Globalization – Asia
In the 1990s and early years of the 21st century, Japan and China have emerged as two major economic powers. Let’s look at Japan.
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Despite suffering a prolonged recession, Japan continued and continues to be one of the world’s manufacturing leaders. So, there is still a great deal of manufacturing that goes on in Japan, and then, manufactured products are exported from there throughout the world.
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And so, that is a chief source of income for the economy in Japan. However, several internal scandals have shaken Japanese confidence and caused many to question the close relations between government and corporations. After there were scandals that were implicating the corporations putting government figures into positions where they could influence the corporations, as far as different economic or tax laws, and that relationship between them that has shaken Japanese confidence in their own economy because, for the most part, they don’t want their economy to have that kind of relationship. They want it to be run in the best interest of the country, and not in the best interest of the government or corporation’s pocketbooks. Even keeping in mind the scandals that have shaken the internal Japanese confidence, Japan is still one of the world’s leading manufacturers.
Let’s look at China. In China, the suffocating communist regime has relaxed its economic structures, or laws and rules, somewhat. So, it hasn’t just let the economy become more capitalist, but it has relaxed the rules that they had placed on the economy somewhat. And the result has been an economic boom. Once China allowed more freedom into the economy, and allowed more flexibility, especially with regard to foreign exchanges, primarily exports from China to other nations, China has experienced an economic boom. They’ve had a lot more money coming into the country after they’ve relaxed some of their rules. Some of their tax laws, some of their economic policies.
China created several special economic zones to draw foreign business. And these special economic zones were set up in areas where it was thought that they could lower more foreign investors, more foreign business. And so, in these zones, they relaxed things even further and gave more freedom, so that hopefully, there’ll be more foreign business, and more money coming into China, more products being shipped out of China. And this has worked. These SEZs, as they are known, these Special Economic Zones are allowed to follow more flexible economic policies than other areas in China, which are more favorable to conducting business. So, these more flexible policies are definitely more favorable to conducting business with these foreign countries than the regularly enforced economic policies.
There are tax incentives for foreign investments in the SEZs. So, for any foreign investors, anyone who’s looking to do business, they would probably want to find one of these Special Economic Zones in China so they could get in on the tax incentives. SEZs are given more freedom when conducting international trade activities. So, again, foreign business is going to be allowed more freedom in these Special Economic Zones, so that’s going to be drawing more foreign business to these economic zones. And the SEZs plan their economies with the primary goal of lowering and then utilizing foreign capital.
Basically, money possibly supplies the raw goods or raw materials that need to be used to provide what their foreign investors’ looking for, but primarily, it’s going to be money. They’re going to get money from these foreign investors, they’re going to come up with an export that they can produce cheaply, and make a profit whenever they are sending it back out of the country. So, their products are chiefly export-oriented. They aren’t going for importing a lot of goods, even though it may be international trade. Usually, it’s going to be China exporting goods in trade for money coming in from these foreign countries.
And at present, Chinese firms or individual business not necessarily in the Special Economic Zones are even beginning to control a sizeable portion of the market in their own right. So, China has relaxed a lot from its previous communist regime, and while it is still run that way governmentally and there are still stricter economic policies, they relaxed it considerably to allow their economy to progress. And they’ve created these Special Economic Zones where their economy’s even more flexible to allow more progress and more money to come into their country.
So, both China and Japan have become more interconnected with the rest of the world, and continue to be major economic powers worldwide.
Next Lesson: Globalization – Europe