GEOG 240
Topic 5: Globalization, Trade &
Investment in Asia-Pacific
Francis Yee
Camosun 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
Outline
I.
II.
III.
IV.
Trade and Investment Policies
Foreign Trade
Foreign Investment
Globalizing China
I) Trade and Investment Policies – shifting
from import substitution in the early phase to outward
looking policy in later phrase

Import
Substitution
 encourage
domestic
production,
 restrict imports
by tariffs,
quotas, and
licensing;
 reduce trade
deficits
A)
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)
B)
C)
Growth Pattern
Structure of Trade
Trading Partners
Total Exports (US$ billions)
A. Exports: Major global exporters
2,500
2,000
Top 10 Exporters of Goods and Services in Asia,
2012
2,060
Source: UNCTAD 2013
1,500
1,000
500
768
553
443
436
300
291
228
-
Countries (World ranking in exports)
226
188
A. Export Growth: double digital growth in most
years and faster than world average
Average Annual Growth Rate (%)
Export Growth in Asia, 1980-2011
18
16
14
12
10
8
6
4
2
0
World
E Asia
SE Asia
Source: UNCTAD
2012.
1980 - 1990
6
15
6
1990 - 2000
7
10
11
2001 - 2011
11
16
12
Impact of Global Crisis on Asia’s Exports: drastic
drop in late 2008 & early 2009 but rapid rebound in 201011. Global exports weakened in 2012.
Annual Growth Rate (%)
Export Growth of Goods, 2007-2012
40.0
30.0
20.0
10.0
0.0
-10.0
Source: UNCTAD 2013.
-20.0
-30.0
World
E Asia
SE Asia
2007
15.6
18.8
12.4
2008
15.2
13.3
14.4
2009
-22.2
-15.4
-17.8
2010
21.7
29.6
29.0
2011
19.9
18.4
17.8
2012
0.4
5.4
1.3
Asia Pacific Exports: increasing share
of world exports from Asia
% of Wrold Exports of Goods
and Services
Global Share of Exports by E & SE Asia, 19802012
30
25
25
25
20
19
15
12
10
5
7
Source: UNCTAD 2013
0
1980
1990
2000
Year
2010
2012
B. Trade Structure
 larger
share of manufacturing in
Asia than world average
Asia’s Export Structure most of the merchandise exports
from Asia was in the manufacturing sector, particularly the office and telecom
equipment sector.
Export Structures in Asia and the World,
2008
35.0
Source: WTO 2010
30.0
% of Total Exports
25.0
20.0
15.0
10.0
5.0
0.0
Agricultural
Fuels &
Mining
Iron and
steel
Chemicals
office
equipment
Automotive
Textile &
Clothing
Others
World
8.5
22.5
3.7
10.9
9.9
7.8
3.9
30.3
Asia
6.0
12.4
4.2
7.5
20.9
6.7
7.2
32.8
C. Destinations of Asian Exports: intraregional exports increased 2.5 times between 2000-2009 to
more than half of total in 2010
Intra-regional Exports in Asia 2010
Other Asia
12%
Aus &
NZ
India
3%
2%
China
12%
Japan
8%
Rest of
world
48%
NIEs
15%
Source: UNESCAP
III) Foreign Direct Investment
A.
B.
C.
D.
Objectives of FDI
Sources of
Investment
Sectoral Structural
Geographical
Distribution
A Canadian bank in Kuala Lumpur
(Photo by F. Yee, 2007)
A) Objectives of FDI
1.
Resource access

2.
Control and ownership of oil,
minerals, and other resources
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
Inflows of FDI to E & SE Asia, 1990-2012
350
300
FDI
250
200
Source: UNCTAD
2013, UNESCAP,
2013.
150
100
50
0
1990
FDI (US$billions)
22
% of world
11
1995
74
21
2000
143
10
2005
161
16
2010
290
22
2012
326
24
C)
1.
2.
3.
4.
Sources of Investment in Asia
Pre-1970s: dominated by USA
& Europe
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)
1990s on : Asian NIEs began to
invest in Asia and beyond
(large trade surpluses provided
the capital for investment)
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)
% of Global FDI
Share of Global FDI Stock from Asia, 19802012
20
18
16
14
12
10
8
6
4
2
0
Developed
Asia, 5
Sources: UNCTAD 2012
Developing E &
SE Asia, 13
4
3
1980
2012
Year
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)
% of Global FDI Stock
Share of Global FDI Stock from Japan,
1980-2011
12.0
10.4
10.0
8.0
6.0
4.0
2.0
4.5
3.6
0.0
Year
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.
FDI in E & SE Asia 2012
(M&As and Greenfield Projects)
Primary
1%
Services
50%
Source: UNCTAD 2013
Manufacturin
g
49%
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
Share of FDI Stock in E & SE Asia, 2011
(Total = US$3.1 trillion)
Others
19%
Indonesia
6%
Singapore
16%
Hong Kong
36%
China
23%
Source: UNCTAD 2012
IV. China’s Globalization
A.
B.
C.
D.
Open Door Policy
Special Economic Zones and Economic
Development Zones
Foreign Trade and Investment
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
Export Destinations of China, 2010
(Total =US$1.6 trillion)
Others
36%
EU
20%
U.S.
18%
S.Korea
4% Japan
8%
Source: WTO
2012
Hong Kong
14%
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?
Global Share of FDI Flow by China, 1980-2011
8.1
Source: UNCTAD 2012
Year
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
0.1
1982
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
1980
% of Total
(Total = US$124 billion in 2011)
American FDI in China
Large influx of FDI to China since
1980s for both market access and to
Reduce production costs. A photo of
Motorola in Beijing by F. Yee, 2007
A retail giant in Kunming,
China (Photo by F. Yee, 2002)
Sources of China’s FDI: 70% from
Asian countries
Sources of China’s FDI, 2010
Others
28%
Hong Kong
42%
Taiwan
7%
S. Korea
10%
Japan
13%
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 nonintervention 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