Since July 1997, a Southeast Asian financial crisis broke out that started in Thailand and quickly spread to the entire Southeast Asia and the world. It caused the foreign exchange and stock markets of many Southeast Asian countries and regions to plummet in turn, and the financial crisis The system and even the entire social economy were severely traumatized. In just half a year from July 1997 to January 1998, the currencies of most countries and regions in Southeast Asia depreciated by as much as 30% to 50%, with the highest devaluation of the Indonesian rupiah reaching more than 70%. During the same period, the stock markets in these countries and regions fell by 30% to 60%. It is estimated that during this financial crisis, the economic losses caused by the decline in foreign exchange and stock markets alone to Southeast Asian countries and regions amounted to more than 100 billion US dollars. Affected by the collapse of the foreign exchange market and stock market, these countries and regions experienced severe economic recession.

This crisis first started with the devaluation of the Thai baht on July 2, 1997. Thailand was forced to decouple the baht from the U.S. dollar. Implement a floating exchange rate system. When the Thai baht exchange rate plummeted 20%. Countries such as the Philippines, Indonesia and Malaysia, which share the same economic problems as Thailand, were quickly hit hard by the depreciation of the baht. On July 11, the Philippines announced that it would allow the peso to be exchanged with the U.S. dollar within a wider range. On that day, the peso depreciated by 11.5%. On the same day, Malaysia raised bank interest rates to prevent further depreciation of the ringgit. Indonesia was forced to abandon its currency against the U.S. dollar, with the rupiah devaluing by 14% between July 2 and 14.

Following the financial turmoil in Thailand and other ASEAN countries, Taiwan's Taiwan stock market devalued and the stock market fell, setting off the second wave of the financial crisis. On October 17, the Taiwan stock market depreciated by 0.98 yuan, reaching 29.5 to 1 U.S. dollar. The Taiwan dollar hit a new low in the past millennium. Accordingly, the Taiwan stock market fell 165.55 points that day. On October 20, the Taiwan dollar fell to 30.45 yuan per US dollar, and the Taiwan stock market fell another 301.67 points. Taiwan's currency depreciation and stock market crash not only further exacerbated the financial crisis in Southeast Asia, but also triggered a sharp decline in the U.S. stock market, among others. On October 27, the U.S. Dow Jones Index plummeted 554.26 points, forcing the New York Stock Exchange to use a trading suspension system for the first time in nine years. On October 28, the stock markets of Japan, Singapore, South Korea, Malaysia, and Thailand fell by 4.4%, 7.6%, and 6.6% respectively. %, 6.7% and 6.3%. In particular, the Hong Kong stock market was affected by external shocks. The Hong Kong Hang Seng Index fell 765.33 points and 1,200 points respectively on October 21 and 27, and fell another 1,400 points on October 28. The cumulative decline of these three major Hong Kong stock markets exceeded 25%.

In late November, South Korea’s foreign exchange market and stock market fell in turn, forming the third wave of the financial crisis. In November, the exchange rate of the Korean won continued to fall. In the first half hour of the opening of the market on November 20, it plummeted 10%, hitting a new low of 1,139 won against the U.S. dollar. By the end of November, the exchange rate of the Korean won against the U.S. dollar had fallen by 30%, and the Korean stock market fell. Also more than 20%. At the same time, the financial crisis in Japan has further deepened. In November, several banks and securities companies in Japan went bankrupt or closed down. The Japanese yen also fell below the 130 yen mark against the US dollar, depreciating 17.03% from the beginning of the year.

Beginning in January 1998, the focus of the financial crisis in Southeast Asia shifted to Indonesia, forming the fourth wave of financial crises. On January 8, the exchange rate of the Indonesian rupiah against the US dollar plummeted 26%. On January 12, Hong Kong Peregrine Investment Company, which was engaged in huge investment business in Indonesia, announced its liquidation. On the same day, Hong Kong's Hang Seng Index plummeted 773.58 points, and Singapore, Taiwan, and Japanese stocks fell 102.88 points, 362 points, and 330.66 points respectively. It was not until early February that the worsening financial crisis in Southeast Asia was initially contained.

The Southeast Asian financial crisis has lasted so long, caused so much damage, and affected so many areas, far beyond people’s expectations. However, the occurrence of a crisis is by no means accidental. It is the inevitable result of a series of factors. From the perspective of external reasons, it is the huge impact of international investment and the resulting withdrawal of foreign capital. According to statistics, during the crisis, foreign investment evacuated from Southeast Asian countries and regions amounted to US$40 billion. However, the most fundamental reason for the financial crisis in Southeast Asia lies in the internal economic contradictions of these countries and regions. Southeast Asian countries and regions have been one of the regions with the fastest economic growth in the world in the past 20 years. In recent years, these countries and regions have exposed increasingly serious problems while experiencing rapid economic growth:

① The advantages of export-oriented labor-intensive industrial development have become increasingly severe with the increase in labor costs and market competition. Intensification is falling. The economic growth patterns and economic structures of the above-mentioned Southeast Asian countries and regions have not been adjusted in a timely and effective manner, resulting in a decline in competitiveness, slow growth in foreign exports, and high current account deficits. In 1996, Thailand's current account deficit in the balance of payments was US$23 billion, and South Korea's was as high as US$23.7 billion.

② Bank loans are too loose, real estate investment is too large, the vacancy rate of commercial housing is rising, and bank bad debts, bad debts and other non-performing assets are expanding day by day. Financial institutions in Thailand have serious cash flow problems, several large companies in South Korea have become insolvent and declared bankruptcy, several financial institutions in Japan have collapsed, and the credit crisis in Indonesia has intensified. The above economic factors have affected the foreign exchange market and stock market from various aspects.

③ Economic growth is overly dependent on foreign capital, which has introduced a large amount of foreign capital and led to an increase in foreign debt.

Thailand's foreign debt was US$20 billion in 1992 and reached US$86 billion before currency devaluation in 1997. South Korea's foreign debt exceeded US$15 billion.

④The exchange rate system is rigid. While the U.S. dollar has appreciated significantly against major international currencies in recent years, the exchange rates of Southeast Asian countries and regions have not been adjusted, resulting in overvaluation, exacerbating the rise in product prices and the sharp decline in exports. Therefore, currency devaluation in these countries and regions is inevitable. Currency depreciation has further reduced the ability to repay foreign debt and intensified inflationary pressure, thus causing the stock market to fall.

⑤ When opening conditions and adaptability are not yet sufficient, the financial market is opened prematurely and international financial integration is involved. When international hot money takes the opportunity to make trouble, some Southeast Asian countries and regions are at a loss or are at a loss. The measures are ineffective and we are completely in a passive position.