http://www.lowyinterpreter.org/post/2015/04/30/Southeast-Asias-ageing-powerbrokers.aspx
The magic formula to industrial success is started first by Japan, then the four tigers and now China.
Mainly about financial repression, urban industrialisation, mercantilist focus on exports and protecting home champions.
Buy local, sell global. This is the formula for How Asia Works.
But for those latecomers and laggards (such as India, Myanmer, Vietnam) who are srriving after China, they will find the magic door shut after China.
Why?
1. Technology
3D printing and robotics is tilting the advantage to capital-intensive rather than labor-intensive economies.
It is becoming harder for poor countries to get rich the traditional way, with the onset of peak manufacturing comes earlier now.
2 Demographic.
In 1970, Japan, Korea and Taiwan collectively had 150 million people and exported goods to about 400 million wealthier Western consumers.
Today, with globalisation, there are 2 billion people in East Asia striving to serve 1 billion affluent consumers worldwide. If we include India, Latin American and African nations joining the export game, we see more scary overcapacity.
China
Their biggest challenge is China which is hard for the global supply chain to ignore, perhaps except low-end manufacturing like textiles.
As China progresses and ages, it is embracing automation. By 2025. China will make the machines that make the machines that replace human workers.
Chinese strategy - Asian Infrastructure Investment Bank
With such intense focus on corporate competitiveness and the interests of capital, it is not surprising that China's overseas developmental assistance is also businesslike. No mistake, Make no mistake, it is not a Marshall Plan.
Reliable Chinese sources said that Chinese firms are expected to scoop 93-94% of the contract value of all projects funded by the AIIB.
Let's not forget about other Chinese unilateral initiatives (eg Silk Road Fund).
By Goldman Sachs' calculation, local expectations for China's newly re-combined train-making monopoly assume a clean sweep at home and an heroic 55% share of all railway rolling stock bought overseas in the next five years. These firms expect a bonanza of construction in which Chinese money, materials, management and manpower can build grand overseas projects. Foreign firms will have to settle for spillover business, in the form of subcontracts.
World Bank ?
Indonesia's development minister, for one, is relaxed. The AIIB will focus on big-ticket items like coal-fired power stations, he reckons, which complements the World Bank's work in poverty reduction and public healthcare and the Asian Development Bank's focus on irrigation and rural roads. In other words, China will build big things; other agencies will do little things. The irony is that the early breakthroughs China itself made (partly with World Bank advice) were in the 'small' stuff: democratising literacy, improving sanitation, and opening opportunity for women. Before it started pouring concrete, China got the basics right first.
No doubt the Chinese would love to sell expensive bullet trains to India, say, but if they were truly interested in assisting India's development, they should share their admirable experience in schooling girls. Would India listen? Narendra Modi does understand that his country risks being 'hollowed out' or de-industrialised unless his own 'Make in India' project succeeds. His trade deficit with China is soaring. India imports high-tech equipment while its exports to China read like the cargo manifest of a 19th century sailing ship.
Japan, Russia ?
China isn't alone in its single-minded pursuit of turnkey infrastructure projects. Building factories is, after all, easier than building 'institutional capabilities.'
The ADB has long been accused of favouring Japanese construction firms.
Russia has become a nuclear one-stop shop, financing, building and even operating nuclear power stations worldwide. Moscow is not particularly interested in transferring skills.
China power
China is not granting aid nor should partner countries expect it. Instead this is a 'win-win' business arrangement. Certainly China's SOEs will win big. And shiny new highways and power plants and railways are welcome everywhere. But the bills will need to be paid.
The magic formula to industrial success is started first by Japan, then the four tigers and now China.
Mainly about financial repression, urban industrialisation, mercantilist focus on exports and protecting home champions.
Buy local, sell global. This is the formula for How Asia Works.
But for those latecomers and laggards (such as India, Myanmer, Vietnam) who are srriving after China, they will find the magic door shut after China.
Why?
1. Technology
3D printing and robotics is tilting the advantage to capital-intensive rather than labor-intensive economies.
It is becoming harder for poor countries to get rich the traditional way, with the onset of peak manufacturing comes earlier now.
2 Demographic.
In 1970, Japan, Korea and Taiwan collectively had 150 million people and exported goods to about 400 million wealthier Western consumers.
Today, with globalisation, there are 2 billion people in East Asia striving to serve 1 billion affluent consumers worldwide. If we include India, Latin American and African nations joining the export game, we see more scary overcapacity.
China
Their biggest challenge is China which is hard for the global supply chain to ignore, perhaps except low-end manufacturing like textiles.
As China progresses and ages, it is embracing automation. By 2025. China will make the machines that make the machines that replace human workers.
Chinese strategy - Asian Infrastructure Investment Bank
With such intense focus on corporate competitiveness and the interests of capital, it is not surprising that China's overseas developmental assistance is also businesslike. No mistake, Make no mistake, it is not a Marshall Plan.
Reliable Chinese sources said that Chinese firms are expected to scoop 93-94% of the contract value of all projects funded by the AIIB.
Let's not forget about other Chinese unilateral initiatives (eg Silk Road Fund).
By Goldman Sachs' calculation, local expectations for China's newly re-combined train-making monopoly assume a clean sweep at home and an heroic 55% share of all railway rolling stock bought overseas in the next five years. These firms expect a bonanza of construction in which Chinese money, materials, management and manpower can build grand overseas projects. Foreign firms will have to settle for spillover business, in the form of subcontracts.
World Bank ?
Indonesia's development minister, for one, is relaxed. The AIIB will focus on big-ticket items like coal-fired power stations, he reckons, which complements the World Bank's work in poverty reduction and public healthcare and the Asian Development Bank's focus on irrigation and rural roads. In other words, China will build big things; other agencies will do little things. The irony is that the early breakthroughs China itself made (partly with World Bank advice) were in the 'small' stuff: democratising literacy, improving sanitation, and opening opportunity for women. Before it started pouring concrete, China got the basics right first.
No doubt the Chinese would love to sell expensive bullet trains to India, say, but if they were truly interested in assisting India's development, they should share their admirable experience in schooling girls. Would India listen? Narendra Modi does understand that his country risks being 'hollowed out' or de-industrialised unless his own 'Make in India' project succeeds. His trade deficit with China is soaring. India imports high-tech equipment while its exports to China read like the cargo manifest of a 19th century sailing ship.
Japan, Russia ?
China isn't alone in its single-minded pursuit of turnkey infrastructure projects. Building factories is, after all, easier than building 'institutional capabilities.'
The ADB has long been accused of favouring Japanese construction firms.
Russia has become a nuclear one-stop shop, financing, building and even operating nuclear power stations worldwide. Moscow is not particularly interested in transferring skills.
China power
China is not granting aid nor should partner countries expect it. Instead this is a 'win-win' business arrangement. Certainly China's SOEs will win big. And shiny new highways and power plants and railways are welcome everywhere. But the bills will need to be paid.
