In Asia, China, which had already introduced the market mechanism before the end of the Cold War, has become a giant supply base for developed countries including Japan. Exports from China currently account for approximately 15 percent of world exports after adjusting for purchasing power parity, a rise from around 5 percent in 1990.
A further decline in loan quality and increases in impairment charges are likely both domestically and abroad; economic conditions in SEE have improved but significant challenges still remain, observed and expected increases in unemployment being a key concern. Additionally, a high percentage of loans in SEE is FX-denominated and unhedged from the borrowers, which should further strain the balance sheets of households and corporates.