BIS Quarterly Review, June 2003 41

Since the crisis hit East Asia six years ago, flows of capital between the region and the rest of the world have changed in significant ways. These changes have responded to altered economic conditions within the region and outside it. However, certain features of the new pattern of flows raise some important policy questions. First, East Asia is exporting capital on a net basis to the rest of the world in very substantial amounts. The external demand that has generated an export surplus has undoubtedly facilitated recovery from the Asian crisis. Moreover, the United States has also benefited from the related capital inflows to finance its current account deficit. Nonetheless, it is hard to believe that the region should be such a large exporter of savings in the long term, or that the US deficit can be sustained indefinitely. Second, East Asia is engaged in an international exchange of risk that is restoring and strengthening national and corporate balance sheets in the region and rendering the region’s economies more resilient. The region is doin