An Comparison of Asian Business Cultures

...

Taiwan’s slowing economic growth recently came from several factors including low inbound investment, weak entrepreneurial innovation and stagnant wages combined with unemployment in high-skilled workforce. Taiwan’s semiconductor industry, the hallmark of its export market, is facing a growing threat from China and Korea, making its semiconductor export declined 4 percent yearly. Taiwan’s challenge is more complicated since its political position somehow prevented it from pursuing bilateral and multilateral trade agreements.

For Korea, its recent growth slowdown is attributable to its unbalanced economic structure. Increased imbalance between the manufacturing and services bring a negative effect on overall productivity growth. Furthermore, recently the corporate woes such as Samsung’s products recall ad the strike from Hyundai Motor’s bankruptcy took a toll on the export market, drawing down its GDP growth rate below 3 percent.

Converge or diverge on development path?

I personally think all of three countries are facing some common issues, which will lead a converge on their development path. The first common issue is the domestic problem. For instance, the persistently low birth rate leads to a population decline. Japan’s population growth has started to drop to only 0.2 percent annually by early 1990s, and the rate of Korea and Taiwan also declined less than 1 percent from 2000s. Take myself as an example, in my hometown I-Lan county more and more elementary schools have closed down due to lack of children in rural place. According to classic economics, population size is critical to GDP growth.

The reason behind the low birth rate is various, but what the government can do is to increase the “quality” of people, meaning that increasing labor productivity instead of pursuing the number of population might be more realistic in such circumstance. So three economies will still need to invest more in technology-intensive industries and fully utilize the innovative capacity to increase productivity per capita.

The second issue comes from China. All three economies actually need to face the economic rise of China. In recent years, China has replaced the U.S. as the major trading partner for them. China’s market is so large that Taiwan, Korea and Japan have all tried to join the Chinese market instead of working against it, meaning that all of the economies are still taking advantage of China’s domestic resources and inevitably compete with each other in mainland China. In order to get adapt to the unique environment, all of them might have quite similar strategic planning in terms of the rapid development of trade, investment and financial flows. Japan’s economic recovery has been maintained partly by the exports to China, and China’s manufacturing platform plays an important role for Japan’s business. However, two countries maintained a type of cold peace although economic relations are thriving. For Japan, the key to benefiting the most from China depends on their ability to find the balance between the economic interactions and diplomatic sensibilities.

Taiwan’s economic growth still relies heavily on its exports performance, especially its largest trade partner China. Though the new president Tsai Ing-Wen tried to invest more domestically and encourage the SMEs to invest more in Southeast region in order to diversify Taiwan’s export market and foundation, the reality of Taiwan’s export dependence is still the biggest concern to overcome its slowing economic growth. In order to achieve its economic prosperity, Taiwan might need to boost its core competitiveness and attract great levels of investment from abroad. Innovation stills plays the most important role to revitalize Taiwan’s economic miracle.

Korea faces a similar problem as Taiwan does. Exports accounted for more than 50 percent of South Korea’s gross national income after 2013. As a result, its economy vulnerable to change in external demand especially when its biggest trading partner China economic performance has started to slow.

Moreover, when China is trying to upgrade its industries towards advanced industries such as electronics, semiconductors and high-quality steel products, bringing tough competition to Korea’s development.

In sum, three economies hold a quite closed connection recently, and their strategic plans are actually influenced by each other. From my viewpoint, their development path in the future is more likely to converge because the biggest threat China in Asia is still growing, and cooperation with each other is always better than competition.

2.

(a) Discuss how the effective mechanisms for managing business government relations vary across three emerging economies: China, India, and Indonesia

China:

As a local or foreign company operating in China, the most important thing to achieve is not the capability of the company but the relationship it holds with the government. We called it “guanxi” in Chinese, which basically means any relations one person has with others. There is an old saying in Chinese society: when you have guanxi, everything is going to be fine. This shows the pervasive social system which governs most the interactions Chinese people recognized, especially when doing business.

I had a personal experience of managing relations with government in China. My family business has operated in China for 16 years. In order to deal with the increased demand, in 2012 we decided to work with local partners to invest in a new factory in Suzhou, a major manufacturing hub near Shanghai. The investment was so large that we needed to interact with provincial departments in China to get approvals to use land for the new factory. We tried to be as efficient as possible when working with all of the many stakeholders we needed to communicate with. However, I found that it’s almost impossible to catch up our original plan without having guanxi with some specific governmental departments. Then our local partner started to use their personal relationships to facilitate the whole application process, but we as a Taiwanese company, which was recognized as a foreign investor, found it hard to utilize the relation we have with local government even though we’ve already operated in China for quite a long time. This shows that forming and managing relations with government is a very complicated process no matter whether you share the same cultural background or language.

The state-owned banks also play an essential role in the economic development in China. Whenever there is an investment