When the global economic crisis first erupted, very few people thought that the crisis in the subprime American housing market would have such widespread ramifications. The Asian economies, in particular, thought that they would escape the worst effects because they were going through a boom in growth and prudent central banking policies along with credit counseling had avoided undue exposure to subprime assets. However, as the crisis has progressed, growth in Asia has slowed to the extent that Hong Kong and Singapore are now in recession while South Korea has experienced a dramatic shrinkage in growth. What actually happened? Takatoshi Kato, IMF Deputy Managing Director, believes that the economic crisis has had the effect of exploding three common Asian myths: Myth #1) the emerging economies of the Asian continent are insulated from the business cycles of the developed economies because intraregional trade has shown a sharp growth. We see that, in reality, the global demand is still a major engine of the export growth for Asia. Asia has become an integrated supply chain for exports to Europe and America and much of the intraregional trade is ultimately reflected in exports to these countries. Because exports form such a large part of Asian economies, Asia has become more vulnerable to the business cycles of the developed world. Myth #2) Asia is relatively insulated from global financial markets. While Asian financial institutions may themselves be prudent investors, overseas investors held large investment positions in Asian financial markets. The outflows from Asian markets when these investments were liquidated were believed to be of the order of $70 billion, enough to impact these markets severely. Myth #3) large stockpiles of foreign currency reserves are the insurance against adverse movements in international financial markets. This has proved true only up to a point. Large stimulus packages in India and China and exchange-rate management in the case of China are beginning to have their effect and these economies are rebounding. But Asia will almost certainly never again succumb to the three myths that have just been exploded.