It has been 25 years since a major financial crisis began in Thailand and soon swept across neighboring Asian economies. CGTN's Gao Ang talked to Andrew Sheng, the chief adviser of China Banking Regulatory Commission. He previously served as the chairman of the Securities & Futures Commission of Hong Kong. He talks about what led to the crisis and what important lessons it has for us today.

ANDREW SHENG Chief Adviser China Banking Regulatory Commission "The first one was that it was a crisis of the Japanese financial system. Japan was the leading geese. They were the first to industrialize. Then as Japan got expensive, they shifted their production down to the four dragons, South Korea, Taiwan, Hong Kong, and Singapore. And then when these countries and regions got expensive, they shifted their production down to the four tigers, Thailand, Malaysia, Indonesia, and the Philippines. It was the four tiger economies they got into trouble. And the reason was that as Japan extended that supply chain, Japanese banks started lending not only to Japanese companies, but Japanese companies lend on trade finance to their customers, which meant that the four tiger economies got a lot of flooding of liquidity. But when Japan had the bubble, the Japanese banks decided to withdraw their loans in dollars.

"And therefore, the countries that borrow most in dollars, which was basically Thailand, where there was a lot of Japanese manufacturing, suffered a hard attack. There was a liquidity shock.

"The second mistake was that Thai companies and Indonesian companies, Philippine companies, they all borrow in foreign currency, and then invested in local currency.

"And then there was a question of regulation. You regulate banks, but you don't necessarily regulate the finance companies that well.

"Would the same type of crisis occur in Asia today? My answer is that the chances are not that high, but with such complex geopolitical tensions, it's not impossible that something will happen the other side of the world, for example, if other emerging markets got into crisis, we in east Asia cannot totally escape the repercussions."

GAO ANG CGTN Reporter "What do you make of the pace of China's opening up policies in the financial sector over the past few years? How important are such reforms to its economic growth?"

ANDREW SHENG Chief Adviser China Banking Regulatory Commission "The lesson of the Asian financial crisis was, at the end of it, the crisis countries could have closed up. They didn't. Right? South Korea opened up even more. Thailand opened up. Malaysia implemented exchange control, but it's still open up.

"So opening up to globalization is not bad, actually a good strategy. But you must be aware that volatile capital flows must be managed, right? You must have cooperation in these areas.

"So therefore, the lessons of the Asian financial crisis apply. Basically, global cooperation minimizes the risks and the damage of financial crisis. So, China's strategy of opening up in a very selective manner where every single step should be very considered prudently has been the correct one. But there are some costs because if you do not actually open up fast enough, you do not get sufficient competition to your domestic players, so that productivity levels will not rise as fast. So, it's a very delicate balance. Nobody has got it perfectly right. Nobody's got it perfectly right. But the gradual direction of opening up is the right strategy. And I strongly support that."