The state of Indiana is located in the Midwest USA. It has port access to Lake

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1 3 Background 3.1 Indiana The state of Indiana is located in the Midwest USA. It has port access to Lake Michigan in the northwest corner of the state, and the Ohio River along the southern boundary of the state. The capital of the State is Indianapolis, and the state s economy is largely driven by the twin engines of the Indianapolis metropolitan area and industrial and manufacturing areas in proximity to Chicago and Lake Michigan described affectionately by Hoosiers as the region. The state has considerable agricultural output, excellent roadways, strong manufacturing and biotech, as well as 3 major universities. 33 For these reasons, Indiana is a potentially attractive trade partner and FDI destination for some firms. Most of the state s population lives in small towns, and like the rest of America, the economy is dominated by Small to Medium sized Enterprises (SME). Despite some highly-ranked major universities, Indiana s K-12 education ranks among the worst in the USA. 34 Although Indiana suffers from poor primary/secondary education rankings, it has excellent secondary education and a well trained workforce; the percentage of Indiana s population employed in the high-tech sectors is above 11%, 35 and is consistently one of the highest ranked in the US for this statistic. The IEDC has made a great effort to create incentive programs and tax breaks to entice businesses to relocate to Indiana, and they have had some successes. 33 IEDC (2007) 34 Untied States Department of Education Statistics ( ) 35 United States Department of Labor Statistics (2006)

2 3.2 Greater China The Greater China area or the Chinese Cultural Sphere consists of China, Hong Kong, Taiwan, and Singapore. (See Exhibit 4: Map 1: Greater China) 36 Singapore, farthest from China itself, is clearly its own economy and market by geography alone. Taiwan and Hong Kong, for political and historical reasons, are also easily identified as separate markets; this is more or less conventional wisdom. However, Mainland China is often mistakenly assumed to be a single market. Marketing campaigns and business ventures do well to identify and recognize the various factors and ways which unify and splinter Greater China. Three of the four original Asian Tigers, 37 Taiwan, Hong Kong, and Singapore are considerably wealthier than China, and the residents generally enjoy a better standard of living, higher salaries, better educations, and more opportunities than their counterparts in China. They also have more opportunities to deal with non-chinese, so may have a wider perspective, more foreign language skills, and more cosmopolitan viewpoint than many residents of China. The early successes of Taiwan, Hong Kong, and Singapore are attributable in no small part to the hyper entrepreneurial close-knit Chinese business community. Shared linguistic and cultural customs are a part of this Chinese business community, but Chinese families and extended family networks are a vital part of the community. Since the 1980s Chinese business networks have rapidly re-established themselves in China, and are now an important part of doing business Greater China China 36 Macau is often included in this list. Since most of Macau s macro-economic indicators compared to the rest of Greater China are on a smaller order of magnitude, so Macau is not considered a separate economy for the purposes of this paper. 37 The four original Asian Tigers are Hong Kong, Singapore, Taiwan, and South Korea.

3 Although in some ways the authoritarian government administration of China seems to have changed very little in the past several centuries, the lives of Chinese people have changed dramatically; considered a Newly Industrialized Country (NIC), in the 1980s China opened its doors to the world, and now its people often enjoy many of the benefits of the modern global community. In most places across the country, educational standards and personal incomes are going up, and exposure to domestic and international media are shaping the hopes and dreams of Chinese people in a way which their revered ancestors could scarcely have imagined. One of China s strongest unifying characteristics is its written language. With a national literacy rate of about 90 percent, 38 printed materials have the most widespread utility for mass communication in China. Indeed, Chinese script is nearly universally comprehensible throughout Greater China. 39 The various parts of Greater China may all share a writing system, but in most all of Greater China the shared spoken tongue of Mandarin, although ubiquitous, is often neither the preferred nor the most common language of communication. Spoken regional dialects abound, and are not necessarily mutually comprehensible. Despite many important similarities throughout the country, China (PRC) itself consists of various distinct geographic, linguistic, economic, and cultural regions. Furthermore, these areas may be demarcated differently depending on which distinctive characteristic is used to segment China, and may or may not conform to provincial borders on the political map. For example, both Taiwanese and Fujian province television stations broadcast Minnan dialect (also known as Taiwanese or 38 Literacy rates according to United Nations Development Program s Human Development Report 2007/ The Chinese writing system actually has a schism; Simplified Chinese is used in China, and sometimes in Hong Kong, while Traditional Chinese script is used in Taiwan, Singapore, most overseas Chinese communities, and sometimes Hong Kong. Although they are most generally mutually intelligible, the convention is a matter of some emotional importance to some Chinese.

4 Hoklo) programming, but despite the linguistic similarity, Taiwan and Fujian are separate and distinctive economic regions with different tastes in television programming and consumer habits, not to mention localized broadcasting industries. China s economic miracle of 1990-present has left huge swaths of inner China largely untouched, but particularly in the south, east, and southeast urban populations have enjoyed rising personal incomes, rapid economic development, and the construction of modern infrastructure. Although outside the metropolitan areas and special economic development zones the enjoyment of these benefits is patchy at best, the country nonetheless supports an unprecedented rising middle-class, and new crops of millionaires. Despite increasingly strict labor and tax laws, sluggish corporate governance reform, possible bubbles in the stock and real-estate markets, unprecedented civil unrest, widespread corruption, and the dire predictions that China s ruling government s inflexibility will cause major domestic and international turbulence, 40 despite all of this, China s economy is expected to maintain strong double-digit growth for the foreseeable future, and international businesses from everywhere seem to be moving to or investing in China Taiwan Taiwan, another one of the original Asian tigers, has a more open political and economic atmosphere than China, not to mention a vigorous democratic government. Taiwan s economy is deeply intertwined with that of the rest of Greater China, as Taiwanese business people go through Hong Kong and Singapore to start or move 40 In Gifford s (2007) excellent report and commentary there are many good examples of the doubts and fears raised by Westerners in connection with China s future, while maintaining a balanced discussion on the issue. 41 Fishman (2006) and Friedman (2007) cover this topic in great detail with many examples.

5 operations to China or other nearby countries to take advantage of low labor costs in developing countries. Taiwan enjoyed decades of strong growth through low cost manufacturing during the s, and those successful years transformed the country and its people. Recently many of the low grade manufacturing facilities have been moved to China, where their Taiwanese owners set up shop selling low quality non-durable consumer goods to the domestic market in China. Despite Taiwan s many strengths, it also suffers from uncertain international status, lagging trade/finance reform, and has been deadlocked in domestic political battle since the millennium. 42 As of 2008 Taiwan s political deadlock is expected to be resolved, as the KMT party is voted into control of the congressional and executive branches of the government Hong Kong Hong Kong has transitioned successfully from manufacturing to become a financial center for Asia, and it is a high tech city strategically positioned for excellent growth as its economy becomes increasingly intertwined with that of China. 43 Hong Kong often functions as a sort of offshore tax-shelter location to start businesses for East Asian businesspeople trying to escape trade restrictions, tax regimes, and economic regulations of their own countries. It also serves as a hub for many multinational enterprises doing business in East Asia, and as a conduit for goods entering and leaving China. Hong Kong is moving away from a language environment of Cantonese and English to an environment of Cantonese, Mandarin, and English, making it even friendlier to people from all of Greater China. Hong Kong has very good transportation links itself, and enjoys a great benefit from the 42 AmCham s(2006) Taiwan White Paper points out many of the current strengths and weaknesses. 43 Hong Kong is a Special Administrative Region (SAR) of China; it was returned to Chinese authority in 1997.

6 lack of cross-straits Taiwan-China transportation links; most cross-straits finance, trade, and travel links are rerouted through Hong Kong, that s the reason so many of Hong Kong s investment and trade statistics seem very different from the rest of Greater China Singapore The smallest country in the Asia Pacific is the city-state of Singapore. Although Singapore is very crowded, its 4.6 million citizens enjoy a very high standard of living in the high-tech metropolis. Singapore not only capitalizes on much of the trade of South East Asia as a shipping hub and free-port special customs area but it also has well developed electronics manufacturing, petrochemicals, tourism and financial services industries. As regional manufacturing competition increases intensity, Singapore is concentrating on greater development of its tourism and financial services industries. With the best corporate governance policies in all of East Asia, Singapore is also an excellent capital market for regional and global corporations, all the more so for it s weathering of the 1997 Asian financial crisis and the 2003 SARS epidemic Cross-Straits relations No discussion of Greater China can ignore the political tension between the People s Republic of China (China) and the Republic of China (Taiwan), not only because it is the largest risk of instability in Asia Pacific, but also because it causes distortions in the social, diplomatic, and business sectors of both countries. There are background historical circumstances that lead to the modern standoff, but for all practical purposes the source of the conflict arises from Beijing s intransigence; the government has played the Taiwan issue to consolidate domestic nationalist sentiment for so long, that it now risks its credibility if it appears to be

7 soft in any way on the Taiwan issue. There is a risk of open military confrontation between the two, but Taiwan has not been a credible military threat to China in the past 50 years; the only real risk is that China will attack Taiwan. To this end, China continues its military buildup in the East, and regularly publicly reiterates its right to attack Taiwan, which it claims as a breakaway province. In May 2008 President Ma Yingjiu was elected in Taiwan. This appears to be the start of détente between the two countries, after more than 50 years of mutual political disagreement. 44 If China and Taiwan can establish official relations and open transport and logistical links across the Taiwan Strait, both sides will benefit; it looks like a win-win proposition, but it s a win-win-lose proposition. Hong Kong is currently one of the most heavily trafficked airports in the world in no small part because all passengers crossing the strait have to stop at a third location, usually Hong Kong, and change planes. Likewise, freight and shipping must go through a third port before they can go across the Taiwan Strait. If goods and people can move freely back and forth from Taiwan to China and vice-versa, Hong Kong will lose its piece of that action. Despite the risk to Hong Kong, improved relations across the Taiwan Strait benefit not only the economy of Greater China, the Asia Pacific, and the world, but also improve international security and cooperation. 44 BBC(2008) is reporting on this topic, among many others.