For the past 30 years, Asian economies have been the world’s envy as they have surpassed practically every other region in terms exports and economic growth. The remarkable development of various Asian countries has drawn millions of people out of poverty and created some of the wealthiest and most competitive economies in the world. Much of this success has been attributed to a distinctly Asian development model that combines high work ethics with an exceptional emphasis on savings and high rates of investment in both infrastructure and human capital. Moreover, the Asian Miracle was also facilitated by the extraordinary complementarily of resources, stages of development and policies of Asian countries. This complementarily made possible a pattern of development known as the Flying Geese model, in which capital, technologies and know-how trickled down, first from Japan to the Tiger economies (Taiwan, Korea, Singapore and Hong Kong) and then to the Aspirant Tigers of Southeast Asia (Thailand, Malaysia, Indonesia and the Philippines), fostering economic development throughout the region. During the 1990s, however, this picture changed abruptly. First, a real estate and equity bubble developed in Japan, the bursting of which dragged Japan into a decade long economic crisis. Second, China emerged as a major player in the world economy as her strategy of opening up to FDI and redirecting economic activity towards exports began to pay off. In the following paper, I analyze how the spectacular rise of China has affected the patterns of Asian economic dynamics since the early 1990s. In particular, I focus on the question weather the win-win situation of economic complementarily of the past has given way to a zero sum competitive game in which the Asian economies fiercely compete for the same FDI inflows and the same export markets.
Table of Contents
1. Introduction
2. The Complementarities of Asian Economic Dynamics
3. China’s Awakening
4. The Effect of China on Asian Trade and FDI
5. China and the Future of Asian Economic Dynamics
Objectives and Topics
This paper examines how the rapid economic emergence of China since the early 1990s has transformed Asian economic dynamics, specifically analyzing whether the historical "win-win" pattern of complementarity has shifted into a zero-sum competitive struggle for foreign direct investment and export markets.
- The historical role of the "Flying Geese" development model in Asia.
- China's transition toward an export-oriented global economy.
- Empirical analysis of trade and FDI flow trends within Asian economies.
- Future implications of China's rise for regional production networks.
- The necessity of domestic structural reforms for sustaining Asian growth.
Excerpt from the Book
What explains this complementarity?
It looks apparent, that in the past decade, the rise of China has had a rather positive effect on most Asian countries as both its exports and its FDI inflows have been largely complementary to those of other Asian countries. From a dynamic perspective, two separate mechanisms appear to be at work.
First, there is evidence that suggests that China is becoming the location for the final assembly in Asian production networks. Thus, Chinese exports induce exports from other Asian countries which produce the intermediate products that are necessary for Chinese exports. This is most evident for electronics manufactures where China today produces more than 80% of notebook computers, 50% of cameras, 30% of air conditionings and 25% of washing machines (Chen and Chen 2004). The parts for these manufactures are typically produced in other Asian countries and merely assembled in China, where labor costs are cheapest and infrastructure is rapidly being expanded. For example, office and telecom equipment account for a large part of total exports for Taiwan, Malaysia, the Philippines, Korea and Singapore, a significant amount of which go to China for further processing (WTO 2005). As evidence for China’s complementary position to other Asian countries one can see that for the Chinese processing sector as a whole, two thirds of the value added typically occurs outside the country, while the final assembly which takes place in China amounts to only one third of the total value added of Chinese exports (Bergsten et al. 2006).
Summary of Chapters
1. Introduction: The chapter outlines the historical "Flying Geese" development model in Asia and introduces the transformative impact of China's emergence on regional economic dynamics.
2. The Complementarities of Asian Economic Dynamics: This section details how resource endowments and production networks previously fostered mutual growth and regional integration among Asian nations.
3. China’s Awakening: The chapter describes China’s transition from an isolated economy to a global player through Deng Xiaoping’s agricultural reforms and the subsequent liberalization of trade and FDI.
4. The Effect of China on Asian Trade and FDI: This core chapter analyzes empirical data to determine whether China acts as a competitor or a complement to other Asian economies regarding trade and investment.
5. China and the Future of Asian Economic Dynamics: The final chapter assesses future trends, suggesting that while regional integration remains strong, countries must pursue domestic reforms to thrive amidst intensified competition.
Keywords
China, Asian Economic Dynamics, Flying Geese Model, Foreign Direct Investment, FDI, Export-led Growth, Production Networks, Complementarity, Regional Integration, Trade Policy, Special Economic Zones, Economic Reform, Industrial Development, Comparative Advantage, Protectionism.
Frequently Asked Questions
What is the primary focus of this research paper?
The paper explores how the economic rise of China since the 1990s has affected regional development patterns and whether this growth has disrupted the traditional collaborative economic model in Asia.
What is the central research question?
The study investigates whether the historical win-win situation of economic complementarity in Asia has shifted toward a zero-sum competitive game for FDI and export markets due to China's rapid integration into the global economy.
Which theoretical model is used to describe Asia's past development?
The paper utilizes the "Flying Geese" model, which describes a process where capital, technology, and knowledge flow from more advanced economies to less developed ones, fostering regional catch-up growth.
How does the author analyze the impact of China?
The author employs empirical analysis by examining FDI inflow data and trade statistics, alongside an evaluation of how regional production networks incorporate China as a hub for final assembly.
What does the study conclude about the future for other Asian countries?
The paper concludes that while competition is rising, countries can succeed by specializing in niche products and pursuing internal reforms to boost productivity and reduce reliance on old export-led models.
What are the main thematic pillars of the work?
The pillars include the analysis of the Flying Geese pattern, China's liberalization strategies, the empirical reality of FDI shifts, and the long-term necessity of balanced domestic economic growth.
Why are Special Economic Zones (SEZs) important to China's growth?
SEZs provided the infrastructure, regulatory environment, and tax incentives necessary to attract massive amounts of foreign direct investment, effectively launching China as a major global export hub.
How do production networks mitigate the "zero-sum" fear?
Production networks allow for an integrated supply chain where other Asian nations provide intermediate goods for final assembly in China, creating an interdependent relationship rather than purely substitutive competition.
- Quote paper
- Patrick Avato (Author), 2006, The Dragon and the Flying Geese: The Effects of the Emergence of China on Patterns of Growth and Development in Asia, Munich, GRIN Verlag, https://www.grin.com/document/58727
