Working miracles? regional renewal and East Asian interlinkages

This contribution considers the arguments surrounding claims that a ‘New’ North East is arising as a particular result of an upsurgent regional economic miracle whose frontal East Asian interlinkages promise continuing business and organizational transformations ahead. Largely off-circuit for other economic miracle claims before, this ‘New’ North East benefits from both any supposed British economic miracle at large and that recently associated with East Asia generally. But while current British state-public narratives constantly reiterate miraculous transformational possibilities, others constitute their chances very differently. Using a concept-led social constructionalist perspective this contribution explores alternative interpretations of the North East economic trajectory which constitute any East Asian interlinkages several other ways. It finally acknowledges differing debates over what roles these interlinkages actually play while posing further questions about where else the North East regional economic trajectory might be headed instead.     

Emerging Asia: Decoupling or Recoupling

In this paper, we investigate the degree of real economic interdependence between emerging East Asian and major industrial countries to shed light on the heated debate over the ‘decoupling’ of emerging East Asia. We first document the evolution of macroeconomic interdependence for emerging East Asian economies through changing trade and financial linkages at both the regional and global levels. Then, by employing a panel vector autoregression (VAR) model, we estimate the degree of real economic interdependence before and after the 1997/98 Asian financial crisis. Empirical findings show that real economic interdependence increased significantly in the post‐crisis period, suggesting ‘recoupling’, rather than decoupling, in recent years. Output shocks from major industrial countries have a significant positive effect on emerging East Asian economies. More interestingly, the reverse is also true. Output shocks from emerging East Asia (and China) have a significant positive effect on output in major industrial countries. The result suggests that macroeconomic interdependence between emerging East Asia and industrial countries have become ‘bi‐directional’, defying the traditional notion of the ‘North–South relationship’ as one of ‘uni‐directional’ dependence.     

East Asian FDI and the political economy of local development

This article situates the experience of the North East region within the context of the debates concerning East Asian FDI and the political economy of local development. The analysis looks in detail at the Sedgefield Borough economy to offer a more critical reading of the role of East Asian FDI in local economic development. The study concludes that East Asian FDI is a small but significant segment of the local economy which reveals evidence of some ‘leading edge’ developments in particular areas in tandem with a recurrence of the structural characteristics reminiscent of previous ‘branch plant’ investments. The conclusions for the business support network concern the need to change the focus and apparent control over the local economic development strategy and to forge strong links to the agenda of more active regional institutions and policy being promoted by the current Labour government.     

Fast but fragile: British restructuring for foreign direct investment in a global era

In the ‘globalization’ debates of the early 1990s, the Anglo-American practices of rapid restructuring to achieve ‘attractiveness’ to foreign direct investment tended to be presented as the universal panacea for dealing with the pressures of global change. However, the East Asian economic crises of the late 1990s have precipitated a widespread questioning, both of the export-oriented ‘Asian model’ of development, and of the possible contagion spreading to the western financial market and ‘FDI attracting’ western states. This article considers the ‘fast but fragile’ nature of Anglo-Saxon style restructuring in the light of the political-economic and social crises experienced by East Asian state-societies. The discussion focuses specifically on the British approach to restructuring for FDI, arguing that this reflects and embodies both a distinctive set of state-societal relations, and a distinctive understanding of what the process of globalization implies for these relations.     

Are East Asian Companies Benefiting from Western Board Practices?

Since the Asian crisis, East Asian nations have strived to introduce corporate governance codes, directing companies how to best improve their corporate governance practices. However, these codes have not been universally accepted by East Asian companies. This study examines the adoption of major board-related corporate governance recommendations by large non-financial companies in seven East Asian nations and investigates whether improvements in these board governance mechanisms have been associated with increased operating performance and market value. The results indicate that family-owned companies started with worse board governance and have been least likely to improve their board governance since the crisis. Overall, bigger, faster growing, non-family-owned companies with less concentrated ownership have been more likely to improve their board governance. Splitting of the positions of Chairman and CEO, creation of audit and nomination committees and improvements in overall board governance were found to have a positive relationship with subsequent operating performance and/or market value. John Nowland is a Finance Lecturer at Queensland University of Technology in Australia. He holds a research masters degree and is completing his PhD at the University of Queensland. His current research focuses on corporate governance and capital markets in Asia.     

The Political Economy of Trade Integration in South Asia: The Role of India

The South Asian regional trade integration process to date has generated only limited enthusiasm. It suffers from significant shortcomings, primarily on account of a very cautious approach adopted to achieve the ultimate objective of ‘free trade’ within the region. In turn, this has led to a fragmentation of the integration process, with some of the partners of the South Asian Association for Regional Cooperation (SAARC) bloc opting for a speedier and more liberal bilateral process with India. India’s engagement remains the critical feature as the single most important trading partner for almost all the other South Asian countries. However, the dynamics of Indian economic integration initiatives too have been changing rapidly, whereby it is looking increasingly to strengthen its economic relations with the wider Asian region. In this context, the question of India’s willingness to give leadership to carry the rest of South Asia as the bridge that connects the region to East Asia needs to be examined. The current evidence suggests that India has attempted to do so via a host of bilateral and regional arrangements, but that the divergences in strategic interests amongst SAARC countries has left Pakistan on the margins of an evolving scheme of overlapping trade initiatives in South Asia. Thus, while something approximating ‘free trade’ in South Asia appears to be taking shape, it is unlikely to take the form of an inclusive South Asian regional integration process envisaged by SAARC.     

Financial versus Monetary Mercantilism: Long‐run View of Large International Reserves Hoarding

The sizeable hoarding of international reserves by several East Asian countries has been frequently attributed to a modern version of monetary mercantilism – hoarding international reserves in order to improve competitiveness. From a long‐run perspective, manufacturing exporters in East Asia adopted ‘financial’ mercantilism – subsidising the cost of capital – during decades of high growth. They switched to hoarding large international reserves when growth faltered, making it harder to disentangle the monetary mercantilism from the precautionary response to the heritage of past financial mercantilism. Monetary mercantilism also lowers the cost of hoarding, but may be associated with negative externalities leading to competitive hoarding. From this viewpoint, this paper makes three observations on the East Asian reserve accumulation. First, the recent large hoarding of reserves in Japan and Korea occurred in the aftermath of the growth strategy that combined export promotion and credit subsidisation (financial mercantilism). Second, whether the ultimate motive is mercantilist or precautionary, the ongoing reserve hoarding in Asia contains an element of competitive hoarding, which is likely to have negative externalities among countries involved. Finally, China's hoarding of reserves partly reflects the precaution against the financial fragility that is likely to follow the slowing of economic growth.     

The internationalization of the RMB: a perspective vis a vis East Asian economic and financial integration

The People’s Republic of China has achieved remarkable progress in the internationalization of the RMB by introducing a number of concrete measures to boost the RMB’s status on the world stage since 2009. The ongoing RMB internationalization is being promoted under the background of deepening economic and financial integration in East Asia. In this article, we attempt to analyse RMB internationalization from the perspective of East Asian regional integration. We hypothesize that East Asian regional integration lays a broad foundation for China to push RMB internationalization forward. An internationalized RMB, we argue, will play more important roles in the process of East Asian regionalization. Thus, RMB regionalization could be an important and necessary step of internationalization. The Chinese authorities should not only push the RMB toward internationalization under China’s framework of domestic financial system reform, but they should also integrate RMB internationalization into the process of East Asian economic and financial integration. Therefore, a win–win strategy of RMB internationalization for both China and East Asian countries is needed.     

东亚经济冲击对称性分析与东亚货币合作

经济冲击的对称性程度,是判断一组经济体是否可以进行货币合作的一个良好指标。本文在前人研究的基础上,对经济冲击的分解变量进行了重新选择,将东亚9个经济体的经济冲击分解为供给冲击、需求冲击和货币冲击。静态与动态实证结果都显示东亚目前的冲击对称性程度还不高。未来东亚货币合作的方向,除了在整体上继续推动东亚各经济体在各领域的合作外,重点是要推进大国之间的经济合作与协调。     

Global Volatility and Forex Returns in East Asia*

During 2001–2010, increases in mature market volatility were associated with declines in forex returns for East Asian economies, consistent with an overall ‘flight to safety’ effect. Estimates from GARCH models suggest that a 10 percentage point increase in mature market equity volatility generated an exchange rate depreciation of up to 3/4 percent. This sensitivity rose during a more tranquil subsample for some countries, reflecting their greater integration with global financial markets. Long‐run forex volatility increased in Asian economies after 2008, reflecting the global reach of the financial crisis in mature markets. Unconditional standard deviations estimated from these models provide operational measures of ‘long‐term’ and ‘excess’ volatility in forex markets.     

Towards a More ‘Ethically Correct’ Governance for Economic Sustainability

In this paper, we propose that economic sustainability is seen in terms of (inter-temporal and inter-national) value creation. We claim that value appropriation (or capture), can become a constraint to economic sustainability. We propose that for sustainable value creation to be fostered, corporate governance needs to be aligned to public and supra-national governance. In order to achieve this, a hierarchically layered set of ‘agencies’, needs to be diagnosed and the issue of incentive alignment addressed. Enlightened self-interest, pluralism and diversity, as well as a representative supra-national organisation for world-wide economic sustainability can serve as a new, more ‘ethically correct’ governance for economic sustainability, but not a panacea.     

Free Trade Areas in East Asia: Discriminatory or Non‐discriminatory?

The debates on regional trade arrangements in East Asia focus on whether the RTAs can be net trade creating or diverting, and whether they impede multilateral trade liberalisation or not. This paper attempts to answer these questions by quantitatively estimating the economic impact of possible East Asian free trade areas based on a bilateral gravity model, and evaluating the main characteristics of the proposed FTAs. We find that the trade creation effect expected from the proposed East Asian FTAs such as a China‐Japan‐Korea or an ASEAN plus three (China, Japan, Korea) FTA will be significant enough to overwhelm the trade diversion effect. We also judge that East Asian FTAs will likely be a building block for a global free trade.     

The Evolving Economic Role of Accounting Standards： Evidence from Bilateral Cross-Border M＆A Flows

Cross-border M＆As are important to the participating countries. I posit that mandatory International Financial Reporting Standards （IFRS） adoption lowers the systemic information noise embedded in countries＇ accounting standards. This reduces the associated information processing costs and enhances the economic role accounting standards play on cross-border M＆A flows. After mandatory IFRS adoption, a 1% increase in accounting standards disparity suppresses bilateral M＆A flows by around 2%; a decrease in accounting standards disparity helps promote bilateral M＆A flows when paired countries＇ governance infrastructure gaps are relatively wider. I do not find that these associations were significant prior to mandatory IFRS adoption. Overall, this paper documents an evolving economic role accounting standards play on bilateral cross-border M＆A flows and sheds light on the economic benefits of adopting IFRS for policy makers.     

Latecomer catch-up strategies in electronics: Samsung of Korea and ACER of Taiwan

Very little is known about the strategies by which East Asian firms acquired foreign technology and managed to ‘catch up’ in electronics. Unlike Western and Japanese innovation ‘leaders’ and ‘followers’, East Asian firms are ‘latecomers’, dislocated from advanced markets, demanding buyers and international sources of technology. This work examines the cases of two leading latecomers - Samsung Electronics of Korea and ACER of Taiwan - to generate insights into how electronics manufacturers overcame barriers to entry and became strong competitors on the world stage. The aim is to highlight the sources, paths and mechanisms of learning in the two firms, relating these patterns to corporate strategy, organization and performance. This contribution argues that latecomers reversed the traditional research and development centred pattern of innovation, travelling backwards along the product life cycle, from mature to early stages. A simple model is put forward to show how latecomer firms progressed up the technological ladder within the electronics subcontract system called original equipment manufacture. Attention is also drawn to theoretical implications and the strengths, remaining weaknesses and future challenges facing latecomer firms.     

INCOME DISTRIBUTION,TECHNICAL CHANGE AND THE DYNAMICS OF INTERNATIONAL ECONOMIC INTEGRATION

This paper explores the features of a dynamic multisectoral model that focuses on the relationship between income distribution, growth and international specialization. The model is explored both for the steady‐state properties and the transitory dynamics of integrated economies. Income inequality affects the patterns of growth and international specialization as the model uses non‐linear Engel curves and hence different income groups are characterized by different expenditure patterns. At the same time income distribution is also reflected in the relative wage rates of skilled to unskilled workers, i.e. the skill premium, and hence the wage structure affects comparative costs of industries which have different skill intensities. The model is applied to a situation that analyses qualitatively different economic development strategies of catching‐up economies (a ‘Latin American’ scenario and a ‘East Asian’ scenario).     

Enough chit-chat,strike! Deliberation and agonism in corporate governance

This conceptual paper contributes to the critique of a body of literature that will be named ‘deliberative corporate governance’ by defending non-deliberative acts performed by stakeholders. It first argues that this literature introduces to the corporation a decision-making process where it does not belong, given the corporation's economic role. This leads to an ‘efficiency constraint’ on any attempt to justify deliberation – deliberative governance theorists must show that it is the most efficient and cost-effective way to address the issues that concern them. A real case example where deliberation would have been counter-productive in that regard will show that this is not the case. Building on this example, the paper uses the theory of democratic agonism to argue that non-deliberative acts should be part of governance. A sketch of managerial duties vis-à-vis such acts is attempted as well. The paper does not seek to reject deliberative corporate governance entirely, but rather to defend the importance of non-deliberative practices in addressing its theoretical concern. It makes a conceptual contribution to corporate governance theory, from which it draws practical implications for stakeholders-oriented management.     

A Political Economic Critique on the Theory of Optimum Currency Areas,and the Implications for East Asia

In recent years, dynamic debate has arisen as to the desirability and feasibility of creating a monetary union in East Asia. While the debate has relied heavily on the theory of optimum currency areas, this theory has weaknesses in explaining the actual formation of monetary unions. At this point, political economy analysis appears to demonstrate stronger explanatory power. This paper provides a systematic review of the main developments in the literature on optimum currency area theory and in the political economy literature on monetary union. In addition, it addresses the feasibility of an East Asian monetary union, by applying the findings in these two academic strands to the region. It finds that even though formation of an East Asian monetary union may be to some extent feasible from an economic perspective, the region’s political situation does not appear favourable for the creation of one.     

东亚区域生产网络发展与东亚区域经济合作的深化

随着产品内分工的发展,东亚区域生产网络的日益深化已成为东亚区域经济发展不可逆的趋势。本文梳理了东亚区域生产网络的表现和特征,对东亚区域生产网络引起的东亚贸易结构变化进行了探讨,分析了东亚区域生产网络对东亚各经济体的影响,揭示了东亚区域生产网络存在的缺点和潜在问题,并提出在东亚区域经济合作不断深化的背景下,促进东亚区域生产网络进一步发展的策略。     

产业内贸易对东亚经济周期协动性影响的实证研究

本文从理论上分析了产业内贸易对东亚经济周期协动性的影响,基于1990-2009年的数据,首先分析了中国与东亚各国产业内贸易指数的动态变化;其次,运用HP滤波方法提取周期因子ct,验证了东亚经济周期的协动性。在此基础上,构建了以贸易强度和产业内贸易为自变量,经济周期协动性为因变量的回归模型,运用分期数据对产业内贸易与经济周期协动性进行了面板数据的固定效应回归分析。研究结果揭示:相较于贸易强度,产业内贸易对中国与东亚经济周期协动性的影响更直接更显著,产业内贸易是中国与东亚经济周期协动性的主要传导渠道。随着产业内贸易比重的提高,中国与东亚贸易伙伴经济周期的协动性趋强。     

The Rise of China and East Asian Export Performance: Is the Crowding‐Out Fear Warranted?

This paper examines how China's emergence as a major trading nation is affecting export performance of its East Asian neighbours. Following a stage‐setting overview of trends and patterns of China's export performance, it probes China competition in third country markets and emerging patterns of imports. The East Asian export experience is examined in a wider global context against the backdrop of the ongoing process of global production sharing. The findings indicate that the ‘China threat’ has been vastly exaggerated in the contemporary policy debate. China's rapid market penetration in traditional labour‐intensive manufactured goods has occurred mostly at the expense of the high‐wage East Asian countries, without crowding‐out the export opportunities of low‐wage countries in the region. More importantly, China's rapid integration into global production networks as a major assembly centre has created new opportunities for the other East Asian countries to engage in various segments of the value chain in line with their comparative advantage.