A larger share has been spent in the liquefied natural gas (LNG) sector, which is not only a China story, with a large part of LNG exports also destined for Japan and Korea. Graph 3  Many of these investment decisions, particularly in iron ore and coal, took place well before commodity prices peaked.
When the Korean banks experienced difficulty rolling over their international bank loans, the Bank of Korea provided the reserves they needed to repay the loans, in effect delivering on the guarantee, but rapidly depleting the central bank’s reserves in the process. Guarantees of this sort clearly create moral hazard.