Economic and Social Aspects of the Dynamics of Financial Instability in Regions with a Predominant Chinese-Speaking Population

This study empirically analyzes data from private non-financial firms in four predominantly Chinese-speaking regions: Hong Kong, Singapore, Malaysia, and Taiwan. Based on two methodologies, Mulligan and Nishi, the study analyzes the 58 largest firms by market capitalization from the four regions from 2006 to 2023 by applying Hyman Minsky's financial fragility hypothesis. Minsky's financial fragility hypothesis states that financial crises arise cyclically and endogenously, as a result of the negative debt to profit ratio in the economy. In his hypothesis, he distinguishes three types of financing firms: hedge, speculative and Ponzi-firm. The risk of a financial crisis is maximized when Ponzi-financed firms dominate the market. In the process of empirical research in four regions, based on economic data, periods of increase in the number of speculative and Ponzi companies are identified. The result of the analysis suggests that while the Taiwanese economy is not experiencing an increase in the share of Ponzi and speculative firms, the other three regions are experiencing an increase in the share of such companies, which in the future could lead the economy to a crisis. In fact, private sector debt increases in all studied regions: Malaysia, Hong Kong, Taiwan and Singapore. It is thought that some socio-cultural characteristics may contribute to the accumulation of debt in regions with a predominantly Chinese-speaking population: the Guanxi business linkage phenomenon, insufficient regulatory measures for private non-financial organizations. Nowadays, it is important to take steps to reduce the financial fragility of companies in order to eradicate the risk of credit accumulation in the private non-financial sector. Key words: financial fragility hypothesis, Minsky moment, hedge lending, speculative lending, Ponzi lending.