According to the “geese-shaped model” of industrial development proposed by the Japanese economist Akamatsu, the economic community once believed that East Asian countries have formed a goose-shaped development pattern with Japan as the head, the four Asian tigers (South Korea, Singapore, Taiwan and Hong Kong region of China) as the geese body, and mainland China and ASEAN countries as the tail, that is, Japan first developed a An industry, when the industry matures, it will be transferred to the four Asian tigers, and when it matures, it will be transferred to the “geese tail” country for development, while the countries in the forefront will achieve industrial upgrading through transfer.
Up to now, the development trend of various countries and regions in the goose model has changed greatly, and the East Asian industrial chain has been continuously reconstructed. The adjustment made by Japanese and South Korean enterprises to the layout of the industrial chain is worth noting. China, Japan and South Korea can also seek new ways of cooperation from the adjustment of this industrial chain to reshape East Asia. Economic development model.20
Changes in “geese mode”
Since the mid-1960s, South Korea mainly imported raw materials, parts and manufacturing machinery from Japan. After assembly and processing, it was exported to the United States market, and quickly achieved rapid economic growth, known as the “Hanjiang Miracle”. South Korea has long actively studied and imitated Japan’s development model and adopted a government-led export-oriented development strategy.
From 1966 to 1978, South Korea accounted for about 40% of imports from Japan. Lee Byung-chul, the founder of Samsung Group in South Korea, visited Japan at the beginning of each year to communicate with the presidents of large Japanese enterprises such as Sharp, Nippon Railway and Ito Tada Business Association. 70% of the company’s management speaks Japanese.
After entering the 1990s, Japan’s “bubble economy” collapsed, greatly reducing overseas investment. In 1992, South Korea imported technology from overseas and the United States surpassed Japan. At the same time, Japan also began to shift its investment focus from South Korea to China and the ASEAN region.
In 1997, taking the Asian financial crisis as an opportunity, the South Korean government began to invest in the domestic manufacturing industry of raw materials and parts. In 2000, South Korea enacted the Law on Special Measures for Cultivating Enterprises in the Field of Raw Materials and Components. Since then, South Korean enterprises have gradually occupied the world’s leading position in semiconductor memory, LCD devices and other fields, especially Samsung, SK and other world-renowned electronic product manufacturers.
Later, South Korea leapt into a member of the Organization for Economic Cooperation and Development (OECD) and the Group of Twenty (G20), and the economic gap between Japan and South Korea narrowed significantly. South Korea’s GDP in 1970 was about one-thirtieth of that of Japan, and by 2018, it had narrowed to one-fifth. South Korea’s per capita national income in 2018 was $30,600, close to 80% of Japan’s, especially in semiconductors and other areas, South Korea has become a world leader.
Since July 2019, Japan has imposed control over the export of important semiconductor raw materials to South Korea, Japan and South Korea have deleted each other from the “white list” of trade, and South Korea have claimed to refuse to renew the Japan-South Korea Military Intelligence Protection Agreement, etc., which have escalated the “mutual abuse” between the two countries step by step and fallen into the lowest point since the establishment of diplomatic relations in 1965. On July 9, 2020, South Korean President Moon Jae-in stressed during an inspection of the semiconductor giant SK Hynix Lichuan factory that “South Korea must turn disaster into a blessing and embark on a path different from Japan.” As a result, Japan and South Korea have gradually changed from a “geese model” dominated by unilateral dependence to a “reciprocal” cooperation relationship, with more industrial and technological competition than cooperation.
It is difficult for South Korean enterprises to return in China.
Since the establishment of diplomatic relations between China and South Korea in 1992, South Korea’s exports to China have been increasing. At present, China is South Korea’s largest trading partner, and the trade volume between South Korea and China exceeds the combined trade volume of South Korea, the United States and South Korea and Japan.
For South Korea, which has long adopted an export-led development strategy, the rapid growth of trade with China has increased South Korea’s dependence on China. South Korean enterprises’ investment in China has changed from building an export-oriented production base to obtaining China’s domestic demand. At the same time, South Korean enterprises began to face fierce competition from local enterprises. In recent years, almost all South Korea’s main industries have faced strong competitors in the Chinese market. Hyundai, Samsung Electronics and others are in a “hard battle” in the Chinese market.
In December 2013, the South Korean government promulgated the Law on Supporting Overseas Investment Enterprises to Return to China, which attempts to change the hollowing of domestic manufacturing industry and promote the creation of domestic employment opportunities. Since 2018, affected by Sino-US economic and trade frictions, some South Korean enterprises exporting to the U.S. market have moved from China to other countries, but they are still mainly labor-intensive enterprises with poor competitiveness. By August 2020, only 80 companies have been identified as support targets.
Affected by the COVID-19 epidemic, South Korea’s economy may grow negatively in 2020. The emergence of the phrase “Anmeijing” (rely on the United States for security issues and maintaining close relations with China on economic issues) in South Korea shows the profoundness of South Korea’s economic dependence on China. In 2019, South Korea’s exports to China accounted for 25.1% of its total exports, while Japan’s exports to China accounted for 19.1% of its total exports during the same period; Japan’s exports to China accounted for 2.6% of Japan’s GDP, while South Korea’s exports to China accounted for 8.3% of South Korea’s GDP.
South Korea exports semiconductors to China the most, accounting for about 27.4%, followed by flat panel displays and sensors accounting for 6.7%, and petroleum products accounting for 5.6%. Structurally, semiconductor advantages are obvious, and intermediate products and manufacturing equipment also account for a high proportion. From the export volume from 2013 to 2019, the most obvious decline was the flat panel display. But this is not the result of shrinking the Chinese market, but because Chinese products with expanded supply capacity have gradually replaced Korean products.
Judging from the sales target of Korean-funded enterprises in China, the share of the third country market, including the U.S. market, has declined significantly since 2000, accounting for only 6.7% in 2018. Since about 10 years ago, South Korean companies have begun to adjust the positioning of Chinese strongholds, and the proportion of the South Korean market among the sales targets of Chinese and South Korean enterprises has gradually increased. Although China’s labor cost has risen, it is still cheaper than South Korea’s domestically and its transportation distance is close, which can reduce logistics costs. Therefore, China is becoming more and more attractive as a production stronghold for South Korea’s domestic demand.
According to the questionnaire survey conducted by the National Federation of Economic People of Korea in May 2020, only 3% of South Korean enterprises chose to “return to their home” in the answer to the question of “global supply chain restructuring response plan”. Although the South Korean government issued the “Programme for Alleviating the Difficulties and Export Support in the Coronavirus Pandemic” in February 2020 and then the “Comprehensive Program to Encourage Returning Enterprises” in June, the current government subsidies and incentives are insufficient, coupled with high labor prices and various Regulation makes it difficult for Korean enterprises to return to their home countries or transfer to other countries. For example, in January 2019, the South Korean company KOMELON announced that it would build a new plant in Vietnam and move the production line out of China. In March 2020, the company announced that it had interrupted its transfer plan considering Vietnam’s poor infrastructure and it was difficult to ensure competitiveness in manufacturing costs.
Imagination space of “China’s industrial chain”
In recent years, the earnings of Japan’s direct investment in China have continued to increase, reaching 2.3 trillion yen (about 155.7 billion yuan) in 2019, accounting for 16.1% of Japan’s investment income worldwide. In terms of manufacturing, the income from the Chinese market accounts for 24.4% of Japan’s investment income worldwide. The return on investment of Japanese companies in the Chinese market is 16.7%, which is much higher than that of other major investors such as North America, Europe and ASEAN.
According to the Ministry of Economy, Trade and Industry of Japan’s Overseas Local Legal Person Survey for the second quarter of 2020, overseas local legal persons’ worldwide sales amounted to $202.4 billion, a decrease of 32.2% compared with the same period in the previous year. However, sales of Japanese-funded companies in China increased by 2.8%, mainly due to the sharp increase in sales to the Chinese market. The Chinese market is the only country where overseas Japanese-funded enterprises have resumed growth.
Driven by the wave of technological revolution in new industries such as artificial intelligence, the Internet of Things, 5G and big data, the charm of the Chinese market and the development space are infinite. China is leading the world e-commerce market and will continue to lead the world consumer market in the future.
Under the unprecedented changes in the world in a hundred years, China’s economy has changed from high-speed growth to high-quality development, and the international cycle has changed to a new development pattern with the domestic cycle as the main body and the domestic and international cycles to promote each other. Expand domestic demand, expand opening up in an all-round way, and high-quality development is the general trend. At present, China is the country with the fastest economic recovery in the COVID-19 epidemic, and the only major country among the major countries to achieve positive economic growth. China’s huge consumer market, high-quality industrial team and improving business environment are still favored by enterprises in Europe, the United States, Japan and South Korea. With the continuous expansion of domestic demand and the increase of large middle-income groups, many Japanese and Korean enterprises will also stay in China and gradually integrate into the “Chinese industrial chain”.
