic of China (PRC), India, and the leading economies in Southeast Asia, the region has prospered at a startling pace. Technologies were adopted, productivity raised, and export markets conquered. Billions were lifted out of poverty. What was once a backwater is now a global engine of growth. 

That roaring progress was, however, fueled by a lesser-known factor: borrowing. Governments, corporations, and households financed their path to prosperity with debt—lots of debt. Today, the volume of debt hanging over Asian economies is huge, in both absolute and relative terms. It was growing fast before the pandemic and is projected to grow even faster because of it. Demography is bound to make matters worse in the long term. How sustainable is this? What should policy makers do to keep Asia’s finances stable? Should markets worry? These are the core questions of this book.

Through a collection of chapters by renowned experts, a diagnosis of Asia’s debt accumulation is offered. The approach is both country- and issue-driven, so both idiosyncratic and common elements can be identified. Matters like Japan’s social insurance promises, the PRC’s state-owned enterprises, the Pacific islands’ aid dependency, and the saving habits of households in the Republic of Korea are dissected. As are trends that are present across countries, such as population aging, shrinking fiscal space, and contingent liabilities. This allows for a deeper understanding of what makes borrowing sustainable—or not. And it leads directly into policy recommendations, especially those involving the use of new financial instruments. 

The final product is a book whose comprehensiveness and practicality are unprecedented in the field. It will be equally invaluable for governments, investors, and scholars in Asia and beyond.