Business and Political Trends in Japan and China - Research Paper Example

Business and Political Trends in Japan and China Japan is considered to be among the greatest economic miracles of the twentieth century and this is mainly because of the fact that despite its defeat in the Second World War, it was able, within a few decades to recover both politically and economically into the developed country it is today. It has been speculated over the years that it is the close relationship between Japan and the United States which enabled it to recover so quickly and that if it had been left to its own devices, its post-war recovery would most likely have taken much longer. One of the biggest hurdles that Japan has had to face over the past few years is the fact that despite its large population, a huge proportion of it is aging. The matter of aging in Japan has become one of grave concern mainly because it has raised the possibility that the productive population is declining while those who are in need of care is increasing. The long term economic situation based on this scenario is not promising and this is mainly because there is likely to be an increasing burden on the government to cater for the aging population while the younger generation, which is supposed to provide the resources to do so, mainly through taxes, is declining (Park, 2010). This is a situation which the Japanese government has to factor in whenever it is making any plans for the future as it is most likely that it will become a reality within only a few decades. The aging of the productive population might also lead to the slowing down of the Japanese economy through the reduction in the number of innovative ideas as well as technology which has been behind the economic growth. The aging of the population also means that there will also be a reduction in the domestic market for its products, a factor which has often been at the core of the Japanese economy mainly because of its large population. Thus, the increasing numbers of individuals in the country who are aging and the death rates that normally accompany the process means that there will be a significant reduction in the domestic market which means that Japan will over the next few years have to secure more markets in the international arena. However, in order to do so, it will have to face fierce competition from such emerging economies such as India and China, which are already rivaling it economically on the international scene. Among the biggest complaints that Japan’s trading partners have made over the years is that its domestic market is not as competitive as it should be. This assertion has been found to be true especially when one considers that the Japanese government is partly responsible for this lack of competition within its market. The Japanese government has adopted such hindering policies as the imposition of high tariffs as well as heavy regulations which have ensured that it is extremely difficult for other countries to conduct business within Japan (Mito & Sakurada, 2003). In addition, the extremely concentrated nature of the Japanese market has led to a situation where it is very difficult for companies from other countries to place their products within it which can effectively compete with domestic products; a factor which is essentially discouraging for foreign investors. It is mainly because of the abovementioned situations that it has become necessary for the Japanese government to put in place those policies which not only encourage the deregulation of its markets but also works towards the development of stronger antitrust laws that aid all the businesses that operate within its economy. While it has been argued that the Japanese market is concentrated, this situation has come to be alleviated over the years as it has been reported that when compared to the market of the United States, the Japanese market has become less concentrated while that of the latter has essentially remained the same. The Japanese government has also contended that despite the common assumption that its market is not competitive, the level of competition has to be analyzed through such factors as entry barriers as well as the profit margins of those companies that conduct business in Japan in order to get a clearer picture of the realities of its markets (Tamaki, 2009). The ability of Japan to deal with the large competition, both at a domestic and international level that has become a part of the global economy, is what has come to distinguish it from other large economies. One of the reasons for Japan’s economic stagnation is based on the fact that there has been an excessive saving practice within the general population as well as the government which has reduced spending. This has created a situation, over the last two decades, where the demand for goods and services within Japan has slumped and has resulted in the slowing down of economic growth, reducing its recovery. In addition, among the biggest supporters of the dominant Liberal Democratic Party are interest groups which represent inefficient sectors of the economy and these have worked towards further undermining the economy because of their protected status. Because of its need to remain in power, LDP has failed to implement those policies which are good for the economy such as dealing with such issues as non-performing loans. Moreover, the political economy of Japan can be said to be one of the biggest impediments of it economic growth and this can be seen through the relationship between regulatory bodies of the financial system and that of the banks and insurance companies. The symbiotic relationship between them has created a situation where it has become difficult for the activities of banks to be regulated and this has proven to be bad for the Japanese economy. It is mainly because of this factor that when a crisis arises, such as the recent financial crisis, these companies tend to take massive losses as a result and this risks their very existence (Cargill, Hutchison & Ito, 1996). An example of such a scenario is the massive hit that Toyota in Japan took during the recent financial crisis which led to numerous losses of jobs as well as the loss of confidence in the company. The ability of Japanese corporations to regulate themselves so that they can be able to weather any form of economic crisis has been brought to question after what happened to Toyota. However, these speculations have been brought to rest through the continued resilience of these companies despite the intense competition that they continue to face in the international markets. The various financial crises that Japan has had to face in the past few decades and the ability of its corporations to recover from them swiftly have ensured that they remain among the most stable in the world (Song, 2010). While this has been the case, it has become imperative for these companies to ensure that they adopt good corporate governance strategies so that they can be able not only to remain competitive, but also to maintain a level of stability which will help in the further economic growth of Japan. Abenomics is a government policy which was put in place by Japanese premier Shinzo Abe as a means of ensuring that the country came out of the economic stagnation that has been taking place for the last two decades. It is a combination of increasing government spending, devaluing the currency by about 2% every year and a growth strategy which is designed to give a much needed jolt to the Japanese economy. Among the most fundamental effects of these policies was that there was an increase in the activity of the financial markets in the country as well as a decrease in the percentage of those individuals who were unemployed. In addition, within a year, the stock market had risen and the economic growth rate had risen significantly to 3.7% in the first quarter of 2013. The economic development of China is one of the most fascinating developments of the past few decades and this is mainly because of the fact that it happened after a period of social upheaval. These upheavals took place as a result of the Cultural Revolution and they can be considered to have been extremely disruptive for the Chinese economy which was at the time among the most vulnerable of the developing world. While this was the case, however, the coming to power of President Deng Xiaoping changed all that because he led the transition of China from being a purely socialist state to one which embraced the free market economy while maintaining the ideals of socialism. From this time onwards, the economic growth of China took unprecedented steps as it not only became one of the most competitive exporters in the world, but it also became one of the largest markets for imported goods. China can be considered to be one of the most competitive markets in the world and this is mainly because it has been able to create a balance between its ability to export and import products. In addition, it has allowed large scale foreign investment which has also encouraged its continued economic growth while at the same time allowing it to become an essential part of the global economy (Howe, 2009). China has also ensured that its labor costs remain relatively low and this has encouraged many corporations, especially from Europe and North America, to move their production plants to this country as a means of saving costs (Solinger, 2002). Because of the Chinese ability to be innovative, it has been able to develop those products which are in high demand on the global market and this has ensured that not only is it able to make massive exports, but it is also capable of dealing with massive competition from the more developed economies in the world. The Chinese economy has been largely supported by the easy access that foreign investors have to its market and this has ensured that there is the swift flow of capital into the country. It is mainly because of this that China has been able to establish itself into the second largest economy in the world and has developed its own niche in the global economy. The fact that China is one of the most advanced economies in the world is because of its concentration on the diversification so that it not only concentrates on the development of goods for export but also for domestic consumption. With the largest population in the world, China also has one of the biggest domestic markets and its government has exploited this situation to ensure its economic growth. The Chinese government has come to adopt policies which encourages the development of greater earning power for those people in the rural areas, who form the majority of the population, so that they can be able to purchase more locally produced products rather than relying on subsistence farming. It is because of the implementation of these policies that China is currently one of the countries which have the largest middle class growth in the world and this is also attributed to its massive economic growth. The growing middle class of this country has also increased its non-governmental purchasing power in the global market as it has not only ensured that there is a balance between its exports and imports, but it has also helped it to develop strong business relationships with other countries in the globe (Gabriel, 2007). It is as a result of the incredible economic development of this country that it currently has one of the fastest growing numbers of billionaires in the world, and this is a testament to its increasing wealth and economic connections. One of the drivers of the economic growth of China has been the state’s tight control over the economy which has ensured that it formulates all the economic policies which are beneficial to the country. The fact that the growth of the Chinese economy is highly state-controlled, has been widely criticized by western governments, such as the United States, which believe that it gives the Chinese an unfair advantage over their competitors in the global economy. However, the state control over the economy can be said to be the main reason for the continued growth that it has experienced over the last four decades and it is most likely that this control will continue to be a dominant factor in the Chinese economy in the coming years (Ding, Dai & Zhao, 2008). Despite the massive criticism that it has received, the state control over the economy has ensured its stability and has enabled the country to weather many of the economic crises which have come its way while western economies have been terribly weakened by the same. In addition, state control over the economy has ensured that the Chinese government has the funds which it can spend towards the further development of its economy as well as to fund the necessary national schemes to encourage the growth in the wealth of its people (Masud & Faisal, 2013). However, it has been found that one of the detriments of state control over the Chinese economy has been the development of massive corruption among the elite who have taken advantage of the success of the economy and their control over the institutions of the state to ensure that they enrich themselves. This massive corruption in government institutions by the members of the ruling Communist Party has been quite detrimental to the further economic development of China. This is mainly because the money which would have been used in the development and improvement of the lives of millions of Chinese has ended up in the hands of a few powerful individuals among the elite. This has created a situation where it has become difficult for these individuals to implement those policies which would cease to benefit them but would benefit the economy as a whole. It is believed that without the much needed economic reforms which have to be spearheaded by the elite, it is most likely that the Chinese economy would cease growing and would instead end up being stagnant. As has been seen above, one of the biggest hurdles that Japan has had to face over the past few years is the fact that despite its large population, a huge proportion of it is aging. In addition, it has been found that among the biggest complaints that Japan’s trading partners have made over the years is that its domestic market is not as competitive as it should be. Moreover, it has been found that among the factors which are likely to slow down the economic growth of Japan is that of poor corporate governance. Furthermore, the economic development of China is one of the most fascinating developments of the past few decades and this is mainly because of the fact that it happened after a period of social upheaval. It has been seen that the Chinese economy has been largely supported by the easy access that foreign investors have to its market and this has ensured that there is the swift flow of capital into the country. One of the drivers of the economic growth of China has been the state’s tight control over the economy which has ensured that it formulates all the economic policies which are beneficial to the country. Finally, one would state that despite the political problems that both China and Japan face on a daily basis, their economies are still doing well and this has been because of their innovative practices as well as the large scale exports of their products. References Cargill, T. F., Hutchison, M. M., & Ito, T. (1996). Deposit guarantees and the burst of the Japanese bubble economy. Contemporary Economic Policy, 14(3), 41. Ding, D., Dai, D., & Zhao, M. (2008). Development of a low-carbon economy in China. International Journal of Sustainable Development and World Ecology, 15(4), 331-336. Gabriel, S. J. (2007). Reform and the non-state economy in China: The political economy of liberalization strategies. Choice, 44(9), 1578. Howe, C. B. (2009). The Chinese economy and "China economists" as seen through the pages of the China quarterly. The China Quarterly, 200, 923-927. Masud, M. M. H., & Faisal, M. (2013). Politics of economy: The case of China's involvement in Africa. Journal of Educational and Social Research, 3(1), 163-168. Mito, T., & Sakurada, D. (2003). State power and multinational oil corporations: The political economy of market intervention in Canada and Japan. International Journal, 58(2), 219-220. Park, G. (2010). The politics of budgeting in Japan: How much do institutions matter? Asian Survey, 50(5), 965-989. Song, J. (2010). Japan's labor market reform after the collapse of the bubble economy: Political determinants of regulatory changes. Asian Survey, 50(6), 1011-1031. Solinger, D. J. (2002). China's workers under assault: The exploitation of labor in a globalizing economy. The Journal of Asian Studies, 61(1), 209-211. Tamaki, E. (2009). The political economy of reproduction in Japan. Journal of East Asian Studies, 9(2), 331-333. Read More