Reluctant Regulators

The 2007–9 global financial crisis was predictable and avoidable but American and British regulators chose not to intervene. They failed to enforce legislation or implement their own policies because of an Anglo-American “regulatory culture” of non-intervention that came to dominate financial regulation worldwide. Hong Kong—the international financial centre of an increasingly prosperous China—defied world opinion and made stability its priority, even where that meant extensive government intervention. This policy ensured Hong Kong’s robust performance during the 1997–98 Asian financial crisis and the latest global crisis. More significantly, it made possible Hong Kong’s impressive contributions to financing China’s economic take-off and to the modernization of its financial institutions.

Reluctant Regulators is a scathing indictment of regulatory inertia in the West. It provides important and original insights into the causes of financial crises and pays special attention to China’s attempts at reform and Hong Kong’s place in China’s financial modernization. The book will be of interest to professionals in financial services, to policy-makers, and to scholars and students in economics, political science and economic history.

Leo F. Goodstadt was chief policy adviser to the Hong Kong Government as head of its Central Policy Unit (1989–97) and has had an extensive consultancy practice in Asian banking. He has written widely on the global financial crisis and on China’s economic development.

“A compelling account of why the global financial crisis owes much to a flawed regulatory culture in Washington and London, and why the banking system in Mainland China has been weakened by the well-intentioned fiscal stimulus package introduced in response to the crisis. Goodstadt argues that the authorities in both the US and Mainland China could learn from the experiences of Hong Kong, which show that a strong regulatory framework does not have to hinder economic growth.” —Hans Genberg, former Executive Director of Research, Hong Kong Monetary Authority

“This is an important book based on extensive research by an astute observer. Goodstadt makes a convincing case that the ability of the financial markets to adequately self-regulate was an illusion, and that the Anglo-American model of financial supervision proved a failure. His argument that the Hong Kong model has shown more resilience is difficult to deny. A timely, imaginative, and well-documented contribution to the debate about the recent financial crisis which should be widely read.” —Helmut Sohmen, Chairman, BW Group Limited