Asia’s expectations for Japan on increase

The Yomiuri Shimbun

People in Southeast Asian countries and India are increasingly interested in China as an emerging power, but at the same time their trust in and expectations of Japan have likewise expanded.

These noteworthy findings were yielded by a recent survey conducted jointly in seven Asian countries by The Yomiuri Shimbun, The Korea Times (Hankook Ilbo) and the Gallup group.

The survey showed that Japan still wields a not inconsiderable influence over other Asian countries.

The survey was conducted in Japan, India, Indonesia, Malaysia, South Korea, Thailand and Vietnam, and was the third of its kind following similar polls in 1995 and 1996.

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The rise of China

In the 10 years since the last survey, the most noteworthy change in the world has been the rise of China, and the latest survey reflected this change.

More than 80 percent of pollees in Malaysia, Thailand and Indonesia said they had a “good impression” of China.

Asked whether “the economic development of China would influence the economy” of their own countries, the majority of respondents, barring those in Japan and South Korea, said it would influence their countries “more positively.”

The findings indicate the relations these countries have with China have been deepening politically and economically.

China’s expanded influence in the future compared with other countries is being widely acknowledged as obvious. Asked, “Which countries or territories do you think will become most influential including economic power on the Asian region in the future,” respondents in Malaysia, Thailand and Vietnam placed China on top of a list of about 20 countries and territories.

While the “emergence of China” has been much heralded in recent years, the “decline of Japan” has been pointed out for a long time now.

Nearly 60 percent of Japanese respondents said Japan’s influence in Asia was getting “weaker” or “somewhat weaker.”

However, the survey showed Japan’s diplomatic foundation in Asia is still sound and that Japan is not facing a “decline.”

The majority of people in other countries said Japan’s influence in Asia was getting “stronger” or “somewhat stronger.”

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Rumors of ‘decline’ incorrect

Asked whether Japan was playing “an active role in the development of Asia as a member of Asia,” about 90 percent of respondents in the Southeast Asian countries said “very active” or “somewhat active,” with increases between six and 18 percentage points from the 1996 survey. About 80 percent of respondents in India also had a similar view.

People in India, Indonesia, Malaysia, Thailand and Vietnam gave high marks to Japan with regard to trust.

Japan’s long-time commitment to helping nations build themselves and develop economically have fostered pro-Japan sentiments in the countries Japan has helped.

Also, amid China’s emergence, those countries are recognizing again the significance and importance of Japan, which has built close economic and other relations with those countries.

This development runs counter to the views held by the Japanese themselves.

In addition to economic relations, expectations for Japan’s leadership are widening to such fields as counterterrorism, antipiracy, disaster relief and the fight against infectious diseases.

An environment in which Japan can conduct a more active foreign policy in Asia is developing–as proved by the latest opinion poll.

(From The Yomiuri Shimbun, Sept. 14, 2006)

(Sep. 14, 2006)

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Rising labor costs may dim China’s appeal

The Yomiuri Shimbun

Labor costs in China are skyrocketing. The low-cost environment in the country where abundant, talented human resources can be obtained cheaply is declining.

One major factor is the presence of migrant workers. In China, about 120 million farmers once worked at factories and construction sites in urban areas, sustaining the nation’s economic growth.

Over the past three or four years, however, the number of migrant workers has decreased, resulting in increases in labor costs at a record high pace.

Last year, the average salary for workers throughout the country increased by 14.1 percent compared with 2004.

This year, many local governments are raising the minimum wages of workers, set independently by localities. The move is in line with a policy set out by the administration of President Hu Jintao to protect the poor.

The local government of Shanghai, where the average salary is the highest in the country, decided to boost the minimum wage by about 9 percent. Major cities such as Guangzhou, Beijing, Tianjin and Dalian, where many foreign companies have their Chinese bases, have decided to introduce double-digit increases in the minimum wage.

The decline in the portion of migrant workers in the labor force is partly due to economic reasons, including an increase in farming income and increased job opportunities in provincial regions.

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Shifts in population

In addition to the economic factors, demographic changes in the country, in particular the decline in the number of young people in farming villages, are affecting the labor supply. The labor shortage in the relatively developed coastal regions, including Guangdong Province, has started to spread inland.

Under the circumstances, local governments of major cities are growing more concerned. Hikes in the minimum wage have started to take on a tinge of competition to secure sufficient numbers of workers.

If labor costs continue to climb in China, foreign companies doing business there may have to revise their management strategies.

Furthermore, China is reviewing its policy of giving favorable treatment to foreign companies.

One major issue is whether to unify corporate income tax, which is similar to Japan’s corporate tax, as the rates for foreign and domestic companies differ. China has given a preferential tax rate to foreign firms in an attempt to procure funds from overseas as it has suffered from a shortage of capital.

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Attractive tax arrangement

While the tax levied on domestic companies is about 33 percent, foreign companies pay less than 15 percent.

However, with competition between domestic and foreign firms intensifying, criticism has increased over the preferential treatment given to foreign firms in China.

As debate on whether to abolish favored treatment for foreign companies continues, the State Development and Reform Commission recently announced unification of corporate income tax rates. The commission manages China’s economic policies.

At the same time, the commission said it would shift its policy of luring foreign companies from “quantity” to “quality.” To enhance its international competitive edge, China will probably become more selective toward foreign businesses, giving priority to foreign companies in high-technology industries.

If the new policies are put into effect, the investment environment will be greatly affected. For foreign firms, China’s attraction as a target for investment will inevitably decline.

However, compared with other Asian countries, China still holds economic advantages. Increases in labor and other costs will promote advancement of domestic markets and industrial structures.

Both positive and negative aspects of the increased costs in doing business in China must be thoroughly examined.

(From The Yomiuri Shimbun, Aug. 28, 2006)

(Aug. 28, 2006)

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Asian trade partnership will test diplomacy

The Yomiuri Shimbun

EDITORIAL

Asian trade partnership will test diplomacy

At a meeting of economic ministers in Malaysia, Economy, Trade and Industry Minister Toshihiro Nikai officially announced an ambitious Japanese plan for a free trade agreement that encompasses East Asia and the Pacific.

Whether the ambitious plan actually can be realized will be a test of Japan’s trade diplomacy.

The economic partnership agreement proposed by Nikai involves 16 nations: Japan, China, South Korea, the 10 member nations of the Association of Southeast Asian Nations, and Australia, India and New Zealand. The agreement is designed to abolish tariffs on commodities, promote investment, protect intellectual property and take other steps to liberalize trade in a wide variety of areas. Japan wants to hold negotiations on the plan as soon as each nation has examined it.

The population of the 16 nations under the “Comprehensive Economic Partnership in East Asia” plan totals about 3.1 billion, about half of the global population. Combined gross domestic product of these nations is about $9 trillion, about one-fourth of the global GDP.

If the plan is realized, trade and investment will be further accelerated, pushing up Japan’s GDP by 5 trillion yen.

Lackluster response

However, the initial reaction from these nations has been unenthusiastic. This is probably because they are suspicious about whether Japan will take the initiative in liberalizing its market.

The Doha Round of the World Trade Organization’s multilateral trade negotiations were broken off in July. As a result, many nations are focusing on bilateral and regional free trade agreements as well as economic partnership agreements.

However, Japan lags other countries in this area. Only five nations concluded or have agreed to conclude economic partnership agreements with Japan. Negotiations between Japan and South Korea have been suspended. With ASEAN, negotiations have faced rough going in the agricultural field, with an agreement planned for next March is unlikely.

On the other hand, China has already concluded a free trade deal with ASEAN. Furthermore, it has long been arguing for an economic partnership of 13 nations–ASEAN members, Japan, China and South Korea–forming an East Asia Community.

Avoiding Chinese dominance

Nikai’s proposal to include Australia, India and New Zealand is designed to counter China’s influence in the smaller grouping. The members are identical to those in an 16-nation East Asia Community plan proposed by Prime Minister Junichiro Koizumi.

However, the issue of liberalizing agricultural markets has always been a barrier in Japan’s trade negotiations with other countries.

Within the Japanese government, opinions are divided over the East Asian economic partnership plan. For instance, the Agriculture, Forestry and Fisheries Ministry is reportedly uncomfortable with the plan. One major factor is inclusion of Australia, an agricultural giant, in the liberalization plan.

Japan’s growth hereafter depends on whether an “open Asia-Pacific” can be wisely utilized. Japan needs to beef up the international competitiveness of its agricultural products so that the domestic agricultural business sector will not suffer under market liberalization. The government has to come up with measures to effectively reinforce the agriculture sector.

The post-Koizumi administration will have the important task of departing from the long-held “defense only” trade policy.

(From The Yomiuri Shimbun, Aug. 25, 2006)

(Aug. 25, 2006)

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