International and Pacific Asian Business - Essay Example

?Running head: INTERNATIONAL AND PACIFIC ASIAN BUSINESS International and Pacific Asian Business Insert Insert Insert Name 09 May 2011 International and pacific Asian Business Introduction Before 1949, China economy had been performing very poorly but from that time, it has been growing steadily due to political and socioeconomic transformations, which were initiated during this time (Minami, 1994, P.1). These economic progresses have been faced with interruptions brought about by political changes and instabilities witnessed in the country from time to time. China economy has been experiencing challenges including a cycle of deflation followed by abrupt inflation, growing inequality in the distribution of revenue and an increasing amount of corrupt economic activities by government officials. However, Deng Xiaoping’s economic reforms clearly transformed the Chinese economy with improved annual 10% growth rate of GNP in the 1980s and marked improvement in the ordinary people’s standard of living (Minami, 1994, P.1). Plan and intention To achieve viable economic growth, the Chinese government lays economic blue prints for its economic developments in phases of five-year plan, which is implemented with specific targets and goals in place. Based on this model, the 9th Five-Year Plan (1996-2000) was quite successful, and the 10th Five-Year Plan (2001-2005) was rolled out with main objectives of “Sustaining fairly rapid growth, strategic restructuring, and improving the quality and benefits of economic growth so as to lay firm foundations for doubling the 2000 GDP by 2010” (China-un, 2008). This is in addition to “substantial perfection of the socialist market economy and putting state-owned enterprises on a modern enterprise footing, thus allowing greater participation in international cooperation and competition” (China-un, 2008). Japan economy began to experience remarkable growth in 1880s and grew rapidly after Second World War, making Japan the first Asian nation to join the advanced industrialized countries, and by 1994, the per capita GNP had surpassed that of the United States (Minami, 1994, P.2). From 1950s, Japan has experienced rapid economic growth due to proper planning and utilization of two economic systems. First, the government is very active in national planning and implementation, guided by the largely free economy via sophisticated and powerful monetary and fiscal policies. Secondly, the Japanese way of linking largely private ownership of assets with conservative public-spirited management, especially the role of the Ministry of International Trade and Industry (MITI) coordinates national industrial policies consistent with economic and social growth (Nationsencyclopedia, 2011). It is the responsibility of MITI to identify and develop industries targeted for Japan economic growth at different times as deemed appropriate through evaluation. Role of culture in the economic development (Confucianism and Guanxi) Culture influences business practices worldwide thereby affecting business management systems in different countries. For China, the traditional Chinese culture is very much involved in most aspects of the society to extent it influences the business management system and the business community at large. For Chinese, in their management system, they tend to be more hierarchical, collectivistic, and context-oriented when compared with westerners, implying that different communication styles are used in Chinese society (Cleland, & Gareis, 2006, P.23-3). Unlike the westerners, the Chinese value interpersonal relationships a lot. The very important aspect of interpersonal relationship value is guanxi (personal relationship or personal connection), that define the basic force that holds the personalized network of influence (Cleland & Gareis, 2006, P.23-3). Guanxi is a major cultural and social part of the Chinese society affecting many areas of Chinese daily life even in the present China. It is products of Confucian values and contemporary political and socioeconomic systems, which has strong influences on how the Chinese manage and are managed, leading to significant management differences between managerial practices in the West and in China. With the Chinese managers putting more emphasis on a subjective, intuitive, and implicit approach, their western counterparts prefer an analytical, logical, linear, and orderly approach (Cleland, & Gareis, 2006, P.23-3). China does not have the same ingrained Confucian value system seen in Japanese business systems, since Confucianism is not very central to Chinese culture as it is in Japan (Tulip-Laine, 2011). This clearly shows why Japan and China are in different economic terms since the form of Confucianism developed in Japan is quite different from that of China and therefore, different national ethos exist in the two countries. Many countries worldwide have tried to copy Japan’s economic model in the late 20th century, yielding limited gains since it only real Japanese who can understand their unique way of life and the culture in which they conduct their businesses (Tulip-Laine, 2011, Para.5). Economic history since 1950s In the pre-reform era from 1953-60, the economy’s performance was better than at anytime in the following decades and this economic growth was supported by high investment rate (Minami, 1994, P.6). In 1960, there was a famine occasioned by crop failure, the industrial equipments were worn out due to overuse, and raw materials were in short supply, creating economic crisis and reduced economic growth (Minami, 1994, P.7). From crisis, the government improved ties with Japan and western nations and a better growth rate resumed. However, in 1966 Mao Zedong introduced the Cultural Revolution, which brought political struggles with the economy not fully recovering up to 1976 when he died. In 1978, Deng Xiaoping introduced the popular reforms and the post-reform era was marked with rapid economic growth with the economy growing at average of 7 % late 1970s and 10% in the 1980s reflecting improved living standards (Minami, 1994, P.9). In 1989, there were pro-democracy political struggles, which adversely affect the economy; but in 1990s, the difficulties were overcome, and the country has been enjoying high growth rates since then (Minami, 1994, P.10). In 1950s, the Japan economy was undergoing recovery from the adverse effects of Second World War. In 1950, the Korean War broke out greatly accelerating the Japan’s economic recovery (Minami, 1994, P.16). The US military expedition relied heavily on Japan for supplies, bringing the much-needed foreign exchange for economic growth. The high economic growth of 1950s continue to 1960s but in 1970s the economic growth slowed and even stared to decline due to effect industrial pollution, and the oil crisis of 1971 and 1973, but it stabilized and started to grow slowly in 1980s (Minami, 1994, P.18). The 1980s were characterized by Japan-US trade imbalances but the Japan economy stabilized and continued to enjoy a slow but steady growth up to date. Role of politics in the economic development Politics play a major role in economic policies and development plans of a country, thus the type of political situation in a country affects its economic developments. In China, when the left was in power, ideologies held precedence over economic theory and material development was next to pursuing communist egalitarianism; achieving equality for all was given priority at the expense of development (Minami, 1994, P.6). When rights are in government modernization, free business policies and building of economic relation with other nation is encouraged to spur economic growth. These situations have been creating political struggles in China, which negatively affects the economic developments. In Japan, before the Second World War, the political system was stable, spurring tremendous economic growth but the political decision to engage into the war greatly reduced the economic gains to the point of collapse. The post war reforms carried out by western governments greatly transformed Japan’s political system through democratization efforts and economic recovery efforts creating a nation with a stable political system which has enabled Japan to maintain a steady and a rapid economic growth over the years. East Asia crisis 1997 Before this crisis, China, unlike Japan, had pegged its currency on the dollar, making it vulnerable to a depreciating yen hence increasing the crisis (McKinnon, & Schnabl, 2006, P.1). During the crisis, China was trapped in maintaining its soft dollar pegs while Japan was trying to stabilize the yen. Japan accepted the financial crisis in the perspective of liquidity, while China was very cautious in standing one of the extreme positions of insolvency and liquidity on the causes of the East Asian financial crisis. China highly criticized the arbitrariness of UN-Japan currency regulation which caused high exchange rates of the yen by 1985 Plaza agreement and reversed as the low exchange rate of yen in 1995 (Young-Chul & Park, 2004, P.12). China also resisted Japan’s proposal for alleviating the crisis since it felt it was not favoring it efforts in the recovery process. Post crisis period Japan understands the East Asian financial crisis, as liquidity and pursues the possibility of financial cooperation as a regional counter measurement to overcome the crisis, while China took a tepid position on the creation of Asian Monetary Fund (AMF) presenting an opposing position (Young-Chul & Park, 2004, P.14). In general, the Chinese approach to this period is more on capitalizing on trade through FTA while Japan is embracing economical cooperation to tackle and prevent the situation from reoccurring. Recovery and success driven by China, model and how different are China is leading Free Trade Areas (FTA) in East Asia, while Japan, with abundant foreign currency holdings, is implementing New Miyazawa Initiative and making swap agreements with individual countries in the region through the Chaing Mai Initiative. Though China has provided over four hundred million dollars financial support to Indonesia in march 2002, which is not in agreement with the New Miyazawa Initiative, China differs with the Japan planning for East Asian regionalism through financial cooperation, arguing that it still needs funds for its own developments (Young-Chul & Park, 2004, P.15). Compared to Japan, China has allowed for slightly more exchange rate volatility since July 2005, while still keeping it currency fixed to the dollar (McKinnon, & Schnabl, 2006, P.4). Conclusion China and Japan have different economic models and policies though they share in the industrialization structures, which China borrowed from the Japan, have well developed industrial processes. Thus, they may experience some related problems incase of economic crisis originating from industrial sector. The Japan economic model is more developed in it stable point while that of China is in its development stage, experiencing rapid growth rates. Reference List China-un, C., 2008. China's Economic Development. (Online). Available from: http://www.china-un.ch/eng/qtzz/wtojjzk/t416412.htm (Accessed on 9 May 2011). Cleland, D.I. & Gareis, R., 2006. Global project management handbook: Planning, organizing, and controlling international projects. London: McGraw-Hill Professional. McKinnon, R. & Schnabl, G., 2006. Current Account Surpluses and Conflicted Virtue in East Asia: China and Japan under the Dollar Standard. (Online). Available from: http://www.stanford.edu/~mckinnon/papers/McKinnon-Schnabl%20HWWI%20_AP_UV_Aug%203%202006.pdf (Accessed on 9 May 2011). Minami, R., 1994. The economic development of China: a comparison with the Japanese experience. NY: Palgrave Macmillan. Nationsencyclopedia. 2011. Japan - Economic development. Encyclopedia of the Nations. (Online). Available from: http://www.nationsencyclopedia.com/Asia-and-Oceania/Japan-ECONOMIC-DEVELOPMENT.html (Accessed on 9 May 2011). Tulip-Laine, L., 2011. The role of culture in defining business management systems. (Online). Available from: http://rusasan.com/en/article-26-the-role-of-culture-in-defining-business-management-systems.html (Accessed on 9 May 2011). Young-Chul, K. & Park, C., 2004. The Financial Crisis and Regional Institutionalization in East Asia. (Online). Available from: http://www.apeaweb.org/confer/sea06/papers/kim-park.pdf (Accessed on 9 May 2011). Read More