Putting Asia's savings to work in region

As Asia has developed, it has been exporting its savings, through a trade surplus with the United States, and re-importing them, in the form of direct and portfolio investment via New York and London - a process that has created severe, though largely overlooked, financial tensions.

At the end of 2015, the combined net asset position of the Chinese mainland, Hong Kong and Taiwan, as well as Japan, the Republic of Korea and Singapore, amounted to $7.3 trillion - almost equivalent to the net international investment liability of the US. This imbalance is not likely to go away any time soon. In fact, the United States' net liabilities have grown lately - to $7.8 trillion at the end of September 2016 - owing largely to its continuing current-account deficit and stronger exchange-rate effects.

So, why don't Asian countries invest their savings within their own region? An obvious reason is that the US dominates global finance, particularly in the capital and currency markets, and has also become the world's venture capitalist, investing internationally, especially in Asia, instead of just borrowing and lending.