From China’s 13th Five-Year Plan to India’s recent economic policies and growth rate aspirations as well as Japan’s tentative march to return to some economic growth, governmental influences in all such markets are evident. The preference for central guidance by government technocrats and policy makers supersedes strategy and overshadows free markets. President Xi Jinping’s primary emphasis in the 13th Five-Year Plan is on the ability of the party to shape and influence central guidance in determining the economic future of China.
Under this plan, state-owned enterprises will continue to play a central role guiding what is labeled as emerging/strategic and priority sectors. He went on to further suggest that macroeconomic and tax reform are important; however, they will still be directed and guided by Beijing and will rely, also, on domestic economic reforms, as well as looking at evolving global economic conditions and global market developments. Moreover, the plan indicated that currency reforms instigated by the central government will ultimately create the favorable conditions for a free-floating renminbi by the year 2020. The plan also emphasizes that overcapacity in the industrial sector will be reduced and income growth will come about by relying upon innovative economic activities guided by the plan. The confluence of these factors will make China a moderately prosperous economy, according to President Xi.
These factors, coupled with the elimination of corruption, and the emphasis on national security will strengthen the party and the Chinese economy, and will enhance better civil–military relations. This central plan is intended to improve the economic well-being of the Chinese citizenry. Moreover, Chinese firms’ capabilities in the domestic market will be fashioned to allow both state-owned and non-state-owned Chinese firms enhanced global competitive positions. It should be noted that this comprehensive plan indicates that centralized control is the main pillar of the strategy of the 13th Five-Year Plan. The critics of such a plan indicate that this strategy, while intended to strengthen China, is not likely to transform the Chinese economy and society or make markets, rather than the party, the ultimate arbitrator for Chinese economic reform.
China’s arrival as the second-largest global economy after the United States was based upon significant investments as well as an ability to manufacture products for export markets. The new strategy, in contrast, could allow for further Chinese steady economic growth or it could lead to economic failures, which could result in political turmoil and external confrontations within Asia and across the Pacific. Moreover, Mr. Xi’s strategy represents some departure from Deng Xiaoping’s strategy that was built upon internal investments, which generated the double-digit gross domestic product (GDP) growth of the last three decades. That strategy relied upon exports, which resulted in balance-of-payment surpluses as well as the establishment of the Chinese Sovereign Wealth Fund (SWF) estimated to exceed three trillion dollars. A new watershed within Asia’s economies suggests that the earlier growth of the Chinese economy is beginning to slow down and currently stands at 6.7%.
India’s recent GDP growth rate of 7.9% during the first quarter of 2016 has exceeded the current growth rate of China and thus has positioned India as the fastest growing emerging economy within Asia. It should be noted, however, that most economic analysts question the reliability of India’s Central Statistics Office. Although the Indian government of Modi had introduced a significant number of economic reforms and measures intended to sustain India’s economic growth, they are not likely to allow for this growth rate to continue. The Indian business community remains skeptical about maintaining such a growth rate and suggests that business confidence is lacking and bank credits are significantly low to sustain the 7.9% GDP growth rate. They also suggest that the absence of a nationwide goods and service tax, as well as low banking deposits, are other areas of concern.
Japanese Prime Minister Abe, hosting the G7 meeting on the Japanese island of Kashiko in Shima, Mie Prefecture of Japan, called upon the G7 leaders to emphasize policies to revive the struggling global economy and to move the G7 countries out of their current slowdown. Minister Abe called for the use of all monetary, fiscal, and structural policy tools to revive the economies of the G7 with a particular emphasis on fiscal policy. With the forthcoming House elections in Japan, Mr. Abe plans to launch additional reforms to stimulate the Japanese economy and to move Japan out of its economic doldrums and toward a GDP growth rate that would allow him to continue to suggest that Japan is on the road to economic recovery. Moreover, he’s trying to rally support for his intended increase in the consumption tax that is scheduled for next year. Appearing to speak from a position of leadership and authority as a host of the group of G7 could enhance his position to introduce the tax and revive the dormant Japanese economy.
Despite its status as the second-largest economy, China was absent from the G7 meeting in Japan. Moreover, President Obama’s pivot toward Asia and the attempt to form the Trans Pacific Partnership, which does not include a rising China, are seen in the eyes of China as maneuvers representing economic and political security challenges. However, it should be noted that the aggressive land proclamations drives of China under Xi Jinping, and the building of bases on the sandbanks of the China Sea, cloud and complicate economic and political cooperation across Asia as well as in Asia–Pacific relationship. These challenges, however, will have to wait for the next G7 meeting as well as further liberalization of economic policies and reforms by the Chinese leadership.
As we move back into our classrooms hopefully refreshed by our summer research, we can be motivated by the humble offerings of this scholarly journal. This time, we present three distinguished articles and a book review to whet your appetites. Our contributors hail from Malaysia, China, and Washington, DC, and their articles cover everything from the board room to the factory floor.
Our first article is “The Effect of Exchange Rate Volatility on the Nexus of Technology Sophistication and Trade Fragmentation of ASEAN5 Exports to China” by Chee-Wooi Hooy, Universiti Sains Malaysia; Ahmad Zubaidi Baharumshah, Universiti Putra Malaysia; and Robert D. Brooks, Monash University. It explores the influence of technology on Malaysian exports to China. The second article, “Board Size and Corporate Risk: Evidence from China,” by Junaid Haider and Hong-Xing Fang of Dongbei University of Finance and Economics, posits a negative relationship between board size and corporate boldness.
The third article is “Causal Ambiguity in Lean Production Implementation in Malaysia” by Suhaila Shamsudin, Nur Issah Mohd Radzi, and Rozhan Othman of Universiti Teknologi Malaysia. It investigates the lack of success of lean production system implementation in Malaysia, which appears to be partially due to motivational uncertainty. Our final offering in this slim volume is Howard University professor Philip Fanara, Jr.’s review of C.C. Goldthorpe’s Rubber Manufacturing in Malaysia: Resource-based Industrialization in Practice (NUS Press Singapore).
We appreciate your time and consideration, and we look forward to the submission of your own good work. We also appreciate the time and effort of our peer reviewers. Without your efforts, we would not be able to continue this tradition of fine, peer-reviewed scholarship. Thank you!