Revisiting the Theme of Dissonance between Manufacturing and Financial Sectors

I have touched on this issue before.

Korea built its solid industrial base, but dissonance between Korea’s manufacturing and financial sectors was one of the major culprits for the 1997 financial crisis.

This problem still persists in Korea. On the surface, Korea has liberalized the banking sector since the 1997 financial crisis. Beneath the surface, its policy apparatus has bolstered the short-term strength of its export/growth engines with little regard to long-term consequences. The lack of financial structure and expertise has hampered productive capacities of Korea.

China is rigorously building its industrial base, while they are blowing asset bubbles fuelled by bank lending, which will result in large NPLs.

Again, productive capacities such as manufacturing and innovation are the wealth of a nation. I have discussed what has happened to the U.S. manufacturing and financial sectors many times. If any country guts its manufacturing sector, it is on a similar trajectory to decline.