One of the most important trends in the world economy in recent years has been the dramatic surge in market reforms throughout the developing world. According to a Harvard study, more than seventy-five developing and post-Socialist economies, with a combined population of more than three billion people are undertaking dramatic economic reforms aimed at integrating themselves into the global market system. Dozens of these economies have succeeded in attracting large flows of capital, and, more than thirty countries have succeeded in establishing stock markets capable of attracting international portfolio investments. These changes have profound implications for the entire world economy and are leading to a reallocation of global savings and investment.
These changes are of great macroeconomic significance, propelling the most dynamic of the reforming countries into unprecedented levels of sustained economic growth and reshaping global capital markets by introducing new opportunities for both portfolio and direct foreign investment. At the same time, however, the capital movements are also introducing new financial risks for both countries and investors, as exemplified by the East Asian financial crisis, the 1994-95 Mexican peso crisis and the recent Argentinean crisis. As one of the most important emerging markets in the world with tremendous potential for sustained high rates of economic growth, Asia is increasingly becoming a key player in the world economy.