Two sides of the financial coin

Nervous sell-offs in Asia's equity markets in response to debt problems in the United States and the eurozone underscore the region's growing links to financial events on the other side of the world. But with increased integration comes the increased threat of contagion. It is therefore not only in Asia's interest to promote global financial stability, but also its economic fate increasingly depends on it.

Asia was fortunate to escape the 2008-09 global financial crisis relatively unscathed. One critical reason was its limited exposure to subprime mortgages and other "toxic" assets in the US. The region's underdeveloped financial markets were relatively "clean" of complex derivative and securities deals.

There is no guarantee that the same will hold true next time around. In fact, the more financial deepening and globalization continue, the greater the likelihood that turmoil in one country will spread rapidly across other countries and regions, inflicting significant economic damage as it goes.