This paper examines the experience of East Asia: how its economies have used their financial systems to finance their phenomenal development and growth. The lessons here are important, particularly for Mainland China in its development towards market-based capital markets. The focus is on three issues. First, what factors have shaped Asian capital markets? Second, Are Asia’s capital markets fulfilling their functions well? And third, if not, what needs to change? Asian capital markets were developed pragmatically, as part of the mercantilist approach to liberalizing. Although the financial sector policies were initially spectacularly successful, the Asian financial sector model did not adapt sufficiently quickly to changing circumstances, did not pay enough attention to the demographic implications of its financial markets, and is currently paying the price of these mistakes.