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Chapter11TheAsiaPacificRegion©McGraw-HillEducation.Allrightsreserved.Authorizedonlyforinstructoruseintheclassroom.
NoreproductionorfurtherdistributionpermittedwithoutthepriorwrittenconsentofMcGraw-HillEducation.LearningObjectives11-1 Thedynamicgrowthintheregion11-2 TheimportanceandslowgrowthofJapan11-3 Theimportanceofthebottom-of-the-pyramidmarkets11-4 Thediversityacrosstheregion11-5 Theinterrelationshipsamongcountriesintheregion11-6 ThediversitywithinChinaDynamicGrowthintheAsiaPacificRegion1of141996financialcrisisinleadingAsianeconomiesTightmonetarypolicy,appreciatingdollar,decelerationofexportsallcontributedtodownturnDespitecrash,AsiafastestgrowingregioninworldGrowthfastestforlastthreedecadesProspectsforcontinuedgrowthareexcellentSourceofnewproducts,technology,vastconsumermarketsDynamicGrowthintheAsiaPacificRegion2of14TheGreaterChinaReferstotwoseparatepoliticalunitsthatdividedin1949People’sRepublicofChina(PRC)TaiwanorRepublicofChina(ROC)BothclaimedtheotherasitsterritoryPoliticallydifficultandmilitarilydangerousdisputepersistsMoredirecttradebetweentwoin21stcenturyHelpseasethehistoricaltensionofEastAsiaDynamicGrowthintheAsiaPacificRegion3of14ThePeople’sRepublicofChina(PRC)MostimportantnationalmarketasidefromU.S.DramaticeconomicandsocialchangesinChinaEventsin2000hadprofoundeffectonChina’seconomyAdmissiontotheWorldTradeOrganizationU.S.grantingpermanentnormaltraderelationstoChina(PNTR)Bestthoughtofasgroupofregions,notsinglecountryChina’sdiversity,size,andpoliticalorganizationmakesthisnecessaryDynamicGrowthintheAsiaPacificRegion4of14ThePeople’sRepublicofChina(PRC)continuedChinafastemergingascompetitoringlobalmarketsMustovercomeissuestoreachfullpotentialHumanrightsandlegalsystemmajorissuesinChinaEnvironmentaldeclineassociatedwithfastgrowthDemographicdisasterassociatedwithone-childpolicyDiscriminationagainstthosemovingfromruraltourbanareasForeignDominanceofAutoIndustryinChinaChinahasbeenpressingbureaucratstobuylocallybrandedcars.ThemarketshareofChinesebrandshasplummetedthiscenturyfrommorethan65percentin2000tojust45percent.Europeanbrandsgarnerabout20percentofthemarket,Japanese15percent,American11percent,andKorean8percent.Volkswagen(includingitsAudiluxurysedans,picturedhereparkedoutsidetheNationalPeoplesCongress)dominatestheotherforeigncarmakers,followedbyHyundaiandToyota.AlmostalltheforeigncompaniesaredeeplyinvolvedinjointventureswithChinesepartners.©StephenShaver/UPI/NewscomDynamicGrowthintheAsiaPacificRegion5of14HongKongRuledbyBritishfor155years;revertedtoChinain1997Becamespecialadministrativeregion(SAR)ofPRC“Onecountry,twosystems”HongKongeconomystrongFreelyconvertibledollar,foreignexchange,securitiesmarketsStockmarketprimarysourceofcapitalforsomeofChina’slargeststate-ownedenterprisesDynamicGrowthintheAsiaPacificRegion6of14Taiwan,theRepublicofChina(ROC)Mainland-TaiwaneseeconomicrelationsimprovingBothhaveenteredtheWorldTradeOrganizationManyrestrictionsended;directtradeimplementedThreedirectlinks:transportation,tradeandcommunicationsTradebenefitsbothcountriesRisingcostsinTaiwan;ChinaofferscheaplaborandengineeringTaiwan’stechpowerhousesalsoseekaccesstoChina’smarketDynamicGrowthintheAsiaPacificRegion7of14JapanFastgrowthin70sand80sEconomyslowedabruptlyinthe1990sFourpossibleexplanationsFaultyeconomicpoliciesIneptpoliticalapparatusDisadvantagesduetoglobalcircumstancesCulturalinhibitionsDynamicGrowthintheAsiaPacificRegion8of14JapancontinuedFaultyeconomicpoliciesStockmarketcrashin1990slastedwholedecadeSomethinknationbecameoverconfident,riskywithfinancesThepoliticalexplanation“One-partysickness”GovernmentcontrolledbybureaucracyDynamicGrowthintheAsiaPacificRegion9of14JapancontinuedGlobalcircumstanceshavehurtDeclineinconsumerpurchasingpower2011earthquakeandtsunamihadlong-lastingeconomicimpactsIncreaseddemandforoilimports,resultingfromdestructionofenergyinfrastructure,hascausedtrade-deficitPopulationisshrinkingComplexlanguageDynamicGrowthintheAsiaPacificRegion10of14JapancontinuedTheculturalexplanationUnifiedeffortafterWorldWarIIfornationalrecoveryAfterachieved,thenationnolongerhadacommongoalCulturalvalueofstructure;notadaptingtoglobalizedcompetitionDynamicGrowthintheAsiaPacificRegion11of14IndiaGainedindependencein1950;hadpooreconomicgrowthGrowthconstrainedbytraditionalinsularpoliciesImportsubstitutionsandanaversiontofreemarketsAnti-businessattitudesandwidespreadcorruptionNowIndiahasembarkedonprofoundtransformationManyeffortstobecomeactiveinglobaleconomyInformationtechnologyboomManyIndiancompaniesexpandingoperationsabroadDynamicGrowthintheAsiaPacificRegion12of14IndiacontinuedFive-pointagendaImprovingtheinvestmentclimateDevelopingacomprehensiveWTOstrategyReformingagriculture,foodprocessing,andsmall-scaleindustryEliminatingredtapeInstitutingbettercorporategovernanceDifficultbusinessenvironmentHightariffsInadequateprotectionofintellectualpropertyAnti-businessattitudesWidespreadcorruptionandbriberyProtectionismofIndianIndustryDespiteworld-classscientists,theIndianpharmaceuticalindustry(withitsownershiprestrictions,pricecontrols,andweakintellectualpropertyrestrictions)doesnotbenefitfrominnovationsandinternationalinvestmentscomparedwithmoreopenemergingeconomiessuchasChina.©rkl_foto/ShutterstockDynamicGrowthintheAsiaPacificRegion13of14TheFour“AsianTigers”HongKong,SouthKorea,Singapore,andTaiwanFastestgrowingeconomiesinregionduring1980sand1990sOftendescribedasthe“EastAsianmiracle”FirstcountriestomovefromdevelopingtoindustrializedstatusMajorinfluenceintradeandeconomiesofworldExpandingactivitytootherpartsofAsiainparticularDynamicGrowthintheAsiaPacificRegion14of14VietnamEconomyandinfrastructurewasinshamblesafterWarCountryispoisedforsignificantgrowthBilateraltradeagreementwithU.S.ledtoNTRstatusU.S.tariffsonVietnameseimportsdroppedsignificantlyPopulationof91millioniseducatedandhighlymotivatedGovernmentiscommittedtoeconomicgrowthDeliveryinVietnamVietnamhasveryfewcars;motorbikesdeliveralmosteverything,includingmooncakes,inHanoi.©HoangDinhNam/AFP/GettyImagesBottom-of-the-PyramidMarkets(BOPMs)
C.K.PrahaladintroducedconceptofBOPMs4billionpeoplewithannualincomebelow$1,200HistoricallyignoredconsumergroupPerceivedlackofresources(bothmoneyandtechnology)MisconceptionaboutinappropriatenessofproductsandservicestypicallydevelopedforaffluentconsumersMarketsnowviewedascommerciallyviableIndustriescanevolvewithexternalsupportundercertainconditionsInfrastructureinIndiaSeeingtheroughweaveoftrafficonthestreetsofoldDelhi,India,youlikelycanunderstandtheneedfortheelevatedexpressways.TheintroductionofTataMotor’snew$2,500car,theNano,willonlymakecongestionworse.Thecountryjustraisedthenationalspeedlimitfrom80kphto100kph,spurredbyaroadsrevolution,thecenterpieceofwhichisthe3,650-milegoldenQuadrilateralhighwaylinkingDelhi,Mumbai(Bombay),Chennai(Madras),andKolkata(Calcutta),themostexpensivepublicworksprojectinthenation’shistory.However,wewonder:Howwillthetrafficpolicekeeptheubiquitoussacredcowsoffexpresswayon-ramps?(left):©Thirteen/Shutterstock;(right):©AmitBhargava/BloombergNews/GettyImagesAsiaPacificTradeAssociations1of5PreparationfornexteconomicleapCountriesoncedependentonU.S.andEuropeanmarketsGrowthdrivenbytrade,investment,technology,andaidedbyothersinregionTradeagreementsASEANASEAN+3APECAsiaPacificTradeAssociations2of5AssociationofSoutheastAsianNations(ASEAN)HadproblemsunifyingeconomiesofmembernationsAllmembersoncehadsimilarproductsandresourcestoexportIntra-ASEANtradehampered;nodemandforcommonproductsMostearlygrowthcamefromtradeoutsideofASEANMembersnowhavefastestgrowingeconomiesinregionAsiaPacificTradeAssociations3of5AssociationofSoutheastAsianNations(ASEAN)continuedFourcausesofvigorouseconomicgrowthformembersGovernments’commitmenttoderegulation,liberalization,andprivatizationoftheireconomiesDecisiontoshifteconomiesfromcommoditybasedtomanufacturingbasedDecisiontospecializeinmanufacturingcomponentsinwhichtheyhaveacomparativeadvantage(whichcreatedmorediversityintheirindustrialoutputandincreasedopportunitiesfortrade)Japan’semergenceasamajorprovideroftechnologyandcapitalnecessarytoupgrademanufacturingcapabilityanddevelopnewindustriesAsiaPacificTradeAssociations4of5ASEAN+3CreatedafterAsianfinancialcrisisof1997to1998EastAsiafeltletdownwhentheWestdidnothelpduringcrisisWantedtobecomemoreself-sufficientASEANmembersplusChina,Japan,andSouthKoreaForeignandfinanceministersfromeachcountryMeetafterannualASEANmeetingGoaltoprotectAsiancurrencyfromfutureattackTalksofcreatingcommonmarketacrossallofAsiaAsiaPacificTradeAssociations5of5Asia-PacificEconomicCooperation(APEC)Formedin1989IncludesallmajoreconomiesaroundthePacificRimplustheU.S.andCanadaProvidesformalstructurefordiscussionofgoalsFreeandopentradeandincreasedeconomiccollaborationSustainregionalgrowthanddevelopmentStrengthenmultilateraltradingsystemReducebarrierstoinvestmentandtradewithoutdetrimenttoothereconomiesAFocusonDiversityWithinChina1of8Mutuallycompetitive,complementaryeconomic“warringstates”inChinaAmongthemarefouruniqueregionaleconomiesNortheastChina:industrialheartlandBeijing-TianjinITcorridorShanghaiandtheYangtzeRiverDeltaPearlRiverDeltaRegion-basedstrategicchoicesimpactsubsidiaryperformanceinChinaExhibit11.7AMapofGreaterChinaAFocusonDiversityWithinChina2of8NortheastChina:LongtimeIndustrialHeartlandIncludesLiaoning,Jilin,HeilongjiangIndustrialandtechnicalcenterofcountryin1970sand1980sNownotasdominant;greatindustrialgrowthinotherregionsCausedbyChineseshiftfromcommunismtowardmorefree-enterpriseorientationProximitytoindustrialneighborsaregionaladvantageGoodsandideasflowfromJapan,SouthKorea,andRussiaAFocusonDiversityWithinChina3of8Beijing-TianjinRegionof35millionpeopleHoststhousandsofITandhigh-techcompaniesHighqualityofhighereducationCentralplanninghasmadeitacenteroftwothingsPoliticsResearchanddevelopmentAFocusonDiversityWithinChina4of8ShanghaiandtheYangtzeRiverDeltaMajorindustrialrenaissanceoverpasttwodecadesDeclineintextileandheavymanufacturingindustriesIncreaseinautomobileandotherhigh-techindustriesShanghaiisaregionaltradeandfinancialcenterAidedbyChina’seconomicgrowthandaccessiontotheWTOYangtzeRiverDeltaprovidesbroadbaseofindustriesandeconomicresourcesAFocusonDiversityWithinChina5of8PearlRiverDeltaIncludesverylargecities,includingHongKongShenzhenleadstheeconomyofregionAboomtownborderingHongKongChina’sfirstSpecialEconomicZone,1980Populationgrewfrom300,000to7millionAmanufacturi
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