Economy of East Asia

The economy of East Asia is one of the most successful regional economies of the world. It is home of some of the world's largest and most prosperous economies: Mainland China, Hong Kong, Macau, Taiwan, Japan and South Korea.

Major positive factors have ranged from favorable political-legal environments for industry and commerce, through abundant natural resources of various kinds, to plentiful supplies of relatively low-cost, skilled and adaptable labor.

In modern societies, a high level of structural differentiation, functional specialization, and autonomy of the economic system from government is a major contributor to industrial-commercial growth and prosperity. Currently in East Asia, trading systems are relatively open; and zero or low duties on imports of consumer and capital goods etc. have considerably helped stimulate cost-efficiency and change.

Free and flexible labor and other markets are other important factors making for high levels of business-economic performance.

East Asian populations have demonstrated rapid learning capabilities and high intelligence – skills in utilizing new technologies and scientific discoveries – and putting them to good use in production. Work ethics in general tend to be highly positive.

In conclusion, there are relatively large and fast-growing markets for consumer goods and services of all kinds.

Its success has led to it being dubbed "An East Asian renaissance" by the World Bank.

History

Ancient East Asia was economically dominated by the three states known today as China, Japan, and Korea. These three ancient states traded an abundance of raw materials and high-quality manufactured goods, exchanged cultural ideas and practices, and had military conflicts with each other throughout the centuries.

China

Main article: Economic history of China before 1912

For much of East Asia's history, China was the largest and most advanced economy in the region and globally as a whole. During the first half of the Middle Ages, China was the most developed state in East Asia. By 1100, the Song dynasty would host a population of almost 100 million people with a sophisticated medieval economic system boasting the use of paper money (written business contracts, mercantile credits, checks, promissory notes, bills of exchange), a maritime shipping power having the largest mercantile fleet in the world patrolling the South China Seas and a strong industrial steel manufacturing capacity. According to the The Economist, China was not only the largest economy for much of recorded history, but it was the worlds largest until the end of the 15th century boasting the worlds highest per capita income and most advanced technology at the time. China was the wealthiest part of the world from 1200 to the 1300s — aside from Italy until the European Renaissance would take off during the late Middle Ages and the modern Western World and Japan overtaking China it during the mid and late-19th century. China would account for around one-quarter of the global GDP until the late 1700s and approximately one-third of the global GDP in 1820.

Japan

Main article: Economic history of Japan

Ancient Chinese coinage and money was introduced to Japan about 1500 years ago during the during early Han dynasty. The Japanese would not mint coins from copper and silver until 708 AD and paper money was introduced in 1661. Japan during the Yayoi period would engage in intensive rice agriculture in paddy fields introducted from southern China via the Ryukyu Islands which developed a manorial economy similar to that of medieval Europe.

As the Yayoi economy used no form of currency, bartering was used to trade goods and services, predominantly farm implements. Yayoi farmers would fish, hunt, gather and farm. The introduction of a highly advanced form of rice cultivation using irrigation propelled the Yayoi economy. Terraced paddy fields made the Yayoi more successful in the growing of rice that surpluses were often produced. The agricultural surpluses produced by the manorial Yayoi economy stimulated Japan's early handicraft industries as well as well as the establishment of urban villages and permanent settlements would start to appear in the Yayoi agricultural community as cities didn't exist at that time. As the Yayoi economy became more sophisticated, Japanese craftsmen would begin to venture in metallurgy and began to develop their own tools such as swords, arrowheads, axes, chisels, knives, sickles, and fishhooks. Decorative items such as ceremonial bells and mirrors were used as religious rituals and status symbols.

From the end of the 7th century to the 8th century, Japan introduced various sociopolitical systems imported from Tang China in order to create a centralized government based on the medieval Japanese ritsuryo code. Copper coins were minted modeled after the Chinese ones. There was a decline in the usage and circulation of minted coins by the 10th century as Japanese society began to lose faith in the value of the copper coins as the coins began more diminutive in size and the quality was diluted with an increase in lead due to a shortage of copper. By the mid 10th century, the mintage of copper coins began to phase out and the use of commodity money such as rice, silk, and clothes which all maintained stable value were used in place of the coins. Commodity money began to gain economic value and status and became the stable criteria for evaluating monetary value of various goods and services. Since carrying rice, silk, and clothes was cumbersome and inconvenient, a credit economy emerged to burden the shoulder of transportation and handling costs. Government offices in the Japanese capital would issue payment orders similar to modern-day checks to rice warehouses under their political constituencies.

The Japanese economy would enjoy a period of growth and prosperity during the medieval era. Marketplaces began to take place aroud the country so merchant entrepreneurs could easily bring their goods and services to consumers. In addition, improvements in agriculture would contribute economic growth as new strains of rice could resist droughts and disease and fertilizers allowed double cropping of fields with better irrigation techniques to help farmers produce greater surpluses. The use of copper-alloy coins greatly facilitated Japanese estates to sell extra produce in the marketplaces. In addition, merchants began to form their own communities and began to exercise economic power and great wealth even though Japan was dominated by a feudal-military system led by warrior samurais and daimyos who exercised great control over various competing semi-autonomous domains across the Japanese archipelago.

In the middle of the 12th century, Chinese coins began to flow into Japan and was beginning to be used as a form of currency. Coins became widespread by the 13th century as the use of the coins was spread among commoners and the Kamakura Shogunate government and imperial court, which initially disapprovedd of their use, but eventually accepted the used of the coins. Coins would eventually replace bartering and commodity money such as rice, silk, and hemp as a form of economic exchange. These coins were widely circulated throughout the medieval Japanese economy, and coins promoted the commodity economy. The Japanese government would suspend the issue of coins until the 16th century, leaving Japanese commoners with only the Chinese coins (toraisen) to use. To address the increased demand for coins, privately minted Japanese coins (shichusen) were circulated, but the quality of these coins would differ by type. The Japanese would begin to classify these various coins by type or quality (the practice known as “erizeni”). As the result, “erizeni” caused confusion in the nation’s coin circulation. As the inflow of coins from Ming China disrupted in the latter half of the Japanese economy during the 16th century, rice, gold and silver served as a medium of exchange and evaluating monetary value.

During the Tokugawa period, the Japanese rice-based feudal economy grew significantly as a stronger emphasis on agricultural production led to greater economic output. In addition, Japan's commerce and manufacturing industries would begin to expand which would lead to an increasingly influential merchant business elite which would also fuel the growth of early modern Japanese cities. Villages, which operated as largely independent units, were would also expand withe conomic activity gradually shifting from subsistence farming to a more sophisticated commercial agricultural based and handicraft industries like silk production, textile weaving, and sake brewing. The development of cash crops and a handicraft industry would also stimulate nationwide commerce. Osaka soon became the commercial center with many wealthy entrepreneurs and bankers, while Edo was a political center and a cosmopolitan city ripe with consumption. In Osaka, the development of futures contracts and the modern futures market in rice would emerge. The construction trades flourished, along with banking facilities and merchant associations. Edo society was predominantly agrarian (particularly at the beginning) with 80 to 90 percent of the population being peasants. The Bakufu central government would act as a political authority through its samurai would wield absolute political power over the feudal society. However, the Bakufu was not very imposed inconsistent economic policies that were often unstable and short-sighted towards private businesses. Each han county could decide its tax rates and other economic regulations. Sometimes the central government tried to control and tax private businesses while at other times, a free economy was permitted. Improved technology helped farmers control the all-important flow of irrigation to their rice paddies. The daimyō and shogun operated several hundred castle towns, which became loci of domestic trade. Large-scale rice markets developed, centered on Edo and Ōsaka. In the cities and towns, guilds of merchants and artisans met the growing demand for goods and services. The merchants, while low in social status, prospered financially, especially those with official patronage. Merchants invented credit instruments to transfer money, currency came into common use, and the strengthening credit market encouraged entrepreneurship. As agriculture and private business grew during the Edo period, pre-modern industrial manufacturing firms would begin to develop. Various industries were promoting many manufactured products such as tea, tobacco, wax, indigo, salt, knives, swords, pottery, lacquer ware, silk, cotton, soy sauce, sake, paper, stone cutting medicine, and chemicals. By the end of the Edo period, many hans and local cities would begin to develop economically and Japan's business and economic center would shift from Osaka to Edo (Modern-day Tokyo) which would eventually lay a firm foundation for the development of the later Meiji period.

Korea

In ancient East Asia, Korea served as a cultural and economic bridge between China and Japan. Ancient Korea maintained close cultural, economic and political ties the various succeeding ancient Chinese dynasties, although there were significant periods of conflict between the two areas. China was also Korea's maritime partner, having a long history dating back thousands of years when ancient Korea commenced trade with ancient China through the Shandong Province through the Yellow Sea route. Its archipelago neighbor Japan was another ancient East Asian trading partner that was also involved in Korean economic and cultural exchange.

The first recorded trade ties of Korea was with Japan, specifically the island of Kyushu, which the Koreans called Wae (and the Chinese Wa), during the Proto-Three Kingdoms period between the 1st and 3rd centuries AD. Early archaeological evidence based on Neolithic pottery and obsidian objects indicate an early maritime trade with ancient Japan. Chinese Han Dynasty commanderies which occupied the north of Korea during this era carried out Korea's diplomatic and economic exchanges. Envoys and tributes were sent by the Wa, which were a confederation of small states situated in modern southern and western Japan, with the most important of being the Yamato in 57, 107, 238, and 248 AD. The evolution of Korean money and the Korean monetary and economic system is correlated with the global human history of money. As with many other neolithic civilizations, ancient Korea adopted a bartering system as a medium to exchange goods and services. Various forms of currency were used such as weapons, tools, ornaments, cattle and grain served as mediums of exchange. In addition, an influx of Chinese coins, bartering items, and privately made weighed money were also widely employed in ancient Korea.

Korea would not begin to use money until the Goryeo period when coins began to flow in during China's Song Dynasty (960-1279 AD) were imported and began to circulate. Tribute was paid to Song China and China exported silk, books, spices, glasses, incense, precious stones and textiles, tea, medicine, and ceramics while Goryeo would export gold, silver, copper, ginseng, porcelain, pine nuts, and hanji paper back to the Chinese. The economy of ancient Gojoseon prospered due to improvements in agricultural technology (as iron tools were introduced from China) coupled with an abundance of natural resources like gold, silver, copper, tin, and zinc durinng the second half of the first millennium CE. Earlier Korean currencies was based on bartering as a means of exchanging goods and services. Fundamental commodities such as grain, rice, and cloth were used and later knives were introduced with settlers coming in from China during the Warring States Period (475 BC - 221 BC) based on archaeological evidence excavated at sites in the Pyongan and Cholla provinces. The Chinese also introduced coins to Korea when the Han dynasty invaded the north at the end of the 2nd century BCE. These coins became the official currency and were known as wuzhu in Chinese or oshuchon in Korean, meaning 'five-grain'. The oshuchon continued to be used by the two kingdoms of Goguryeo and Silla up to the 10th century CE. Modern archaeological evidence points out that they are commonly found in the tombs of the Nangnang (Lelang) region. During the Three Kingdoms period, the demand for coins increased as the Korean economy became more advanced and external trade would expand. Baekje was a great maritime power; its nautical skill, which made it the Phoenicia of East Asia, was instrumental in the dissemination of Buddhism throughout East Asia and continental culture to Japan. Baekje played a fundamental role in transmitting cultural and material developments to ancient Japan, including Chinese written characters, Chinese and Korean literature, technologies such as ferrous metallurgy and ceramics, architectural styles, sericulture and Buddhism.

The Joseon Dynasty became Korea's first golden age, as a majority of Korean innovations were developed at that time. In the 1400s, Korea had the highest standard of living in East Asia due to improvements in agricultural production. Unfortunately, the high standard of living would be burdened by feudalism as peasants made up 80% of the entire population and excessive authoritative government administration that existed in medieval Japan and Europe. Highly educated Yangbans entered government as influential scholars during the Joseon Dynasty. Wealthy landowners and a scholar-gentry, similar to a social structure that in China were the leading social class in Joseon society. Moreover, Confucianism was utilized as a blueprint for organizing Joseon society in which private business remained under government influence inhibiting economic growth as the Confucian social hierarchy placed merchants at the bottom under scholars, farmers, craftsmen, and technicians even though merchants along with craftsmen and technicians led middle class lifestyles.

The Joseon government also subsidized the agricultural industry and land reclamation projects to increase food production – the growing of rice, barley, buckwheat, beans, ginseng, cotton and potatoes. Accompanying the agriculturally based prosperity came with the increased use of irrigation and a modern monetary economy was beginning to emerge. From the late sixteenth to the early seventeenth century, invasions from Japan and China wiped out the command system and forced Joseon Korea to transition to a market economy. Markets premature very slowly and grain markets in agricultural regions of Joseon Korea were less integrated compared to early modern China and Japan. The Joseon bureaucracy was tarnished entirely and began started to receive taxes in commodity money — rice and cotton textiles — and eventually began to mint copper coins and lifted trade restrictions. One famous international trade port during the Joseon era was Pyongnam, where medieval Korean merchants offered brocades, jewelries, ginseng, silk, and porcelain, which were renowned worldwide.

In the 17th century, privately operated handicraft factories replaced government operated factories which spearheaded the production of goods and services for sale. The increase in mercantile activities contributed to the rise of commercial farming, which transformed rural Joseon life. Coin currency circulated bridging the gap between rural life and the city economies. By the eighteenth and nineteenth centuries, rice productivity would decline in addition to deforestation and natural disasters contributed to the slowdown of the Joseon economy. Grain storage would become a target for corrupt politicians and tax exemptions would cease to exist to agricultural production from 1860 onward.

Korea under the late Joseon dynasty was seen predatory and rent-seeking, as it was marred by rampant political corruption that led to the decline of the Joseon dynasty which created a power vacuum that drew the Qing Dynasty and Japan to compete for influence over the Korean peninsula. Corvee obligations, excessive taxation, landlord exploitation, and peasant oppression contributed to Joseon Korea's gradual economic decline. The relative decline of Qing China coupled with a modern and industrialized Japan gave the Japanese to flex its newly modernized political and military muscles to occupy and colonize the Korean peninsula, a quest Japan had been trying to do since centuries. By the late-19th Century, the Joseon Dynasty was unable to keep up with the rapid industrialization of the Western World and Japan. In 1910, Japan annexed Korea due to the decline of the Qing Dynasty, and would remain under Japanese control until its defeat by the Allied Powers during World War II.

Modern era

Main articles: Miracle on the Han River and Taiwan Miracle

Present growth in East Asia has now shifted to Mainland China. As of early 2016, Japan, South Korea, Taiwan, and Hong Kong are the four East Asian countries and regions that are considered developed markets by most economic indexes, and Singapore is the sole developed market by all economic indexes in Southeast Asia. Since the end of the 20th century, Japan's role as the principal economic power in the region has shifted to the Four Asian Tiger economies and more recently, China, which became world's second largest economy in 2010. Furthermore, a 2012 report by The Economist noted that South Korea is expected to overtake Japan in terms of GDP per person at power purchasing parity by 2017, a feat already accomplished by Macau (2010), Taiwan (2010), Hong Kong (1997), and Singapore (1993).

China

Main article: Chinese economic reform

Internal strife, political turmoil and foreign exploitation of China resulted the share of the country's GDP to fall to 5 percent in the 1950s to accounting for one-sixth of the global economy as of 2016 with the Chinese renminbi playing a major role in establishing the modern Chinese economy on a domestic and global scale. China's rise in the global economy would catapult the middle kingdom as the largest East Asian economy, overtaking Japan as the world's second largest economy in August 2010.

Hong Kong and Macau

Main article: Four Asian Tigers

In the early 1960s, the British colony of Hong Kong became the first of the Four Asian Tiger economies by developing strong textile and manufacturing industries and by the 1970s, had solidified itself as a global financial center and was quickly turning into a developed economy. Following in the footsteps of Hong Kong; South Korea, Taiwan, and the city-state of Singapore soon industrialized thanks to capitalist and open policies by their efficient governments. By 1997, Hong Kong, Taiwan, and South Korea joined Japan as developed economies in East Asia, while Singapore became the sole developed economy in Southeast Asia. Additionally, the economy of Macau, then a Portuguese colony, was also experiencing rapid growth during this period through textile manufacturing and the development of a hospitality and tourism industry, which resulted in high levels of foreign direct investment into the territory. Macau replaced Las Vegas as the world's largest gambling center in 2007.

Japan

Main article: Meiji Restoration

East Asia became an area of economic power starting with the Meiji Restoration in the late 19th century when Japan rapidly transformed itself into the only industrial power in East Asia. From the late nineteenth century to the end of the 1980s, Japan was the dominant economic power in East Asia. In the late 1980s and early 1990s, Japan's GDP was large as the rest of Asia combined together. Japan's early industrial economy reached its height in World War II when it expanded its empire and became a major world power. After its defeat and economic collapse after the war, Japan's economy recovered in the 1950s with the post-war economic miracle in which rapid growth in the Japanese economy propelled the country into the world's second largest economy by the 1980s.

In 1853, an American fleet led by US Commodore Matthew C. Perry appeared off the Japanese coast. Faced with the threat of invasion, Japan was forced to cast aside global isolation and would open up to Western ways. Emperor Meiji would emerge from the shadows stressing his zeal for modernization through the development of industry and cutting edge modern technology by abolishing feudalism in the late 1860s. The Meiji government endeavored to assimilate Western ideas and philosophies, science and technological advances and ways of military warfare integrated with their traditional East Asian philosophies to suit its growing needs for modernization. As the Meiji Period began, the new Japanese national leadership systematically ended feudalism and transformed the archipelago from an underdeveloped feudal samurai state into East Asia's first industrialized nation that closely rivalled the Western colonial powers during the latter half of the nineteenth century. Economic reforms included a unified modern currency based on the yen, banking, commercial and tax laws, stock exchanges, and a communications network. Establishment of a modern institutional framework conducive to an advanced capitalist economy took time, but was completed by the 1890s. To promote industrialization, the government decided that, while it should help private business to allocate resources and to plan, the private sector was best equipped to stimulate economic growth. The greatest role of government was to help provide the economic conditions in which business could flourish. The Meiji period saw the new government pour its economic resources into industry and modern technology. As the Meiji government emerged as the chief promoter of private enterprise, enacting a series of pro-business policies, it poured venture capital into many private businsesses focused on modern technology, but many of these failed to take off and were sold at a loss to bidding businessmen but the power of the great zaibatsu business conglomerates such as Mitsui and Mitsubishi would become household names. From the onset, the Meiji rulers embraced the concept of a free market economy and adopted British and North American forms of free market capitalism. Once the initial losses were written off, many of the remaining businesses would become profitable. Legal frameworks were established and export and banking industries would soon take hold to funnel venture capital towards financing modern trade and industry. The political judiciousness of the Meiji leaders galvanized Japan's position in the Orient as East Asia's greatest power sustaining a powerful military that defeated the stagnant Chinese Qing Dynasty during the First Sino-Japanese War as well as vanquishing imperial rival Russia in 1905, the first major military victory in the modern era of an East Asian power over an European one. In 1910, Japan made among it's many territorial aquisitions by annexing Korea and parts of Manchuria establishing itself as a maritime colonial power in East Asia. The industrial revolution in Japan first appeared in textiles, including cotton and especially silk, which was based in home workshops in rural areas. By the 1890s, Japanese textiles dominated the home markets and competed successfully with British products in China and India, as well. Japanese shippers were competing with European traders to carry these goods across Asia and Europe. By improving the quality of textile making equipment to both upgrade the quality and quantity of silk, Japan became the world's largest exporter of silk in 1909. After the first twenty years of the Meiji period, the industrial economy expanded rapidly until about 1920 with inputs of advanced Western technology and large private investments poured into modernizing heavy industry. The Meiji government also modernized its infrastructure by establishing railway and shipping lines, telegraph and telephone systems, shipyards, mines, and inaugurated a land reform program to prepare the country for further development. In addition, Japan also a highly educated population, where its industrial manufacturing sector grew significantly. Implementing the Western ideal of capitalism into the development of modern science and technology and applying it to private business and military enhancing capabilities helped catapult Japan into the forefront of military and economic dynamism by the beginning of the 20th century.

Policy

Among the major policy choices commonly adopted in East Asia, and noticeably less so elsewhere in the developing world are openness to foreign trade, significant levels of government savings and an emphasis on education for both boys and girls. While these attributes were far from universally applied, they are conspicuously present in the region to a much larger degree than is the case elsewhere.

See also

• 1997 Asian Financial Crisis
• Economic integration
• Economy of Hong Kong
• Economy of Japan
• Economy of Macau
• Economy of Mainland China
• Economy of South Korea
• Economy of Taiwan

External links

• Political economy of East Asia