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Chapter 11
Asia
Pacifc
Region
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Dynamic Growth in the
Asia Pacifc Region
Asia has been the astest growing
area in the world or the past threedecades
Starting in 1996 the leadingeconomies o Asia !"apan #ong$ong So%th $orea Singapore and&aiwan' e(perienced a serio%sfnancial crisis which res%lted in the
crash o the Asian stoc) mar)et*
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Dynamic Growth in the
Asia Pacifc Region&he 199+ estimates by the ,nternational
-onetary .%nd !,-.' that Asianeconomies wo%ld ha/e 09 percent o theglobal o%tp%t by the year 0 were ontarget*
2oth as so%rces o new prod%cts andtechnology and as /ast cons%mermar)ets the co%ntries o Asia3partic%larly those along the Pacifc Rim3are 4%st beginning to gain their stride*
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&he Greater China
“ &he Greater China” reers to boththe People5s Rep%blic o China !PRC'
and the Rep%blic o China !RC' or&aiwan
Aside rom the 7nited States and "apan there is no more important
single national mar)et than the PRC&he economic and social changes
occ%rring in China since it beganacti/ely see)ing economic ties withthe ind%striali8ed world ha/e been
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&he Greater China PRC
&wo ma4or e/ents that occ%rred in0 are ha/ing a proo%nd e:ect onChina5s economy
1' admission to the ;orld &radergani8ation
0' the 7nited States< granting normaltrade relations !=&R' to China on a
permanent basis !P=&R'*2eca%se o China5s si8e di/ersity >
political organi8ation it can be morecon/eniently tho%ght o as a gro%p oregions rather than a single co%ntry
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&he Greater China PRC
#%man rights and the legal systemare ma4or iss%es in China
&wo other problems ace China in thelonger r%nthe well?)nown en/ironmental
decline associated with its astgrowth
the demographic disasterassociated with its one?child policy*
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&he Greater China
#ong $ong
Ater 1@@ years o 2ritish r%le #ong
$ong re/erted to China in 199 whenit became a special administrati/eregion !SAR' o the PRC
&he 2asic Baw o the #ong $ong SAR
orms the legal basis or China5s oneco%ntry two systems agreementthat g%arantees #ong $ong
a%tonomy
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&he Greater China
#ong $ong
&he social and economic
systems liestyle and rightsand reedoms en4oyed by thepeople o #ong $ong prior to the
t%rno/er were to remain%nchanged or at least @ years
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&he Greater China
&aiwan !RC'
-ainlandE&aiwanese economic
relations contin%e to impro/e asboth ha/e entered the ;orld&rade rgani8ation*
&aiwanese companies ha/ein/ested o/er F@ billion inChina
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&he Greater China
&aiwan !RC'
&aiwanese companies ace rising
costs at home China o:ers anearly limitless pool o cheaplabor and engineering talent
&aiwan5s tech powerho%ses alsosee) access to China5s mar)et
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"apan
"apan5s ast growth in the 19s and 19Hsama8ed the world*
"apan5s economy slowed abr%ptly in the199s.o%r reasons or this may be.a%lty economic policies
,nept political apparat%sAd/erse global circ%mstancesC%lt%ral inhibitions
Iach o these o%r has their proponents
each their own rationale
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,ndia
Since its independence in 19@the world5s largest democracy
had set a poor e(ample as amodel or economic growth
,t was among the last o the
economically importantde/eloping nations to throw o:traditional ins%lar policies*
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,ndia
,ndia5s growth had been
constrained and shaped bypolicies o import s%bstit%tionand an a/ersion to ree mar)ets
=ow howe/er times ha/echanged and ,ndia hasembar)ed on the most proo%ndtransormation
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,ndia
,ndia has ta)en the ollowing steps
1' Pri/ati8ing state?owned companies asopposed to merely selling shares in
them &he go/ernment is now willing to
red%ce its ta)e below @1 percent and togi/e management control to so?called
strategic in/estors0' Recasting the telecom sector5s
reg%latory a%thority and demolishingthe monopolies en4oyed by SIs
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,ndia
,ndia has ta)en the ollowingsteps+' Signing a trade agreement with the 7S
to lit all J%antitati/e restrictions onimports
K' -aintaining moment%m in the reorm othe petrole%m sector
@' Planning the opening o domestic long?distance phone ser/ices ho%sing andreal estate and retail trading sectors tooreign direct in/estment
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&he .o%r Asian &igers
&he most rapidly growing
economies in the Asia Pacifcregion d%ring the 19Hs and199s were the gro%p reerredto as the .o%r Asian &igers !or
.o%r Dragons' #ong $ongSo%th $orea Singapore and&aiwan
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&he .o%r Asian &igers
ten described as the Iast Asianmiracle they were the frst
co%ntries in Asia ater "apan tomo/e rom a stat%s o de/elopingco%ntries to newly ind%striali8edco%ntries*
Iach has become a ma4or inL%encein trade and de/elopment in theeconomies o other co%ntries
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Mietnam
Mietnam5s economy andinrastr%ct%re were in shambles ater0 years o socialism and war
#owe/er this co%ntry o more thanHH million people is poised orsignifcant growth*
A bilateral trade agreement betweenthe 7nited States and Mietnam led to=&R stat%s or Mietnam
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Mietnam
&his will lower tari:s onMietnamese e(ports to the 7nited
States rom an a/erage o Kpercent to less than + percent*
, Mietnam ollows the same
pattern o de/elopment as otherSo%theast Asian co%ntries it co%ldbecome another Asian &iger*
o om o e
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o om o ePyramid -ar)ets
!2P-'C* $* Prahalad and his associatesintrod%ced a new concept into thedisc%ssion o de/elopingco%ntries and mar)ets3bottom?o?the pyramid mar)ets !2P-s'3
consisting o the K billion peopleacross the globe with ann%alincomes o less than F10
o om o e
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o om o ePyramid -ar)ets
!2P-'&hese mar)ets are notnecessarily defned by nationalborders b%t rather by thepoc)ets o po/erty acrossco%ntries*
&hese K billion cons%mers areo co%rse concentrated in theBDCs and BBDCs*
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-ar)et -etrics
&he ollowing slides display the%ndamental mar)et metrics or
the eight most pop%lo%sco%ntries o the Asia Pacifcregion as well as cons%mptionpatterns
"apan stands o%t and there is anoticeable di:erence betweenthe Chinese and ,ndian
emphases on ed%cation
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Standard o Bi/ing in the Iight-ost Pop%lo%s Co%ntries in
the Asia Pacifc Region
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Iight
-ost Pop%lo%s Co%ntries in the
AsiaNPacifc Region
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Asia Pacifc &rade Associations
&he Asia Pacifc region is preparing orthe ne(t economic leap dri/en by tradein/estment and technology aided by
others in the region&ho%gh ew in n%mber trade
agreements among some o the Asiannewly ind%striali8ed co%ntries are seenas mo/ement toward a region?wideintra?Asian trade area
nce a so%rce o ine(pensi/e labor orprod%cts shipped to "apan or to thirdmar)ets these co%ntries are now seen
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Association oSo%theast Asian
=ations !ASIA='
.o%r ma4or e/ents acco%nt or the/igoro%s economic growth oASIA= co%ntries
1' the ASIA= go/ernments5 commitmentto dereg%lation liberali8ation and
pri/ati8ation o their economies0' the decision to shit their economies
rom commodity based toman%act%ring based
i i
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Association oSo%theast Asian
=ations !ASIA='.o%r ma4or e/ents acco%nt or the /igoro%seconomic growth o ASIA= co%ntries
+' the decision to speciali8e in man%act%ringcomponents in which they ha/e acomparati/e ad/antage !which created moredi/ersity in their ind%strial o%tp%t >
increased opport%nities or trade'K' "apan5s emergence as a ma4or pro/ider o
technology and capital necessary to %pgrademan%act%ring capability and de/elop newind%stries*
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Asia Pacific Market Group Fundamental Market Metrics
A i P if
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Asia?PacifcIconomic Cooperation
!APIC'&he other important gro%ping that
encompasses the Asian?Pacifc Rim is
the Asia?Pacifc Iconomic Cooperation.ormed in 19H9 APIC pro/ides a
ormal str%ct%re or the ma4orgo/ernments o the region incl%dingthe 7nited States and Canada todisc%ss their m%t%al interests in opentrade and economic collaboration
Asia Pacifc
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Asia?PacifcIconomic Cooperation
!APIC',t is a %niJ%e or%m or promoting trade
liberali8ation and economic cooperation
APIC has as its common goals acommitment toopen trade
increase economic collaboration
s%stain regional growth and de/elopmentstrengthen the m%ltilateral trading system
red%ce barriers to in/estment and tradewitho%t detriment to other economies
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Di/ersity ;ithin China
=ortheast China Bongtime,nd%strial #eartland
2ei4ingE&ian4inShanghai and the Oangt8eRi/er Delta
Pearl Ri/er Delta
&he ther 2illion
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=ortheast China
&he traditional ind%strial heartland in=ortheast China with the coastal cityDalian as its h%b among the three
pro/inces o Biaoning "ilin and#eilong4iang*
An ad/antage o this region is itsconnection with China<s most important
ind%strial neighbors* Biaoning has theclosest economic ties with "apan "ilinwith So%th $orea and #eilong4iang withR%ssia
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2ei4ingE&ian4in
&he 2ei4ing?&ian4in inormationtechnology !,&' corridor in northChina*
Central planning has made thisregion o +0*@ million not only thepolitical center o the co%ntry b%t
the R>D center as well*&he @?mile corridor between 2ei4ing
and its coastal co%sin &ian4in hostssome @ Chinese high?tech
companies among them Beno/o and
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Oangt8e Ri/er Delta
&he Oangt8e Ri/er Delta is also )nownas the Greater Shanghai area with itsemerging ,& man%act%ring center o
S%8ho%*Contains the cities o Shanghai P%dong
> S%8ho%
Shanghai has been %ndergoing a ma4orind%strial renaissance d%ring the pasttwo decades*-o/e rom low /al%e?added to medi%m
/al%e added man%act%ring
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Pearl Ri/er Delta
&he Greater Pearl Ri/er area incl%des three cities o o/er @ million inhabitants
!#ong $ong G%ang8ho% and Shen8hen'
f/e cities with more than 1 millioninhabitants !h%hai #%i8ho% .oshanhongshan and Dongg%an'
and a n%mber o cities that each contain
appro(imately hal a million inhabitantss%ch as -aca%*
-aca% ? China5s Bas Megas also a SAR
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&he ther 2illion&he r%ral China ew ;esterners e/er
see doesn<t yet participate in the global
economy*&he central go/ernment pays it
some attention b%t not m%ch* &hese one billion people %s%ally recei/e
abo%t 1Q o the central go/ernmentb%dget ? less than F1 a head or r%ralroads water power s%pplies schoolsand hospitals*
=ot accessible beca%se o a poor or
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=egotiation Styles ;ithinChina
=ortheastern =egotiators E orthrightind%strio%s competent
b%sinesspeople* Generally honest >plainspo)en* =ot )nown or their ris)?ta)ing propensity or creati/ity*
2ei4ing Area E )now or an %n%s%al
b%rea%cratic sloth > imperialistperspecti/e* &he res%lt ? a relati/elac) o creati/ity no thin)ing o%tsidethe bo(*
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=egotiation Styles ;ithinChina
Shanghai Area ? renowned or theirshrewdness* %tgoing big tal)ers andbig spenders* &ry to impress* Mery
creati/e thin)ers ? anything is possible*S%ccess%l and really the dominantb%siness gro%p on the -ainland*
&he Pearl Ri/er Delta ? =egotiators arerep%ted to be relati/ely honest andorthright* Intreprene%rial >spontaneo%s*
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=egotiation Styles ;ithinChina
#ong $ong ? biling%al and spea)Inglish L%ently* #%mility and
indirection are more emphasi8ed*&aiwan E most conser/ati/e* =either
Con%ci%s<s inL%ence nor the-andarin spo)en has been mitigated
by Comm%nist philosophies and r%le*ConseJ%ently age ran) and amilyplay the most power%l roles*
-ar)eting
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-ar)etingpport%nities in
&he Greater China&here are e(treme di:erences in
economic well?being c%lt%resand political str%ct%res*
&he rich m%nicipalities li)e2ei4ing and Shanghai are J%itecomparable to Paris =ew Oor)or &o)yo in terms o thea/ailability o l%(%ry prod%cts*
-ar)eting
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-ar)etingpport%nities in
&he Greater China,n terms o the stages o economic
de/elopment they are large > rich
eno%gh to be tho%ght o as more?de/eloped co%ntries*
As in the 7nited States l%(%ry carssell better on the coast and tr%c)s
sell better in r%ral areas o the west*7nli)e the 7nited States in China yo%
cannot sell the same lines o