Policymakers in emerging Asian economies are not idiots. They recognise that, in most cases, their government bond markets are a poor mechanism for capturing domestic savings. But they seem incapable of taking the necessary remedial action. A glance across Asia suggests that developing deeper, more liquid, sovereign bond markets is a huge, multi-decade task.

Only South Korea, on the cusp of developed-market status, comes close to fulfilling all seven requirements for depth and liquidity set out by the Asia Securities Industry and Financial Markets Association, a Hong Kong-based advocacy group. But, even in South Korea, it is not possible to sell government bonds short and the government keeps changing its mind over taxing foreigners’ capital gains. India still has no bond futures market, after several attempts to create one. China has odd repo markets (bonds are pledged, rather than transferred), and excludes foreigners altogether. Other markets lack scale. The average transaction size in government bonds – a useful measure of market depth – is $1.9m to $2m in Indonesia, Thailand and Malaysia, about one-eighth the size of Hong Kong or China.

The result is that domestic savings institutions end up funding somebody else’s development. Take the Philippines: back in 2000, when it was running a current account deficit, the government depended on foreigners for 41 per cent of its financing. In 2010, the seventh successive year of current account surpluses, the overseas financing ratio had fallen only slightly, to 38 per cent. Policymakers should recognise that from deep and dynamic government bond markets only good things spring: a cushion in the event of crisis; a risk-free yield curve to support corporate bonds; a stable source of liquid assets for banks; and a source of funding for 20- or 30-year infrastructure projects. True global rebalancing can’t take place without them.