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, owing to growth in telecommunications, wholesale and retail trade, and financial services. Prior to the global economic slowdown (which began ostensibly in the last quarter of 2000, compounded by the uncertainty produced by September 11, 2001), the US economy played an important role in supporting global demand – accounting for more than 50 per cent of the growth of global demand. While this was reflected in record US current-account deficits, these deficits proved to be an important buffer against global recession. Japan, on the other hand, has failed to live up to
, the fall of the won resulted in further competitive devaluation throughout 3 The Asian financial crisis Table 1.2 Indonesia Korea Malaysia Philippines Singapore Thailand China Hong Kong (SAR) Taiwan Japan USA Changes in real GDP (%) 1996 1997 1998 8.0 6.8 8.6 5.8 7.6 5.5 9.6 4.5 5.7 5.0 3.7 4.5 5.0 7.5 5.2 8.4 −1.3 8.8 5.3 6.8 1.6 4.5 −13.7 −5.8 −7.5 −0.5 0.4 −10.0 7.8 −5.1 4.8 −2.5 4.3 Source: World Bank (2000). East Asia. Faced with such mounting problems, the Korean government initially approached Japan for financial aid, but the request was turned down
for success and embeddedness and networks as frictions, or ‘conspiracies against the public’. Dore (1983) argued that the success of Japanese capitalism, with its strongly embedded economic relations, involving long-term commitments among firms and between large firms and their key workers, demonstrated that the liberal model of capitalism was faulty. There was not one capitalism but several kinds, none of which was to be regarded as the norm, and the more embedded and regulated Rhenish and Japanese capitalisms were looking stronger than the Anglo-American neo
IMF package for Thailand. Similarly, 252 Why China survived the crisis Singapore’s minister for information, the indefatigable George Yeo, while accusing Japan of abdicating its global responsibilities, noted that “the determination of the Chinese government not to devalue the renminbi in order not to destabilize Asia further will long be remembered” (Kelley 1998, 28). Another observer noted that the RMB was a “pillar of stability” in the region (Dassu 1998). How did China respond to the Asian financial crisis? Why did China come through such a severe region
expanding at an annual rate of over 8 per cent, Korea’s per capita income had grown to US$10,973 by mid1997.2 This earned the country its coveted membership of the exclusive OECD (Organization for Economic Cooperation and Development) group of nations.3 Already the world’s eleventh largest economy in 1996, Korea’s publicly stated ambition was to outperform Japan technologically in the new millennium. Indeed, the “miracle on the Han” seemed to know no bounds. As the world’s top producer of the dynamic random access memory (D-RAM) computer chips, the second largest
interest rates. In fact, firms assumed that they would be able to roll over their loans easily when they fell due – after all, this is what they had done for several years before the crisis. Foreign lenders also complied, often not undertaking adequate appraisal of their investments. Radelet (1999) aptly notes that Indonesia’s vulnerability was all the greater because its largest creditors were Japanese banks, which provided about 40 per cent of the total credit from foreign banks. The underlying weaknesses of Japanese banks made them more likely to try to pull their
high level of investments necessary for 71 The Asian financial crisis rapid growth. Second, there was the appreciation of the yen vis-à-vis the weakening US dollar after the 1985 Plaza Accord, during which time the baht was effectively pegged to the dollar at a rate of roughly 25 baht per US dollar.14 Third, as Japan, South Korea, Hong Kong and Taiwan faced sharply rising labor costs and protectionist barriers, this increased the cost advantage of exports from Thailand, Malaysia and Indonesia. Fourth, and most importantly, export expansion was fueled by massive
‘undermine economic value’) while clusters are good (‘open’, ‘facilitating’, 1998a, p. 227). The best kinds of clusters are to be found mostly in the USA, where the greatest number provide the greatest synergies arising from overlapping clusters, whereas in developing countries clusters tend to be too centralised around a few dominant players, are often state supported, and are ‘hub-and-spoke networks’ (1998a, p. 231). Japan is castigated for following such a model, exacerbated by a metropol-centric and overdirected bias. Given this fusion of the empirical and the
years in Massachusetts (late 1970s to 1985) were also a time during which new business models, with superior new product development and innovation performance standards, were being developed in other regions. The Japanese extended the Toyota production system to the Canon model that set new standards for rapid new product development and incremental innovation (see table 9.1).7 This model established a technology management capability that integrated applied research and production in the service of product-led competition. The Canon model established new performance
creditors ignored information about weak supervisory structures in debtor countries. Yet the widespread perception that the IMF bailed out all foreign and domestic investors is incorrect. Private creditors (mostly European and Japanese banks) have taken large losses and have had to lengthen the maturities of their claims, and bondholders and equity investors have sustained huge losses in Asia. One recent study has estimated that foreign equity investors as a group suffered potential losses of roughly US$240 billion from the Asian and Russian crises, and the corresponding