geog 240 topic 5: globalization, trade & investment in asia-pacific francis yee camosun college
TRANSCRIPT
GEOG 240
Topic 5: Globalization, Trade & Investment in Asia-Pacific
Francis YeeCamosun College
Abbreviations FTA – Free Trade Area WTO – World Trade Organization APEC – Asia Pacific Economic Cooperation GATT – General Agreements on Trade and Tariff ASEAN – Association of Southeast Asian Nations NIE – Newly Industrialized Economies FDI – Foreign Direct Investment TNC – Transnational Corporations NIDL – New international division of labour
OutlineI. Trade and Investment Policies II. Foreign Trade III. Foreign InvestmentIV. Globalizing China
I) Trade and Investment Policies – shifting from import substitution in the early phase to outward looking policy in later phrase
A) Import Substitution
encourage domestic production,
restrict imports by tariffs, quotas, and licensing;
reduce trade deficits
Malaysia has adopted an import substitution program until late 1970s (Photo by F. Yee 2007)
B. Outward Looking Policies Trade and investment
encouraged remove restrictions
on imports & exports Incentives provided to
TNCs (tax holidays, reduced fees on land and utilities)
Reduce government red-tape
Vietnam adopted an outward looking policies by opening up for foreign investment since the late 1980s (photo by F. Yee 2010)
II) Foreign Trade
A) Growth PatternB) Structure of TradeC) Trading Partners
C
hina
(1st)
Ja
pan
(4th
)
S. K
orea
(6th
)
S
inga
pore
(1...
Hong
Kong
(13t
h)
Taiw
an (1
9th)
In
dia
(21s
t)
M
alay
sia (2
4th)
T
haila
nd (2
5th)
In
done
sia (2
7th)
-
500
1,000
1,500
2,000
2,500 2,060
768 553 443 436
300 291 228 226 188
Top 10 Exporters of Goods and Services in Asia, 2012
Countries (World ranking in exports)
Tota
l Exp
ort
s (U
S$
billion
s)
Source: UNCTAD 2013
A. Exports: Major global exporters
A. Export Growth: double digital growth in most years and faster than world average
1980 - 1990 1990 - 2000 2001 - 2011
World 5.9825282314 6.7455884129 11.2733381009
E Asia 14.9106894303 9.9772659991 15.672083579
SE Asia 6.1883141336 11.1496263268 12.2273853681
1
3
5
7
9
11
13
15
17
Export Growth in Asia, 1980-2011
Ave
rag
e A
nn
ua
l G
row
th R
ate
(%
)
Source: UNCTAD 2012.
Impact of Global Crisis on Asia’s Exports: drastic drop in late 2008 & early 2009 but rapid rebound in 2010-11. Global exports weakened in 2012.
2007 2008 2009 2010 2011 2012
World
15.6139757964
15.1789393463
-22.24246
88256
21.7344241154
19.8700455819
0.4468685884
E Asia
18.8136172351
13.264673863
-15.37388
73245
29.6064603015
18.3825408637
5.3616544709
SE Asia
12.429074699
14.3803785426
-17.77156
74185
29.003195762
17.8087219316
1.2620973844
-25.0
-15.0
-5.0
5.0
15.0
25.0
35.0
Export Growth of Goods, 2007-2012
An
nu
al G
row
th R
ate
(%
)
Source: UNCTAD 2013.
Asia Pacific Exports: increasing share of world exports from Asia
1980 1990 2000 2010 20120
5
10
15
20
25
30
7
12
19
25 25
Global Share of Exports by E & SE Asia, 1980-2012
Year
% o
f W
rold
Exp
ort
s of
Good
s an
d S
erv
ices
Source: UNCTAD 2013
B. Trade Structure larger share of manufacturing in
Asia than world average
Agricultural Fuels & Mining
Iron and steel
Chemicals office equipment
Automotive Textile & Clothing
Others
World 8.5358991002
22.4615300419999
3.7361034547
10.851150672
9.93453472 7.84861100879999
3.8944871867
30.2763683888
Asia 5.9735266038
12.409908471
4.1546491216
7.47671936410001
20.8996031 6.65999397779998
7.17171559039999
32.8424755011
2.5
7.5
12.5
17.5
22.5
27.5
32.5
Export Structures in Asia and the World, 2008
% o
f Tota
l Export
s
Source: WTO 2010
Asia’s Export Structure most of the merchandise exports from Asia was in the manufacturing sector, particularly the office and telecom equipment sector.
Rest of world48%
NIEs14%
Japan8%
China12%
India2%
Aus & NZ3%
Other Asia12%
Intra-regional Exports in Asia 2010
Source: UNESCAP 2011
C. Destinations of Asian Exports: intra-regional exports increased 2.5 times between 2000-2009 to more than half of total in 2010
III) Foreign Direct Investment
A. Objectives of FDIB. Sources of
InvestmentC. Sectoral StructuralD. Geographical
Distribution
A Canadian bank in Kuala Lumpur (Photo by F. Yee, 2007)
A) Objectives of FDI
1. Resource access Control and ownership of oil,
minerals, and other resources
2. Market oriented Open new market or Increase
market share in host countries
3.Cost efficiency Reduce costs of land, labour,
and other factors of production
A Japanese TNC in Sydney, Australia (Photo by F. Yee 2006)
B. Flows of FDI to Asia: increased by 15 times and doubled its share of global FDI
1990 1995 2000 2005 2010 2012 1990 1995 2000 2005 2010 2012
FDI (US$billions)
22.088
73.69 142.731
160.64
290.38
326
% of world
10.6471282928828
21.4965621253271
10.1911332834954
16.3796856821521
22.1833291189235
24
25
125
225
325
Inflows of FDI to E & SE Asia, 1990-2012
FD
I
Source: UNCTAD 2013, UNESCAP, 2013.
C) Sources of Investment in Asia
1. Pre-1970s: dominated by USA & Europe
2. 1970s-1980s: Japan became one of the major investors in Asia and invested heavily in N America & Europe in the late 1980s (as a result of currency appreciation and protectionism in core countries)
3. 1990s on : Asian NIEs began to invest in Asia and beyond (large trade surpluses provided the capital for investment)
4. 2000 on: China emerged as a new investor at the global level
Tokyo Stock Exchange is one of the top stock exchanges in the world controlling a large proportion of the capital flow to Asia (Photo by F. Yee, 2010)
Top Foreign Investors: dominated by developed economies but
increasing share by Asian countries
FDI from Asia: increasing investment from developing countries (NIEs)
1980 201202468
101214161820
3
Developing E & SE Asia; 13
4
Developed Asia; 5
Share of Global FDI Stock from Asia, 1980-2012
Year
% o
f G
lob
al FD
I
Sources: UNCTAD 2012
Japan’s FDI: the world’s largest
investor in late 1980s, stagnated since the 1990s and picked up again in the last 5 years (2011 total = US$962 billions)
0.0
2.0
4.0
6.0
8.0
10.0
12.0
3.6
10.4
4.5
Share of Global FDI Stock from Japan, 1980-2011
Year
% o
f G
lob
al FD
I S
tock
Japanese FDI
1970s: Resource oriented to secure energy and raw materials
1980s: reduce cost of production by relocating to LDCs
Mid-1980s – establish branch plants in Europe and N America for market access and address protectionism measures
A Japanese MNC in Singapore’s Science Park (Photo by F. Yee 2007)
TNCs from developing Asia: Total FDI stock from Hong Kong increased from US$12 billion in 1980 to US$1,046 billion in 2012
A privatized bridge built by Hong Kong investor in early 1980s in Fumen, China (Photo by F. Yee, 2005)
A major grocery chain owned by Hong Kong’s Hutchison Whampoa in Guangzhou, China (Photo by F. Yee 2005)
C. Sectoral Structure of FDI: concentrated in both the manufacturing and the service activities – several Asian countries have recently opened their service sector for FDI and provide a higher rate of return than the manufacturing sector.
Primary1%
Manufac-turing49%
Services50%
FDI in E & SE Asia 2012(M&As and Greenfield Projects)
Source: UNCTAD 2013
Location of FDI by Sector: Resource FDI concentrated in Indonesia (oil); Manufacturing FDI SE Asia, China; and Services FDI in Japan and NIEs
A Japanese industrial TNC in Guangzhou, China (Photo by F. Yee, 2005)
A French retail TNC in Singapore (Photo by F. Yee 2007)
D) Geographical Distribution The destinations of FDI flow in Asia changed during
the last three decades. 1970s: most of the FDI split between NIEs
(Taiwan, Hong Kong, Singapore & S. Korea) [mainly for cost-efficiency] & ASEAN-4 (Philippines, Thailand, Malaysia, and Indonesia) [primarily resource oriented or for market access]
1980s: equally shared by NIEs, ASEAN-4, and China (open door policy and low labour costs)
1990s on: China became the leading recipient and received the lion’s share of FDI in the region [for both cost efficiency & market access]
Manufacturing Relocation China: Relocation from coastal to inland regions of China
(FDI to inland increased from 12% in 2008 to 18% in 2012) Labour intensive industries: some relocated from China to
SE Asia, e.g. Cambodia (labour costs 1/3 of China), Vietnam, and to Bangladesh in S Asia
Vietnam: Nike’s production increased from 25% in 2005 to 41% in 2012
Upgrades in China: Samsung has a joint venture in Suzhou to produce the latest generation of LCDs and a $7 billion facility in Xi’an to produce flash memeory (Samsung’s largest overseas investment)
(UNCTAD 2013)
Destinations of FDI Stock: Hong Kong, China, & Singapore topped the list
Hong Kong36%
China23%
Singapore16%
Indonesia6%
Others19%
Share of FDI Stock in E & SE Asia, 2011 (Total = US$3.1 trillion)
Source: UNCTAD 2012
IV. China’s GlobalizationA. Open Door PolicyB. Special Economic Zones and Economic
Development ZonesC. Foreign Trade and InvestmentD. China in SE Asia and Africa
A. Open Door Policy (1978 on)
promote foreign trade, encourage foreign investment, establish special economic zones, and import foreign technology
A banner in Shenzhen to support open door policy initiated by Deng Xiaoping (photo by F. Yee, 2009)
B. Special Economic Zones established in 1979 in Shenzhen, Zhuhai, Xiamen, and
Shantou (southern China) Encourage foreign investments from Hong Kong, Macau,
and Taiwan Provide tax incentives, lower land use and utility fees,
reduce import and export duties and restrictions, and lower cost labour
Shenzhen’s population exploded to over 10 million in 2010 and a per capita income of US$15,000 (highest in China)
Economic Development Zones: coastal cities and open economic regions 14 coastal cities were opened to foreign
investment since 1984, well established transport and industrial
infrastructures, connections to overseas Chinese communities e.g. Tianjin, Qingdao, Shanghai, Ningbo, Fuzhou,
Guangzhou
Open Economic Regions (1988 on)
attempts to diffuse the economic benefits of the open door policy and the SEZs to other regions
allows greater economic cooperation between the economic zones and cities
3 Open Economic Regions Yangzi (Chang Jiang) Delta
Economic Region (around Shanghai),
the Pearl River (Zhujiang) Delta Economic Region (around Guangzhou), and
the Minnan Delta Economic Region (around Xiamen)
Shanghai’s Pudong district experience a rapid urban and economic growth in the past decade (photo by F. Yee 2012)
C. Foreign trade and investment Largest trading nation in the world and large
trade surplus generated Both EU and US are important export markets for
China (40% of total) Joined WTO in 2001 after 10 years of negotiation
with US Expanding urban population with rising income,
are attractive for foreign corporations for trade and investment
China also has a large pool of labour force which makes it competitive in labour costs
China’s Export Market: led by US & EU
EU20%
U.S.18%
Hong Kong14%
Japan8%
S.Korea4%
Others36%
Export Destinations of China, 2010 (Total =US$1.6 trillion)
Source: WTO 2012
FDI in China Why China was able to increase its share the world’s total FDI inflows from 0.1% to 8% in the past three decades?
0.02.04.06.08.0
10.012.014.0
0.1
8.1
Global Share of FDI Flow by China, 1980-2011 (Total = US$124 billion in 2011)
Year
% o
f Tot
al
Source: UNCTAD 2012
American FDI in China
A retail giant in Kunming, China (Photo by F. Yee, 2002)
Large influx of FDI to China since1980s for both market access and to Reduce production costs. A photo of
Motorola in Beijing by F. Yee, 2007
Sources of China’s FDI: 70% from Asian countries
Hong Kong42%
Japan13%
S. Korea10%
Taiwan7%
Others28%
Sources of China’s FDI, 2010
Foreign Investment Spatial Patterns Concentrated in the South in early phase
but spread to the north when the 14 coastal cities were established
Investments in the interior, including Wuhan and Chongquing, began to emerge
Most FDI originated from Asian countries and directed into places with Chinese family ties in earlier place while increasingly investment pours into large cities, such as Shanghai, Beijing, Tianjin
D. China in SE Asia and Africa 1. SE Asia Economy: model of economic reform for SE Asia Culture - Expanded broadcasting and education exchanges
with SE Asian countries Migration - Increased in migration from Yunnan and other
border provinces to Burma and Laos Resources – rapid industrialization increased
China’s demands for lumber and minerals from SE Asia
2. China in Africa Oil resources – Africa became an increasing important
source of oil supply for China Non-intervention policy – China follows a policy of non-
intervention in other countries’ internal affairs Aid – extractive activities are combined with aid projects in
road construction and dam building Chinese exports – provided low cost products to consumers Conflicts – domination of local markets