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1 EAS6212 Final Essay Author Affiliation Course Instructor Due Date

2 EAS6212 Final Essay 2. Why have multinational corporations created extensive global value chains in East Asia, including South East Asia? There are various multinational corporations (MNCs) that have created extensive global value chains in East Asia, including South Asia. These corporations are attracted by various factors that contribute to economic value in the region. As a result of these MNCs' attraction in the region, East Asia has achieved advanced technology and economic growth and development. Arguably, cost efficiency is a key factor influencing MNCs to create a global value chain in East and South East Asia. Most countries in this region offer lower labor costs as a strategic incentive approach to help organizations optimize production and minimize costs. For instance, there are multiple young people in China available to work for transnational corporation factories ( Chang, 2009). Consequently, MNCs take this cost advantage to maximize profits and help them acquire market competitiveness internationally. Availability of labor and MNCs in the region makes East and South East Asian populations to increasingly gain purchasing power as they progress to middle social class status due to economic improvement, making the region a better target market to consume the MNCs' products. In this regard, MNCs acquire easier access to a fast-growing and broader consumer base ( Gotoh, 2020). This is a strategic approach that aligns with various MNCs' long-term objective of attracting the rapidly growing population in the middle-income class. East and South East Asian countries have significantly improved their infrastructural development in the region, attracting MNCs investments. According to Brown (2016), infrastructural development is essential in influencing MNCs' decision-making. Typically, effective logistics and transportation networks play an essential role in facilitating global value

3 chain effectiveness and significantly reduce the cost of operating the business. Therefore, the East and South East Asian region attracts MNCs’ long-term investments due to improved and advanced infrastructure that facilitates better transport and supply chain management. Additionally, the broader spread of innovation and technology enhances an essential role in facilitating MNCs' investment in the East and South East Asian region. MNCs and East Asian and South East Asian countries collaborate effectively in enhancing innovative ideas essential for corporate business world enhancing competences that facilitates technology transfer between the businesses and the region’s population (Brown, 2016). Consequently, this approach facilitates these communities produce an innovative environment, helping the MNCs achieve effective operational efficiency to facilitate profit maximization. Thus, the East and South East Asian population develops effective significance in influencing MNCs' achieve a productive innovative network internationally. Moreover, MNCs’ are attracted by the East and South East Asian government business regulatory rules and regulations that attract foreign investment. For instance, the region’s government's decision to implementing industrial rules and regulations that attracts foreign companies in the region and implementing laws that reduce total tax liabilities facilitates an enabling environment for the MNCs' investments ( Brown, 2016). Thus, MNCs are attracted by government policies that help them develop global value chains and support their business operations. Therefore, cost efficiency, increasing population in middle-class income, improved infrastructure, innovative technology, and investment-friendly government policies play an essential role in attracting multiple MNCs to invest in East and South East Asian regions creating

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4 an effective global value chain. In this regard, the region attracts foreign investment in the global economy. 3. State interventionism in both China and Japan created excess corporate debts resulting in major corporate bankruptcies, discuss whether you agree with this view and why. Notably, state intervention played a significant role in controlling trade and industries in China and Japan. These state interventions purposed to enhance trade and regulate the economies to enhance effective developments and economic stabilities. Nonetheless, the two economies’ strategic approaches and economic policies implemented in East Asian countries had both positive and negative impacts on the economy. For instance, the major role of the state in facilitating economic growth and development in China especially through the provision of cheap credit and state-owned-enterprises (SOEs) expansion influenced the corporate sector to reach an overleveraging situation ( Yeung, 2017). In this regard, high growth rates of SOEs, under the control of Chinese state policies led the nations’ industries to become indebted to various financial institutions and organizations. Consistently, the corporate borrowing rate increased uncontrollably due to the provision of cheap credit by state-controlled financial institutions. Consequently, multiple Chinese companies became distressed financially due to the burden of excessive debts from various financial institutions. This approach caused some Chinese companies to experience crucial bankruptcies, incapacitating them from running the businesses further. Therefore, the state’s intervention in China influenced excess indebtedness among corporate businesses despite its effort to facilitate high economic growth in the country. In the same way, the Ministry of International Trade and Industry played a significant role in facilitating state intervention in Japanese companies by implementing industrial policies

5 and regulations during the post-war period. The effectiveness of these industrial regulation policies and social policy systems mainly targeted to facilitate significant changes that would have influenced attractive economic growth and development in the country ( Abrahamson, 2017). Nonetheless, the early 1990s’ unexpected high cost of living and assets in the region demonstrated the negative effects of excessive borrowing in the Japanese economy ( Yeung, 2017). These effects were indirectly initiated and built up during the intervention period by the Japanese state government. As a result, companies that had overborrowed from financial lending institutions encountered financial crisis that risked termination of their business organizations. Therefore, the Japanese state’s intervention in regulating the economic operations in the country had substantial benefits initially. However, this approach played an essential role in influencing excessive corporate borrowing leading to a financial crisis in the Japanese industrial sector. In this regard, the Japanese and Chinese governments implemented strategic approaches to facilitating high rates of economic development, increasing employment rates, and attaining a stable economy. However, these strategies led to an unintended economic imbalance that was facilitated by excessive borrowing leading to a financial crisis in multiple companies and eventual companies’ bankruptcy . The two nations implemented effective measures to address the situation and revive the economy successfully. For instance, strict social security systems were implementedinTaiwan and South Korea for the past 15 years to mitigate re-occurrence of financial crisis in the region (Holliday, 2005). Such social and economic measures influence economic development and prevents adverse effects on the economy during recession period. Therefore, Japanese and Chinese state interventions in facilitating high economic growth and resolving essential problems in circulation led to unintended excess corporate debts resulting in major corporate bankruptcies. These issues hurt the two nations’ economies significantly,

6 influencing global economic shifts. Therefore, states intervention in regulating commercial industries policies is complex and requires critical approaches to facilitate the country achieving its main economic strategic goals and take mitigative measures to prevent the occurrence of negative effects in the future. 4. ‘Financialization and digitalization have had more positive impacts on both economic and social development in China and Japan.’ Discuss whether you agree with this view and why. Arguably, there is various factor that affirms that financialization and digitalization have had positive impacts on both social and economic development in China and Japan. Incorporating financialization and digitalization economic activities has influenced effective and efficient operations in China, leading to rapid economic growth in the country. For instance, the 2015 “Made in China 2025” is strong evidence demonstrating the positive effects of technology and innovation in China ( Russo, 2019). China demonstrates its passion for digital transformation in economic growth and development by focusing on implementing electric vehicles and industry 4.0 technologies in production and manufacturing. The country also demonstrates its leadership skills in mobilizing sustainability through substantial government support and expanding the middle-class population that facilitates large-scale experiments in various energy production. Thus, significant initiatives like “Made in China 2025” demonstrate how financialization influences the formation of competitive social technical systems and facilitates effective economic growth among various industries in the country. Additionally, financialization and digitization have had positive impacts on Japan's economy. According to Brown (2016), the 2015 initiative, “Society 5.0” demonstrates the positive effects of digitization in Japan, demonstrating the country's commitment to leveraging

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7 digital technologies in implementing a super-smart society. The strategic objective of the 5 th science and technology that purposes to achieve and sustain a Super Smart Society demonstrates the significance of Japan in adopting transformative digitization. The main Additionally, research on big data adoption has shown significant and effective adoption of digital technologies among various Japanese manufacturing companies as evidenced by the Research Institute of Economy, Trade and Industry (RIETI). Therefore, financialization and digitization contribute significantly to Japan’s economic development facilitating the country to conform with the current digital technology trends globally. Furthermore, digitization has influenced essential social developments in China. The effective use of digital technologies such as the Internet of Things (IoT) and big data has influenced effective public services, urban planning, and governance in China. Schiller (1999) argue that the development of network technology helps corporate business adopt telecommunication to improve operational efficiency. In this regard, the digitalization scale in China has influenced advanced and improved innovation and efficiency in the Chinese economy. Nonetheless, digitalization can lead to some challenges like skill gaps and data insecurity, requiring careful attention. Therefore, enhancing data security and bridging the skills gap can enhance inclusive social development, maximizing the social benefits of financialization and digitalization in China. Japan’s Society 5 initiative has effectively enhanced social development in the country through the use of various digital technology platforms. Japan demonstrates its commitment to enhancing efficiency and improving manufacturing processes by emphasizing the internal use of digital data and sharing of data in the automotive supply chain sector ( Russo, 2019).

8 Consistently, the high aging population in Japan indicates the need to adopt highly effective digital solutions to address their unique health needs effectively. On the other hand, financialization and digitization can facilitate some challenges. For instance, China faces disparities in adopting new technologies as the economy transitions from industry 3.0 to 4.0, particularly among Small and Medium Enterprises, and SMEs ( Brown, 2016). Japan requires well-established and sustainable innovation to help address the aging population’s health needs. Therefore, the above illustrations affirm that financialization and digitization have had more positive than negative social and economic impacts in China and Japan. The two countries have strategically utilized digital technologies to enhance societal improvements and economic growth. Nonetheless, the two countries can implement effective strategies to address the emerging challenges in the financialization and digitization world.

9 References Abrahamson, P. (2017). East Asian welfare regime: obsolete ideal-type or diversified reality. Journal of Asian Public Policy , 10 (1), 90-103. Brown, R. C. (2016). Made in China 2025: Implications of Robotization and Digitalization on MNC Labor Supply Chains and Workers' Labor Rights in China. Tsinghua China L. Rev. , 9 , 186. Chang, D. O. (2009). Informalizing labour in Asia's global factory. Journal of contemporary Asia , 39 (2), 161-179. Gotoh, F. (2020). Industrial associations as ideational platforms: why Japan resisted American- style shareholder capitalism. The Pacific Review , 33 (1), 125-152. Holliday, I. (2005). East Asian social policy in the wake of the financial crisis: farewell to productivism? Policy & Politics , 33 (1), 145-162. Russo, M. (2019). Digital transformation in the automotive supply chain: China, Germany, Italy and Japan in a comparative perspective. DEMB WORKING PAPER SERIES . Schiller, D. (1999). Digital capitalism: Networking the global market system . MIT press. Yeung, H. W. C. (2017). Governing the market in a globalizing era: Developmental states, global production networks and inter-firm dynamics in East Asia. In Global Value Chains and Global Production Networks (pp. 70-101). Routledge.

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