One consequence of the regulatory reform program after the crisis is that it has tended to increase the cost of bank-intermediated finance. As a result, market intermediation is increasing, which will have implications for the future of financial integration in Asia. This is evident in the recent strong issuance of offshore bonds by Asian non-financial corporations.
Much of this rise has been driven by Chinese issuers, which now account for about 40 per cent of the bond issuance by Asian non-financial corporations (Graph 2). However, borrowing from banks still represents the vast majority of debt of Asian nonfinancial corporations. Another question that arises is which of these forms of cross-border flows – banking or market-based – are more stable?