[Apa yang berlaku sekarang tentu akan menggusarkan banyak negara - khususnya menteri yang menjaga kewangan negara. Setakat ini kita baru menerima kesan kemelesetan ekonomi Amerika sahaja. Jika Koizumi meneruskan rancangannya ramai lagi yang akan tercedera kerana yen yang murah akan menarik pelaburan dunia ke Jepun dan menggugat industri rantau Asean.

Sekarang negara China pula mula 'mencuri' pelaburan di rantau ini melalui beberapa strategi yang sungguh menarik dan berwawasan sekali. Mereka lakukan itu tanpa MSC - tetapi hanya dengan mencerdikkan rakyatnya dan mencipta beberapa segmen atau kelompok industri dengan tenaga buruh yang amat murah sehingga berjaya menawan banyak gergasi IT. Kemelesetan ekonomi dunia kini menyebabkan syarikat Jepun pun turut mengalihkan kilang di sini - itu termasuk Toshiba dan Sony (Fortune).

Nampak jelas siapa yang memang berwawasan dan siapa yang begitu haprak di zaman ini. Dengan langkah China itu ia bakal menjadi kuasa IT terbesar untuk mengikut jejak Taiwan sekarang ini. Tidak sia-sia Hong Kong dan Taiwan membina lapangan terbang yang besar kerana mereka sudah nampak semua kemungkinan ini....
- Editor]

http://business-times.asia1.com.sg/
views/story/0,2276,15415,00.html?

July 23, 2001

Asia must be ready for Japan shock

By Vikram Khanna

IF the downturn in US capital spending is bad for East Asia, and especially its technology exporters, there's another rude shock looming that could be worse: an economic and financial meltdown in Japan - and no, we haven't seen it yet.

What we're talking about here is the possible consequences of Japan's maverick prime minister, Junichiro Koizumi, going ahead and implementing his 'shock therapy' reforms - the ones which his predecessors found too hot to handle.

Although Mr Koizumi's programme is still short on details, from what little we know, it has a 'scorched earth' agenda:

use tougher criteria to classify bad loans in Japan's banking system (which means they will increase dramatically, perhaps to around US$1 trillion) and then dispose them within two to three years; force banks to stop lending to irretrievably weak companies; follow this up with serious deregulation across many sectors; tighten up on public finances; and alongside, pursue sweeping administrative, social and political reforms as well.

Mr Koizumi, who enjoys 80 per cent-plus popularity ratings, acknowledges that his programme will lead to more jobs being lost and firms going bust. How all this will lead to economic recovery hasn't been clearly explained - many Japanese worry that it will not. But what's certain is that, if the programme is pursued in earnest (and that's a big if), it will lead to a savage downturn in Japan, perhaps even a depression, with a dramatic increase in unemployment, already running at a record 5 per cent.

Bad timing: With the US also flirting with recession (Mr Koizumi couldn't have chosen a worse time to pursue his reforms), things could get pretty bad.

Just how bad will depend crucially on how the Bank of Japan chooses to respond. Its present position is that it has done everything it possibly can to ease monetary policy. If that's true (and many economists don't agree), then Japan is well and truly headed for a depression. But if it's not, further easing by the BOJ is on the cards - whether through more purchases of long-term government bonds, a higher inflation target, or purchases of foreign exchange (through the finance ministry).

Cheaper yen: That would spell a weakening of the yen, which, according to some analysts, could go to as low as 140 against the US dollar by the year-end. Japanese officials seem ready for this. Ask them about the yen and they say they won't 'intentionally' force the yen down to gain competitiveness - which many observers interpret to mean that an 'unintentional' weakening of the yen will be tolerated.

The chances are, we will probably get some combination of a sharp economic slowdown in Japan and a weaker yen in the short term, that is, over the next two to three years.

Asian policymakers will need to consider what the impact of this will be. The immediate casualty will be trade - although this won't hurt Asia too badly as Japan accounts for only around 13 per cent of the region's total exports. More serious will be a retrenchment of foreign direct investment by Japanese companies and banks in Asia - as happened during the Asian crisis.

Contagion effect: But most serious of all is the possibility of Asian currencies weakening sharply in the wake of the yen's decline against the US dollar. One way the process could be triggered is by a devaluation of the renminbi.

So far, China has pledged not to pursue this option. But if the yen were to weaken to, say, beyond 140 to the greenback, Beijing might be forced to change its tune. And that will put other Asian economies under serious competitive pressure and make their currencies vulnerable as well.

There's still a chance none of this will happen - that Mr Koizumi won't actually push through his apocalyptic reforms. But in case he does, Asian economies must be ready to handle a grim scenario.

http://business-times.asia1.com.sg/
views/story/0,2276,15410,00.html?

July 23, 2001

Resurgent China should jolt S'pore, rest of Asia

I REFER to the report 'S'pore must carve niche areas or be left behind: SM Lee' by Loh Hui Yin (BT, Jun 14).

I agree with SM Lee's comments. The media has compared Singapore with Hong Kong. Actually, the real rivals to both these cities are the Chinese coastal cities, notably Shanghai. Actions by the central government indicate a desire for Shanghai to be the financial hub, not Hong Kong.

If the centre of gravity for financial activities is shifted from Hong Kong to Shanghai, most of the educated and more westernised Hong Kong people will also move to Shanghai. It would be like the exodus of the educated and well-off who fled Shanghai when the communists invaded.

China can now be divided into 3 economic regions: the rich coastal cities; the middle-class central plains; and the backward region in the west. Economic progress will flow from the coastal cities to the plains and finally to the western regions.

This will allow China to hold on to any industry without fear of rising labour costs. Take the example of the hard disk industry.

Most hard disks in the world are now made in Guangdong. The industry has shifted from Singapore to Malaysia and Thailand, and is now in Guangdong.

The main reason for the shift is labour cost. However, China's hard disk industry won't suffer the same fate: Once the labour cost in Guangdong rises to an uneconomical level, MNCs simply have to shift inland to the central provinces.

And later, when the labour cost in the central provinces rise, the MNCs can shift to another more inland province.

This process can continue till MNCs reach the western regions like Xinjiang. The whole process of shifting factories from the coastal cities to the western-most regions can take up to decades.

And once the factories move out of Guangdong, the MNCs can set up R&D centres and higher value added services in Guangdong. Thus, once an industry has set foot on China's soil, it is likely to remain there for a long time.

Moreover, there are now thousands of Chinese students and workers overseas. They are learning from world-class companies. Once China has developed and raised its social standing, overseas talents will return and help raise its technological expertise further - much like what has happened in Taiwan.

What China has, therefore, is the potent combination of high-tech capabilities and low labour costs. Only India has a remote chance of being in a comparable situation.

For the rest of Asia, there's an urgent need to find other niches, with India's focus and dominance in software and China's potential dominance in hardware.

Of course, any regional conflict (political and economic, or even internal unrest) involving China could derail its progress.

But just as it would be unwise to assume China's growth will continue in a straight line, it would be equally unwise to assume China will remain backward compared to Singapore, Japan or even the US.