The first step in assessing China’s financial vulnerability is to distinguish a solvency crisis, which can occur when firms lack sufficient capital to withstand an asset-price meltdown, from a liquidity crisis. During the Asian financial crisis of the 1990s, some countries suffered foreign-exchange crises, in which devaluation and high real interest rates de-capitalized banks and enterprises, owing to the lack of sufficient reserves to repay foreign-exchange debts.