The Two Leading Economies in Asia - Essay Example

The two countries differ so much when it comes to economic systems, a price system, an employment system, and public finance. After WWII, Japan’s economic growth had been rapid, having been successful among the market capitalist economies in the world, whereas, China’s economic system consists mainly of the Chinese Communist Party (CCP), which influences overall levels of economic and political activities are apparent. Japan imports fuel and energy resources, and in their thrust to excel in the steel industry, on the process, their environment had become extremely polluted.

China’s industry also includes steel, but they are equally strong when it comes to agriculture which is fully controlled by the government, to undertake the feeding of the large population of China. Prices of commodities in Japan are being determined by the demands of consumers as prescribed under the consumer sovereignty law in Japan’s market system. However, in the case of China, consumer demands do not establish the pricing system, but the government of China first takes into consideration the costs of productivity, potential profits, and taxes.

The labor system of Japan exists on relatively uniform wages, which had proven to be effective for them because it brought about higher rates of labor productivity. In the meantime, China maintains the “eight-wage” classification system, in which the workers’ wages are dependent on their skill level, class one being the lowest (Chan, 2002). The market forces are overridden by government action in determining wages. Income distribution caused a wider degree of disparities than the Japanese system, in effect, Chinese people find many basic goods to be beyond their spending capacity and the living standards in China are perceived to be lower compared to Japan.

The two countries show significant differences when it comes to public finance, which is one of the most crucial elements in determining the long-term success of an economic system, that gauges the minimum standards of living of the general population (Chan, 2002). The two features that encompass public finance are budget and expenditures, and the structure of taxes. Clearly, Japan applies the decentralized manner of budget allocation, while China is more comfortable with the centralized way of consolidating both national and local budgets, which is naturally larger than Japan, considering the population of China.

The structure of taxes in China vis-à-vis that of Japan’s supports the dominance of indirect taxes from enterprises because the collection is more efficient and maybe easily administered to finance economic development, while the preference of Japan leans towards direct taxation, particularly the personal and corporate income taxes, inasmuch as most of the labor force is involved in private enterprises.Japan’s economy had started to be debt-ridden, while China’s rise to economic power is deep-rooted, without getting hurt by the steady influx of recession and financial crisis all over the world.

The time will come that China will triumph over Japan as China will challenge the very core of Japan’s economy, which is the high-end manufacturing. Japan is second to the USA in the world economy, and China is only third, but one day soon, Japan will be overtaken by China.