East Asian Competition and Taiwanese Know-how

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Tigers and Sea Turtles
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There is a visible transplantation of capital, know-how, and skill from overseas Chinese communities.

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<p>Well, first of all, if China was located elsewhere, not in East Asia, but in Latin America, or South Asia, or Africa, it would probably view its record of economic development during the 60s or even 70s as not so bad. Even before the market reform between 49 and 79, the average growth rate was almost 4 percent. By 3rd world standards it's not bad at all. And also, in terms of human development indicators, China did a very impressive job in life expectancy, reducing infant mortality rate, things like that. But, China is surrounded by many, many extremely successful late industrializing economies. The neighboring East Asian economies, they have pursued an export oriented industrialization strategy. So this is kind of a bad practice, exemplified by Taiwan, South Korea, and other countries. So, that also gives China the kind of guidance or encouragement so that, at least the coastal part of China, can follow in the footsteps of Taiwan, South Korea, Hong Kong, and Singapore, to move rapidly into this export-led growth. Lastly, there is a visible transplantation of capital, know-how, and skill from overseas Chinese communities, primarily from Hong Kong and Taiwan. Remember that in the early 90s, which was right after Tiananmen Square incident, most foreign companies, I mean western companies, or even Japanese companies, were very reluctant to go into China. And also, the relationship between China and the west was very contentious right after the Tiananmen Square incident. But the Taiwanese companies, and companies based in Hong Kong, and also some companies owned by overseas Chinese seized the opportunity because at that point they could get the best tax breaks, they could get a very lucrative package from the Chinese authority. So they move in en mass, really en mass. To extend that, virtually all the light manufacturing activity in Taiwan was totally transplanted to China, especially to the Pearl River Delta. And I think that&rsquo;s a very important transfer not of capital &ndash; actually China, itself, has enough domestic savings, it is not really short of working capital -- but knowledge about the foreign market, knowledge about how to organize this supply network, how to do quality control, and how to plug oneself into this global chain of production. I think that&rsquo;s really very precious for China from the very beginning. And also those people happen to speak the local language. So, they can communicate very effectively with the local cadres, with the local manager, with the local employees. So, I think that actually created a tremendous spillover effect. Many of those successful exporting companies in Guangdong right now, many of them are former employees of Hong Kong or Taiwanese run companies. They work for them for a couple of years and then learn all the tricks, all the know-how, and start setting up their own company. So that preparation is really a key to the success in places like Guangdong, and later on in Jiangsu.</p>
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Chu Yun-han talks about China's integrating local ingenuity with imported know-how in the early period of reform to create growth.