CHAPTER 11

REGIONAL ANALYSIS

OFASIA

Asian Economy PRISMs1. Is the “Protestant Ethic” the

universal model of national economic development?

2. Should nations use military means to solve economic problems?

3. Is a nation’s economic or political stability more important?

4. Should nations that don’t like each other cooperate economically?

5. Should nations use military means to deal with economic problems?

ASIAN EXPORTS AS A % OF 2004 NATIONAL GDP

CHINA: 190%INDONESIA: 31%JAPAN: 12%Malaysia: 44%South Korea: 121%Thailand: 71%Taiwan: 65%

ASIAN IMPORTS AS A % OF 2004 NATIONAL GDP

CHINA: 89%INDONESIA: 27%JAPAN: 10%Malaysia: 100%South Korea: 40%Thailand: 66%Taiwan: 53%

ASIAN “PROTESTANT ETHIC” VALUES

1. Family solidarity2. Nationalistic trade competition built on product

pride3. High savings rate &

postponement of consumption

4. Strong commitment between company & employees

5. High value placed on education

6. The 5 “Protestant Ethic” values seem to be the key to economic development in all cultures, not just Protestant ones.

7. Western Europe & the USA have gravitated away from the Protestant Ethic over the past half century (family instability, low savings, shaky relations between company & employees), raising questions about future Western growth & prosperity.

The Asian Flying FormationOf Evolving Economic

Development• Japan• The 4 Tigers

Hong Kong

SingaporeTaiwanSouth

Korea

• Malaysia• Thailand• Indonesia• Philippines• Vietnam• China: the “joker card”

THE ASIAN FLYING GEESE FORMATION

1. Japan has led the way in Asian’s economic development, showing other nations how to develop net exporting economies & providing financial & technological assistance to successive waves of Asian economic development.

2. The “4 Tigers” followed Japan in their wave of development, then the smaller Asian nations. China was “last in line,” but is quickly muscling its way to the front of Asian economic power.

1. Hong Kong: Gateway to China: the world’s largest emerging market

2. Singapore: Asian headquarters for

Western companies3. Taiwan: Computer hardware 4. South Korea: Hyper-

aggressive risk-taking competition to

competeagainst Japan

ASIAN ENTREPOT NATIONS1. Entrepot (“importing/exporting port”)

nations serve as an export gateway to a neighboring nation that is difficult to directly trade with due to political problems or a poor business infrastructure.

2. Hong Kong (& to a lesser extent, Taiwan, Singapore, & Macau) have always served as entrepots to mainland China due to their excellent port transportation services, insurance companies, & ethnic connections to the mainland.

3. The reality that entrepot nations are dependent on trade with China, puts China “in the driver’s seat” of future regional growth.

ASEANAssociation of Southeast Asian

Nations: Beginning of Asia’s First Free Trade Zone?

1.The smaller Asian economies (Singapore, Malaysia, Indonesia, Vietnam, Brunei, Thailand, Philippines) originally formed ASEAN to protect themselves against giants Japan & China, but no free trade agreement exists. 2.“ASEAN + 3” includes China, Japan, & South Korea in the trade talks, hoping to promote cooperation between the larger & smaller Asian economies.

3.The new American-Pacific Trade Cooperative (APEC) is made up of the largest Asian & Western economies who may eventually develop some degree of cross-regional free trade, this pulling the global triangle of trade (NAFTA + EU + Asia) closer together.

4.China has become the largest export market for other Asian nations, & China exports even more within Asia than it does to the U.S.

ASIA’S OVERDEPENDENCE ON WESTERN MARKETS

1. Modern Asian economies were built on Western materialism/debt

2. Western economies are now maxed out on both materialism & debt

3. Western population growth is stagnant

4. The West now consumes more services than manufactured goods, but Asia exports few services

5. Western companies are more innovative than Asian companies

ASIA’S FOOD MINE FIELD

1. Un-enforced food safety standards throughout many parts of Asia have endangered the health of many unsuspecting Asian consumers.

2. Numerous deadly chemicals have found their way into Asian food, medicine, & toiletries.

3. Formaldehyde (used in embalming) has been used to lengthen the shelf life of noodles.

4. Borax, a common ingredient of plastics & detergents, is often used to preserve fish & meats.

5. Diethylene glycol (the “sweetening” agent in anti-freeze) has been found in Chinese toothpaste & in Asian cough syrups & drops.

6. Industrial dyes have been found in Asian ice cream sold in schools, & farmers frequently shine up their vegetables for market using deadly banned herbicides.

7. “It could very well be that polluted products consumed today might not even show perverse health impacts for another decade.”

8. Asian government officials claim they have kept exports free of such pollution, but no one can say for certain.

9. Some health officials in the West worry that the growing drug manufacturing industry in China & India (which produce 20% of generic pharmaceuticals sold in the U.S.) may contain adulterated fillers active ingredients and fillers.

1.China is competing against other Asian nations for global customers & FDI. This will disrupt the overall Asian economy just as a Joker card disrupts a card game.

2.China wants to eclipse Japan as Asian’s economic leader, another unpredictable, destabilizing force in Asia’s future

WHY CHINA IS A JOKER CARD

3. China is also a joker card for developing nations, stealing away their off-shoring operations due to China’s unrivaled low labor costs.

4. Mexico’s electronics industry is operating at just 60% of capacity due to jobs stolen away by China.

5. China’s $600M annual investment in biotech labs is sucking away high value-added business from industrialized Western nations.

KOREAN COMPETITIVE STRATEGY1. Chaebol: large family-networked

corporations diversified into multiple unrelated industries

2. Until the late 1990s, the giant chaebol sought to compete against arch-rival Japan through taking large strategic risks to compensate for less advanced SK technology & global market shares

3. Risks included price-cutting, high debt financing, unrelated diversification, & rapid expansion of factories

CHAEBOL REFORMS SINCE THE ASIAN CURRENCY CRISIS OF THE LATE

1990s1.Downsizing & limiting

areas of diversification 2.Reducing employee

expectations of lifetime employment

3.A new emphasis on innovation & entrepreneurial start-ups

Korea’s largest company, Hyundai also owns Kia Motors. Daewoo is owned by America’s GM, while France’s Renault acquired Samsung motors.

Will South & North Korea eventually unite similar

to West & East Germany?

The short-term strain on South Korea to rebuild its northern neighbor

would be greatly overshadowed by its magnified long-term

economic size & competitive clout.