Professional Documents
Culture Documents
Question 1 (2 points; max 2 pages): (Overseas Chinese and Indian business networks in Asia)
Ethnic Chinese and ethnic Indian entrepreneurial networks constitute an integrating force in
Asia. Provide an outline of the main characteristics, advantages and disadvantages, and future
prospects of such networks.
Characteristics:
Little differentiation between family and the firm
Strong familiar and informal networks
Institutional embedded (good relations)
Highly diversified firms
Entrepreneurial initiative
Trust and loyalty
Low-educated
Started from scratch
Indian secrecy
Advantages Informational voids in Asia (see from BG-perspective and western perspective)
Fast decision making
Hands on experience
Lateral transfer of knowledge
Qualitative information (connections)
Holistic information processing
Emergent planning (ad-hoc)
Provide a brief background to recent trends in the economic development of China (since c:a
end of 1970s) and India (since c:a early 1990s). Try to identify similarities and differences in
overall strategies and economic development patterns between the two countries with
examples from key economic sectors.
China:
1978
o Open market reforms (good timing, globalization and deregulations)
o SEZ (FDI) (PN)
o Labor-intensive industries
o Export-led growth
o Heavy investments in industries and infrastructure
o Manufacturing (from labor-intensive to capital intensive)
o Technological upgrading (heavy investments in R&D + education)
o Urbanization (industrial manufacturing cities)
o Organizational capacity
India:
Balance of payment crisis in 1991
o Liberalization
o Skipped the second industrial stage
o Still regulated market
o Limited FDI + low integration in PNs
o Poor institutions and infrastructure
o Slow urbanization
o Boom in BPO and IT-services (increase in FDI after 2000)
o Rigid labor market
Similarities:
Acknowledged the importance of liberalization FDI
Import substitution
Fast growth
Both resilient to financial crisis
Differences:
The Chinese organizational capacity is more pragmatic (India slower)
China has focused on manufacturing while India has focused on services. China has
used the comparative advantage, not India (labor-intensive).
India less integrated in PNs
Slower urbanization in India
Rigid labor market in India
Low investments in infrastructure and industry
Asian economies have to large extent been integrated without forming any legal boundary
such as the EU and NAFTA. Organizations such as ASEAN and other institutional
arrangements such as ASEAN+3 (China, Japan, South Korea) do not cover the whole Asian
region as a legal framework for building a single and common market. Nevertheless, Asian
intra-regional trade has been on a rising trend over the last several decades and has become a
mainstream to build its own pattern of trade.
Explain and discuss the roles China and India have played in forming intra-regional trade
relationships with other major Asian counties such as Japan, South Korea, Taiwan, Hong
Kong, Singapore and Malaysia!
High and increasing intra-regional trade in East Asia (South Asia lagging behind)
Global production networks (vertical specialization). Countries such as Japan, Korea
and Taiwan (moved labor-intensive production to China) exports parts to China, who
are the final assembler. Electronics, machinery and transport
Indias participation relatively low
China imports resource-based and pp from middle-income Southeast Asian countries.
Future:
Backward integration in PNs.
o More locally suppliers in China.
o Chinas intra-regional trade has decreased since 1999.
o Chinas go west strategy.
Since the global quotas for textiles and garments disappeared in 2005, the intra-
regional trade has declined since China is less reliant on ASEAN countries.
China competes with Southeast Asia as a final assembler and source domestically
Scenario 2:
Possible scenario for max 2 years.
Increased Regional PN costs. Communication, monitoring etc. (<10% of total costs).
Difficult for JIT (planning etc.)
Sophisticated products Complex networks
Increase Value-added and GDP in countries
U.S. and EU demand decreases due to trade deficit etc.
China and India large markets and capacity (especially China)
Southeast Asian countries left outside PNs and have to increase technological capacity
Scenario 3:
Least likely scenario in the short term but not in the long term
Electronics alone is not a sufficient pathway to reach higher stages of
industrialization...
Green technologies
o Still unclear how it will affect investment, output, employment, production
methods and industrial geography
o Capital-intensive skills and research intensive
o Restructuring of industries, transports etc. Such as, Investment in low-carbon
economy, Urban infrastructure, transport and energy conservation, Water
conservation and management, Lean natural resource use technologies
Articles
China Foreign Trade:
Growth and Structural Changes:
A shift in export structure From labor-intensive to more capital-intensive and
technology-intensive industries, mainly transport and machinery
Imports of primary products increasing
Growth slowdown in both exports and imports
o Appreciation of RMB
o Rising resource costs
o Labor costs rising
Future prospects:
Cheap money, cheap labor, cheap resources. Things of the past > Capital and
technology-intensive products.
Downsides:
Tunneling of capital support parents
Poor monitoring
Concentrated power Negative for the country
Management position held by family
Transparency
State-led:
Infant industry argument
Crony capitalism:
Low-trust countries opportunistic politicians and protection from uncertain
environments.
Relations essential
Institutional Void:
As long as the market is imperfect and here are no institutions, BG will exist.
BGs will disappear when institutions appear
Korean BNs:
Chaebols
Similar to Japan
More vertically integrated
Family-owned and controlled
Less rivalry
Family relationships rather than contractual relationships
Difficulties for single firm to survive in Korea compared to Japan firms strive to
join clusters.
Chinese BNs:
Blood, religion, dialect etc.
Family owned
Trust
Confucianism - family
Lower transaction costs due to trust
Limited firm size
Other:
Savings and investments driver in the Asian industrial economy
Increased domestic consumption?
High savings in China due to:
Poor security nets
Limited consumer financing (house and cars)
Education
Aging population, one child policy medical services
History
Demand for savings
Still developing
PPP low
Urban infrastructure lagging
India
BOP crisis in 1991 --> Liberalization
Skipped the second industrial stage
Limited FDI focused on market seeking (horizontal) and low integration in PNs
Regulated market, poor institutions and infrastructure rigid labor market and labor
regulation
Slow urbanization
BOOM with BRO and ITS
Increase of FDI after 2000 mainly services
Trade liberalization but no structured policies
Competitive advantage in labor intensive still focused on capital intensive (skill and
technology) exports leading to exports to developing countries instead of developed
countries which results in lower export numbers. Developed countries prefer imports from
more quality-associated countries for importing capital intensive products.