Overcoming Japan's China Syndrome - rieti.go.jp · PDF file2 From Pessimism to Optimism From...
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Overcoming JapanOvercoming Japans China s China SyndromeSyndrome
C. H. KwanC. H. Kwan
AprilApril20022002
RIETI http://www.rieti.go.jp/en/index.html
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From Pessimism to OptimismFrom Pessimism to Optimism
From devaluation to revaluation of From devaluation to revaluation of Chinese Yuan Chinese Yuan From From who would feed Chinawho would feed China to to safeguard against Chinese agricultural safeguard against Chinese agricultural productsproductsImpact of IT Revolution: From digital divide Impact of IT Revolution: From digital divide to leapfroggingto leapfroggingJapanJapans loss of confidences loss of confidence
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An Objective Evaluation of An Objective Evaluation of ChinaChinas Economic Powers Economic Power
GDP level instead of rate of changeGDP level instead of rate of changeHigh share of foreign companies and High share of foreign companies and import contentimport contentDisparities between coastal and inland Disparities between coastal and inland regionsregions
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Comparison between Major Development Comparison between Major Development Indicators of China and JapanIndicators of China and Japan
1236123619601960
1071107120002000
Per Capita Electricity Per Capita Electricity Consumption (Consumption (kwhkwh))
38.838.819601960
39.239.220002000
EngelEngel s Coefficients CoefficientIn Urban Areas (%)In Urban Areas (%)
Source: China Statistics Abstract, Japans 100 Years (Kokuseisha).
16.716.719591959
15.915.920002000
Primary Sector as a Share of Primary Sector as a Share of GDP (%)GDP (%)
30.730.719601960
313119991999
Infant Mortality RateInfant Mortality Rate(per thousand)(per thousand)
1965196519981998
67.7467.7472.9272.9268687272Life Expectancy (years)Life Expectancy (years)
MaleMaleFemaleFemaleMaleMaleFemaleFemale
JapanJapanAround 1960Around 1960
ChinaChinaLatestLatest
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Competition between China and Competition between China and JapanJapan
Japan
China
Amount
Shoes TV SemiconductorProduct Sophistication Index ($)
Low-tech Products High-tech Products
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Calculation of Product Calculation of Product Sophistication IndexesSophistication Indexes
Low-tech Products Shoes
Mid-tech Products
TV
High-tech Products
Semiconductor
Share
Per capita GDP of exporters
Product Sophistication Index of Semiconductor
Product Sophistication Index of TV
Product Sophistication Index of Shoes
$1,000 $5,000 $30,000
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Competition between China and Competition between China and Japan in the U.S. MarketJapan in the U.S. Market
0
10
20
30
40
100 1 ,000 10 ,000 100 ,000
1990
Product Sophistication Index ($)
(Billion dollars)
JapanChina
0
10
20
30
40
100 1 ,000 10 ,000 100 ,000
1995
Product Sophistication Index ($)
(Billion dollars)
JapanChina
0
10
20
30
40
100 1 ,000 10 ,000 100 ,000
2000
Product Sophistication Index ($)
(Billion dollars)
JapanChina
Low-tech Products High-tech Products
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Asian CountriesAsian Countries Competition Competition with Chinawith China
1990 1995 2000Japan 3.0% 8.3% 16.3%South Korea 24.0% 27.1% 37.5%Taiwan 26.7% 38.7% 48.5%Hong Kong 42.5% 50.5% 55.9%Singapore 14.8% 19.2% 35.8%Indonesia 85.3% 85.5% 82.8%Malaysia 37.1% 38.9% 48.7%Philippines 46.3% 47.8% 46.1%Thailand 42.2% 56.3% 65.4%
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Japan Competes only about 10% Japan Competes only about 10% with Chinawith China
Division of labor within each product Division of labor within each product categorycategory
---- LowerLower--end versus higherend versus higher--end productsend productsHigh import contents of Chinese products High import contents of Chinese products Actual degree of competition with China Actual degree of competition with China about 10% for Japanabout 10% for Japan
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The Rise of China: Implications The Rise of China: Implications for Relative Pricesfor Relative Prices
Terms of trade = Export prices / Import pricesTerms of trade = Export prices / Import prices
ChinaChinas TOT falls s TOT falls immiserizingimmiserizing growth growth ASEAN ASEAN Terms of trade fall with ChinaTerms of trade fall with ChinaJapan and Japan and NIEsNIEs Terms of trade improveTerms of trade improve
Prices of laborPrices of labor--intensive goods intensive goods
Prices of technologyPrices of technology--intensive goodsintensive goodsChinaChinas TOT =s TOT =
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The China Factor in JapanThe China Factor in Japans Deflations Deflation
S'S
D
S
DD'
Output
Output
Good deflation: Lower import prices
Bad deflation: Demand shift to Chinese products
Price level
Price level
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Overcoming JapanOvercoming Japans China s China SyndromeSyndrome
Protectionism incompatible with structural Protectionism incompatible with structural reformreformIndustrial Upgrading without hollowing outIndustrial Upgrading without hollowing outFocus on productivity, not competitiveness Focus on productivity, not competitiveness Rise of China and other Asian countries Rise of China and other Asian countries means a shrinking Northmeans a shrinking North--South gapSouth gapIt is in JapanIt is in Japans interest to be surrounded s interest to be surrounded by prosperous and peaceful nations rather by prosperous and peaceful nations rather than by poor and unstable onesthan by poor and unstable ones