The Asian financial crisis of 1997-1998

The Asian financial crisis crept into Southeast Asia on only the second day of Hong Kong's return to China in 1997, and the city was soon preyed upon as an ATM machine by George Soros, a global financier.

Property prices spiraled down by half and middle-class families panicked to find their assets turning into debts. There were moments of grief, pain, and undermined confidence in Hong Kong.

Countries most affected by the 1997 Asian financial crisis

Hong Kongers did not fight alone. In March 1998, the former premier Zhu Rongji promised that the central government would protect Hong Kong from the financial crisis "at all costs" if needed. It was reported that Soros dropped his teacup upon hearing of Zhu's statement.

Speculative hedge funds were rebuffed when Hong Kong, backed by Zhu, spent HK$118 billion ($15 billion) buying stocks and futures to defend the peg.

Closer cooperation between Hong Kong and the Chinese mainland not only boosted the former's economy, but also helped fuel the latter's dramatic economic growth. Both are still reaping the benefits.

As the Chinese economy continues to develop and Chinese companies' thirst for global capital grows, Hong Kong is in a good position. Now the city ranks as a conduit to international financial markets and the natural destination of choice for Chinese companies to raise international funds.

Jack Maisano, chairman of the American Chamber of Commerce in Hong Kong (AmCham), attributed the key reasons for this optimism to the improving economic situation around the world, increasing economic progress in China, Hong Kong's economic integration with and proximity to the Chinese mainland, as well as the "support and help that China's mainland has given to Hong Kong."

"The fact that Hong Kong is part of China is exactly where the city's advantages lie," said Maisano. The economic development of the Chinese mainland has brought ongoing opportunities to Hong Kong, and the appeal of the city to international investors is unprecedented, said the AmCham chairman.

In the 1990's during the Asian financial crisis, Chinese mainland helped maintain financial stability in Hong Kong.

China's role in combating the Asian Financial Crisis