China's rapid growth wants watching

TOKYO: "China's rapid economic growth has ushered in an era of fierce market competition..."

This is how the Economy, Trade and Industry Ministry white paper for fiscal 2001 describes the present state of East Asia's economy.

The trade and industries of East Asian countries had taken on the form of a phalanx of migrating geese, with Japan as the pilot goose followed by countries in various stages of development with newly industrializing economies (NIEs), such as South Korea, coming next, followed by Thailand and other members of the Association of Southeast Asian Nations, with China trailing behind.

In the past few years, however, that neatly shaped wedge model of the region's economic development has disintegrated.

As the era of coexistence of economies in distinctly segregated development stages draws to an end, countries are being driven into an era of dog-eat-dog competition in a broad scope of sectors, ranging from labor-intensive fields to technology-intensive manufacturing.

Yet the Japanese people have little understanding of this harsh reality.

Even as we clarify Japan's current situation for the public, we need to do our utmost to dispose of bad loans for once and for all, to realize structural reforms and to quickly regain our international competitiveness so that Japan can survive the storm of market competition and gain the momentum to revitalize its economy..

The emergence of the Chinese economy in recent years has been spectacular. China has been rapidly transforming itself into an internationally competitive player, first in the textile industry since the latter half of the 1980s, and then in the IT and machinery industries since the mid-1990s. Its exports marked a four-fold increase over the past decade, and it joined the club of the world's top 10 exporting nations.

The Chinese economy's annual growth averaged 10 percent in the 1990s. As of 1998, its nominal gross domestic product was the world's seventh largest, following hot on the heels of such major industrialized powers as the United States, Japan and European countries. Even this year, the Chinese economy has been growing at an annualized rate of 8 percent.

According to the white paper, China's economic growth is largely due to active foreign direct investment totaling US$40 billion annually from the United States, Europe and other East Asian countries.

Leading foreign companies in various fields have flocked to China, wooed by an improved environment for direct investment offered by the Chinese government and a labor force that is skilled, cheap and abundant.

Meanwhile, local businesses are building factories to produce parts for foreign manufacturers. The combination of all these improved conditions has put into motion a favorable cycle that continues to lure even more foreign direct investment.

The Japanese economy has been in a decade-long period of stagnation, attracting less than one-fourth the foreign direct investment of China. Its trade surplus also has entered a decline.

The government has mapped out a so-called e-Japan strategy to promote information technology in the hopes that an IT revolution would free it from the mire of economic stagnation. But in many areas -- from government operations using the latest in IT infrastructure to the development of human resources and innovative management strategies with IT in the private sector -- Japan lags behind not only the United States and European countries but also the Asian NIEs.

The era in which Japan extend its largess to and acted as a role model for other Asian nations, including China, has passed. We would like to pay renewed attention to China for its power to attract huge amounts of foreign direct investment and to use that investment for its own economic innovation and growth.

-- The Yomiuri Shimbun