Lee Hsien Loong: Well, I think itís different. The fundamentals are not the same. Before 1997, many of the countries were running balance of payments deficits and money was coming in by the spades all over the region. People were just saying, invest in Asia, and a lot went into Southeast Asia. They just bought the index or whatever was in the markets, and all of this money was volatile. So, when the mood changed, when problems came up in some of the countries, starting with Thailand, the money stampeded out, just as it had stampeded in, and that caused a problem.
Today, I think thereís a certain ebullience, confidence which is building up in Asia, but not to the extent of what happened before 1997. The countries are running balance of payments surpluses, not deficits.
SPIEGEL: And have today's investors learned from those events?
Lee: I think the big difference in China is that they have capital controls and it is mainly a domestic stock market. Itís not foreign money in the Shanghai stock market. So, itís not money which can leave and then suddenly drag down the whole system.
SPIEGEL: That sounds as if the Chinese Government has taken some measures to control any the situation?
Lee: I suppose the measures are helpful, but the fundamental problems, some of them are structural ones and you cannot solve them just by imposing a Tobin tax, raising it from 0.1 to 0.3 percent. Thatís just adding some sand and grit into the wheels and slowing things down. You must have a market that is well-regulated, that is transparent, where the investors are well-informed and itís not just 200,000 households a day saying thereís a chance to get rich and I want to get into it.
SPIEGEL: Thatís whatís happening at the moment?
Lee: Which I think is happening.
SPIEGEL: So, how is it going to end?
Lee: Well, markets come up, markets go down, itís happened before. The question is what the impact will be on the rest of the Chinese economy. I donít think the Chinese financial system operates quite in the same way as that of the developed countries. Their banks donít operate commercially and they donít lend based on risk, and credit and returns, yet. Their companies donít depend on the stock market for financing in a very big way, yet. Some of them go overseas to get financing. Many of the big companies are state-owned enterprises. So, I think it will end, as bubbles end, in manias, panics and crashes.
SPIEGEL: What will the impact be on your country and on other Southeast Asian countries?
Lee: If it is just the Chinese stock market, I think itís manageable, though there may be some impact in terms of the mood on the other stock markets in the region. But if itís the Chinese economy which goes down, of course, the impact on Asean would be big because China is now the biggest, or nearly the biggest, trading partner for many of the Asean countries. For Singapore, if you count Hong Kong and Taiwan, together with China, itís our biggest export market.
SPIEGEL: Is China also the biggest threat to Singapore?
SPIEGEL: How is Singapore going cope with this challenge?
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