China and Japan in East Asian economic development - Term Paper Example

? China and Japan in East Asian Economic Development China and Japan in East Asian Economic Development In 1960, the GDP of ASEAN + 3 was approximately 40% of US GDP, with Japan contributing more than 80% of total East Asian GDP, followed by China (Mainland only), with not quite 8%. In 2000, the GDP of ASEAN + 3 was approximately 75% of US GDP, with Japan contributing more than 60% of total GDP, followed by China (Mainland only), which contributed somewhat more than 15%. Japan also leads in GDP per capita among East Asian economies, with almost US$50,000 in 2000 (at market exchange rates), followed by Singapore at US$30,000. In contrast, Mainland China’s GDP per capita was less than US$900 in 2000 (Lau, 2003, p.4) Even though politically and socially two entirely different countries, (China is a communist country whereas Japan is a democratic country), China and Japan play a pivotal role in controlling Asian economy in general and East Asian economy in particular. Even though India, South Korea etc are some other prominent economies in Asia, no other country seems to be as effective as China or Japan as far as the influence in Asian economy is concerned. Both China and Japan adopt different methods and philosophies for attaining economic growth. “Japan is all about the way of doing things. China is all about finding a way to do things” (The difference between China and Japan, 2007). It is often said that Japan gives more priority to quality whereas China gives more priority to quantity because of the superior quality of Japanese products and the bulk quantities of products produced by China. In other words, China tries to reap more profits with the help of bulk production and cheaper prices whereas Japan tries to grow with the help of superior products of higher prices. In the consumer world, Japan stands as a sign of quality whereas China stands as a sign of quantity. It should be noted that some of the reputed brands in global market have its origin in Japan. For example, Sony, Mitsubishi, Toyota, Honda, etc are some of the popular Japanese brands not only in Asia, but also all over the world. At the same time Chinese products are popular for cheaper prices rather than superior quality. It is difficult for Japanese or American companies to compete with Chinese products in global markets as far as prices are concerned. In short, Japan and China play a vital role in controlling East Asian economy. This paper analyses the role of Japan and China is East Asian economic development. Role of Japan and China in East Asian economic development Japan achieved an average annual rate of growth of real GDP in excess of 10 percent during the decade of 1960-1970 (in fact, between 1955 and 1975). However, due to the two oil shocks, the average annual rates of growth in the two subsequent decades declined significantly to less than 5%. And since 1990 the average annual rate of growth has been below 2%. Despite the considerable slowdown in the Japanese economy during the past decade, China was able to achieve an average annual rate of growth of almost 10% over the past two decades, a performance comparable to that of Japan between 1955 and 1972) (Lau, 2003, p.7) Japan was the leading player in Asia until couple of decades before. They were instrumental in shaping the economies of many other Asian countries. They provided lavish grants and financial aids to many of the other Asian counties like South Korea, India, Vietnam, Philippines etc. In India a huge drinking water supply project is still functioning. Moreover, in the 1970’s Japan provided a Yen loan to South Koreas first subway project which helped South Korea immensely in increasing its transportation facilities. “In the subway network system project, new model subway trains, manufactured under a joint venture between Korean and foreign companies, were introduced. In the course of the joint venture, the Korean manufacturer of the subway trains learned new technology”(East Asia’s economic development and Japan’s ODA, n. d). Moreover, “In order to achieve comprehensive development of the rural areas of the Philippines, Japan has conducted a rural development infrastructure project since 1995” (East Asia’s economic development and Japan’s ODA, n. d). In short, most of the Asian countries including China received Japanese aids in one way or other in the past. However, Japan is facing stiff challenges at present because of the recent earthquake and the subsequent tsunami attack. These natural disasters were the most serious challenges Japanese people were facing after the nuclear bombing disaster during the Second World War by America. The recent recession also struck Japan badly even though most of the other prominent Asian economies like China, India and South Korea managed to escape from it. In short, Japan is currently going through a bad phase. On the other hand, China is going through one of its most prosperous periods in history. Many people believe that China may become the number one economic power in the world within another twenty years of time and it will expel United Sates from its top spot. According to Keidel (2008), China’s economy will surpass that of the United States by 2035 and be twice its size by midcentury (Keidel, 2008). The economic reformation processes undertaken by Deng in the 1980’s and 90’s gave momentum to Chinese economic growth and it shaped Chinese economic growth in the right direction. Before Deng, the communist administration was adamant on communist ideologies and therefore failed to play any significant role in China’s economic growth. Deng on the other hand succeeded in rewriting or giving new dimensions to some of the established communist principles. Private capital which is believed to be the number one enemy of communism, accepted or welcomed lavishly by the Deng administration. When globalization was entered the horizon, China was bit reluctant in embracing it because of their doubts about the possible hidden agendas set at the back drop of globalization by the capitalist countries to exploit the wealth of other countries. However, such doubts were evaporated immediately and China actively started to implement globalization principles in its economy which brought theme dividends. The world’s richest country “United States has $ 246 trillion trade deficit with China” at present (McEachern, p.275) which is a clear fact to underline China’s dominance in global economy. Over time, China has become increasingly an important destination for the exports of other East Asian economies; however, Japan remains more important than China for most of the East Asian economies (in terms of their export ranks), with the notable exception of South Korea—China has supplanted Japan as the second most important export destination for South Korea (the U.S. remains the most important destination for South Korea). The share of imports from East Asian economies has risen considerably for Japan, to 40% in 2001, and has remained high for China, at 48% in 2001. These shares have risen for all other East Asian economies (Hong Kong, Taiwan, South Korea and the ASEAN). The ranks of East Asian economies in both the China and Japan have also been rising (that is, becoming higher in rank and lower in number) over time (Lau, 2003, p.17). “During 1997–2005, the PRC’s (People’s republic of China) average annual growth rate in real GDP was 8.9%. During the forecast period of 2005–2010, it was assumed that the PRC continued its historical growth trend of 8.9% per year” (Mai et al, 2010, p.5). No other country in the either in Asia or in the world was able to achieve such a phenomenal growth rate during the above mentioned period which clearly underlines China’s dominance in global economic circle. Even though some people have some concerns or doubts about the statistics put forward by China, majority of the people are of the view that China is going to be the most prominent force in the East Asian and global economic circle. “As the Chinese currency is greatly undervalued, the difference between PPP and exchange rate conversion is unusually large. With exchange rate conversion, Chinese GDP appears to have been only 15 percent of that in the USA in 2003” (Madisson & Wu, n, d., p.1). Even the critics have no doubt about the strength of Chinese economy compared to that of other countries. Globalization succeeded in rewriting some of the established economic theories and philosophies in the world. Earlier different countries were focused mainly on their own economic growth; however at present because of heavily globalized or interlinked global economy, countries are giving more importance to collective growth than individual growth. As a result of that different regional trade blocs and free trade agreements were established at different parts of the world. Trans-Pacific Partnership (TPP) is one such free trade agreement established to strengthen the trade ties between the countries in the Asia-Pacific region. Trans-Pacific Partnership (TPP)  The Trans-Pacific Partnership (TPP) is a multilateral free trade agreement that aims to bring countries in the Asia-Pacific region under one umbrella. TPP includes United Sates and countries from East Asia, Oceana and Latin America such as New Zealand, Australia, Chile, Brunei, Singapore, Peru, Malaysia and Vietnam. The major objective of TPP is to increase cooperation and trade ties with the help of elimination of tariffs. The vision and mission statement of TPP says that 90% of tariffs between member countries of TPP should be eliminated by 2006 and to reduce the tariff level to zero percent by 2015. Even though Japan is not a member of TPP, many people believe that Japan may become a member of TPP in future. There are some who see the idea of a Trans Pacific Partnership (TPP) as the instrument that will forge a new US economic relationship with Asia as well as broader economic integration across the region. Although there wasn’t much talk of TPP from the President over the past week, TPP remains an important sub-text in the dialogue about how to take trans-Pacific economic ties to a new level (Drysdale, 2010). It is a fact that neither America’s economy, nor Japan’s economy is in good shape at the moment. At the same time, Asian countries are developing at a rapid pace than other countries in the world. Some people point out that the global wealth is slowly shifting to the more densely populated Asian region from the less populated European and American region. In any case, one thing is sure; Asia is developing rapidly than any other regions in the world. Asia’s cooperation is necessary for struggling regions like America and Europe. The recent Asian visit of president Obama and other European leaders to Asian countries like India, Japan, Korea, China etc indicates the growing roles of Asia in global economic matters. During his recent Indian visit Obama has signed a trade agreement worth multibillions with Indian authorities. TPP could be used judiciously by America to strengthen its trade tie up with Asia in general and East Asia in particular. According to Capling (2009), “TPP could well prove to be an attractive vehicle for multilateralising regionalism in the Asia-Pacific, and could serve as a catalyst for broader developments. Certainly, the ‘bottom-up’ and incremental approach of the TPP is likely to be more politically feasible” (Capling, 2009) At present, Japan is taking part in the meetings of TPP as an observer country. However, in Japan people are on different layers about the countries ambition to join TPP. Some people in Japan argue that membership in TPP would destroy Japan’s agricultural sector since under the agreement of TPP, the exports and imports of agricultural products to and from Japan will be seriously affected. At the same time, Japan knows very well that an increased tie up with the key players in the Asia pacific region is essential for its economic growth at present, especially after the recent tsunami attack. Even though Japan is bit hesitant in joining TPP, China is not so. China has already expressed their readiness to join TPP which is taken as a surprise not only by Japan, but also the other member countries of TPP. China is interested in joining international negotiations on a transpacific agreement on free trade and investment, a move that trade officials fear could leave Japan out in the cold as it dithers over whether to join the talks. According to Foreign Ministry sources, China have expressed its intention to join working-level negotiations to be held Nov. 9, 2010 by participating nations in the Trans-Pacific Partner (TPP) agreement. China's move has sent a chill down the spines of Japanese trade officials because Tokyo remains torn over whether to participate in the TPP framework due to fierce domestic opposition to any moves to liberalize agricultural trade. Trade officials are concerned that if Beijing joins the TPP talks--to be held ahead of the annual summit meeting of the Asia-Pacific Economic Cooperation forum that opens in Yokohama on Nov. 13--while Tokyo does not, Washington might join hands with Beijing over Tokyo's head. The officials are scrambling to analyze China's move and its potential repercussions (China warms to transpacific trade talks, 2010) It should be noted that China was earlier reluctant in joining any international bodies operating by capitalist countries. As mentioned earlier, China looked suspiciously at globalization when it first appeared in the world. But at present China knows the importance of increased cooperation among different regional countries better than any other countries. No country can grow properly, relying only one its individual capabilities. Prejudices and biases often retard the progress of a country. China’s move will definitely force Japan to think seriously in joining TPP. Even though Japan has world’s third largest economy, the current shape of their economy is not so good. They need all possible support from all corners now to bring the economic growth back in the right track. Conclusions Japan and China are prominent economies not only in Asia, but also in the world. Japan’s economy was the third largest in the world earlier. Even though, Chinese economic growth is phenomenal at present, same thing cannot be said about Japan’s economy. The recent natural disasters like earthquake and tsunami struck Japan badly and as a result of that Japanese economy is facing stiff challenges now. On the other hand, the economic reformations implemented in 1980’s and 90 have helped China to put a strong platform for tis economic growth. China is marching towards prosperity and many people believe that they will become the strongest economy in the near future itself. Global wealth is shifting from American and European region to Asian region at present which mean America and other European countries cannot survive long without seeking the assistance of Asian countries. TPP is a free trade agreement reached between countries in the Asian and Pacific region to actively participate in global trade. China already showed its readiness to join TPP whereas Japan has still some concerns in joining TPP. Both Japan and China can increase their economic growth prospects further, if they join TPP without a time delay. References 1. Capling A. (2009). The Trans-Pacific Partnership. Retrieved from http://www.eastasiaforum.org/2009/11/23/the-trans-pacific-partnership/ 2. China warms to transpacific trade talks, (2010). Retrieved from http://www.yomiuri.co.jp/dy/national/T101027005526.htm 3. Drysdale P. (2010). Is the Trans-Pacific Partnership idea a dead end? Retrieved from http://www.eastasiaforum.org/2010/11/15/is-the-trans-pacific-partnership-idea-a-dead-end/ 4. East Asia’s economic development and Japan’s ODA, (n. d). Retrieved from http://www.mofa.go.jp/policy/oda/cooperation/anniv50/pamphlet/accomplishment2.html 5. Keidel A. (2008). China’s Economic Rise—Fact and Fiction. Retrieved from http://carnegieendowment.org/publications/index.cfm?fa=view&id=20279&prog=zch> 6. Lau L.J. Ph. D (2003). The Impact of Economic Development of East Asia, Including China on Japan. Retrieved from http://www.stanford.edu/~ljlau/Presentations/Presentations/030530.pdf 7. Mai YH., Adams P., Dixon P., and Menon J. (2010) The Awakening Chinese Economy: Macro and Terms of Trade Impacts on 10 Major Asia-Pacific Countries”. 2010. Asian Development Bank. Retrieved from http://www.adb.org/documents/Papers/Regional-Economic-Integration/WP66-Mai-The-Awakening-Chinese-Economy.pdf 8. Madisson A & Wu HX (n. d). China’s Economic Performance: How Fast Has GDP Grown; How Big Is It Compared With The USA? Retrieved from http://www.ggdc.net/maddison/articles/China_Maddison_Wu_22_Feb_07.pdf 9. The difference between China and Japan. (2007). Retrieved from http://www.spectator.co.uk/clivedavis/373526/the-difference-between-china-and-japan.thtml Read More