East Asian Giants: Changing Markets of China and Japan Kristin Vekasi University of Maine kristin.vekasi@maine.edu
The World s Three Largest Economies GNI in millions of USD 0 200000 400000 600000 800000 1000000 1200000 Actual Size of Economy Projected Size of Economy Time
Prediction about the World s Three Largest Economies (circa 1988) GNI in millions of USD 0 200000 400000 600000 800000 1000000 1200000 United States Japan Germany 1960 1970 1980 1990 2000 2010
The World s Four Largest Economies GNI in millions of USD 0 500000 1000000 1500000 United States Japan Germany China 1960 1970 1980 1990 2000 2010
China s economy strong, US modest Most-strong growth in both economies Strong growth in both economies Modest-low growth in both economies Source: The Economist Dec. 27, 2011, The Dating Game
Japan High-income, consolidated democracy Stagnant decades, but recent signs of growth Competitive, but robust and stable consumer market New market possibilities with TPP China 35 years of economic reforms and growth, though not for all Chinese Multiple regional economies with different market potential Corrupt and capricious, but likely stable one-party authoritarian regime
The Japan that Can Say NO (1989)
Japanese Stock Market Annual Values, 1981-2015 Nikkei 300 Index 10000 20000 30000 40000 1980 1985 1990 1995 2000 2005 2010 2015
No economic recovery without structural reform Privatization and administrative reform Bold domestic leadership Koizumi Junichiro Prime Minister 2001-2006
Koizumi s protégé Abenomics and the Three Arrows 1. aggressive monetary policy: end deflation 2. expansionary fiscal policy: short-term economic boost 3. broad growth strategy Abe Shinzo Prime Minister 2007-2007; 2012-
US and Japan Per Capita Income, 1960-2013 Reasons for optimism about recovery, Abenomics Per Capita Income, 2005 USD 10000 20000 30000 40000 United States Japan Japan is a stable, democratic, high-income country 1960 1970 1980 1990 2000 2010 Source: World Bank Development Indicators
Points to watch: liberalization of agriculture, finance
US, Japan, and China Per Capita Income, 1960-2013 Per Capita Income, 2005 USD 0 10000 20000 30000 40000 United States Japan China 1960 1970 1980 1990 2000 2010 Source: World Bank Development Indicators
Reform and Opening Late 1970s: special economic zones (SEZs) in Guangdong, Fujian 1980s: liberalization of exports Post-1986: coastal development strategy Rapid growth of export promotion trade Slow growth of ordinary trade Uneven regional composition of trade WTO membership in 2001: trade and inward FDI rocket
Special economic zones (SEZs) from 1980-2006: southern, coastal economic strategy Source: Wang, Jin, The economic impact of Special Economic Zones: Evidence from Chinese Municipalities, Journal of Development Economics, vol. 101 (2013):133-147.
Chinese Inward FDI, 1982-2013 Chinese Exports by Region China s Balance of Payments, 1980-2013 Balance of Payments, millions of USD 0e+00 1e+05 2e+05 3e+05 1980 1985 1990 1995 2000 2005 2010 Source: World Bank Development Indicators
The China that Can Say No (1996) and Unhappy China (2008)
Beijing s Economic Model Export-led growth, employing vast, cheap labor force producing labor-intensive products High domestic savings rate Large state-owned enterprises account for 1 3 of total economic output, and maintain control of strategic sectors New shift: Domestic consumption Reform banking and state-owned enterprises
Trade as % of GDP in China, 1982-2013
M Schiavenza, Mapping China s Income Inequality The Atlantic 9/13/13
M Schiavenza, Mapping China s Income Inequality The Atlantic 9/13/13
M Schiavenza, Mapping China s Income Inequality The Atlantic 9/13/13
Source: The Economist
More Developed China(s) Demand for quality, foreign goods Increasing consumption, middle class New rich Financial liberalization Less Developed China(s) Manufacturing possibilities Go West campaign: Xi an, Chengdu, Chongqing Immense possibilities for expansion
East Asian Giants: Changing Markets of Japan and China Japan High-income, consolidated democracy Competitive, but robust and stable consumer market New market possibilities with TPP China Multiple regional economies with different market potential Relatively corrupt and capricious, but likely stable one-party authoritarian regime
Questions? Kristin Vekasi kristin.vekasi@maine.edu