Wan-wen Chu

Import substitution and export-led growth: A study of Taiwan's petrochemical industry

Abstract In this paper, the study of Taiwans petrochemical industry is used to discuss the validity of certain hypothesis concerning the economic success of the Asian newly industrializing countries (NICs). We find in the case of Taiwans petrochemical industry that, in order to promote local upstream production, import substitution was a supplementary strategy in Taiwans export-led growth. Moreover, and contrary to the neoclassical hypothesis, the state played a crucial role in the initial stage of the industrys development in the 1970s, and has continued to provide help and subsidies until the present time. This strategy was succesful insofar as export growth in the downstream sector was maintained. After 1982, the state increased its subsidies without significant effect on growth suggesting both the growing political clout this industry and a decline in the states autonomy.

Export-led growth and import dependence: The case of Taiwan, 1969–1981

Abstract Taiwan provides a notable example of successful export-led growth in recent years. This paper explores the prospects for her continued growth by examining past changes on the supply side. The Leontief input-output framework is employed. It is found that the level of import content in exports increased during the course of Taiwans export-led growth. On a sectoral level, the level of import dependence also increased for all but some leading export sectors. Linkage effects of exports are not large enough to offset the price effect and the effect of the spreading of import-dependent technology to other sectors. The decline in exports domestic content has been more than offset by the increase in quantity of exports, so that Taiwans income has been growing. This decline in the domestic content slowed from 1976 to 1981, but so did the growth in export volume, which reflects the effects of protectionism and the difficulty of finding enough new exportables.

Latecomer upgrading in Taiwan

Taiwan successfully upgraded its industries and entered into the high-tech industries in the last decades of the twentieth century. This essay examines how Taiwan achieved latecomer upgrading, by exploring the process by which its latecomer firms entered high-tech and modern services. It is found that the latecomer firms, called second movers here, entered high tech when the product just turned mature, and relied upon a different set of capabilities from those of the first movers in the advanced countries. The findings challenge prevalent orthodoxy, which includes open markets, increased foreign investment, small firms, and diminished state intervention. In reality, large domestically owned second movers rather than foreign enterprises or small networked firms have led Taiwans entry into mature high tech. In the meantime, the government intervention has not been lessened, but has been adapting to the changing environment, in promoting high-tech industry and modern services.

Entrepreneurship and bureaucratic control: the case of the Chinese automotive industry

Whether and how will the state treat different kinds of enterprises, state-owned enterprises (SOEs) and non-SOEs, in the related industry differently? Does this concern give its industrial policy any special Chinese characteristics? This article looks at a particular aspect of the Chinese automotive industry policy, that is, regulating entries, which poses special problems for the government. It explores why the government still retains this method of control even after it has been shown to be ineffective, and how the government tries to reconcile it with the aim of promoting entrepreneurship. The government finds that it cannot do away with entrepreneurship brought by the unplanned entrants (SOEs or not) to keep the industry competitive. Moreover, with SOEs accounting for the major part of the auto industry, the government has to protect the SOEs and propel them to upgrade at the same time. The government is thus likely to continue regulating entries, while trying to find a balance between the needs of keeping entrepreneurship and managing SOEs.

Market socialism, Chinese style: bringing development back into economic theory

China became an important engine of growth for the world during the recent global financial crisis, mainly because of the Chinese governments willingness and ability to stimulate aggregate demand quickly and effectively. China has been able to achieve that partly because of the legacy of central planning before the reform. The local governments implement infrastructure and other projects effectively and quickly, and the state-owned banks lend freely, under the guidance of the central government. These institutional arrangements, however, have been responsible for Chinas sustained growth since reform began in 1978. They are more for development than for aggregate demand management. The recent event only heightens the merits of its growth-promoting system. A question arises regarding the merits of the Chinese system of market socialism in general. Regarding economic theories, the outstanding performance of the Chinese economy has three implications: (1) Keynesianism is still alive; (2) Gerschenkrons theories of economic backwardness remain valid – that is, the larger the gap, the greater the need to socialize investment risks, and the more forceful the governments intervention needs to be; and hence (3) the more imbalanced the development process will be. These imbalances present daunting challenges.

Industry policy with Chinese characteristics:a multi-layered model

ABSTRACT Though China has characteristics of a developmental state like those of East Asia, there are evident differences due to China’s scale. Unlike the East Asian model, in which the central government takes charge of industrial policy directly, the Chinese central government formulates the policy and the local governments implement it. Thus, a multi-layered and complex policy structure has been the norm, and considered one of the Chinese characteristics. This paper examines several examples of Chinese industry, and finds that the effectiveness of this model mainly depends upon the way the central and local governments interact. For example, the 2004 automotive industrial policy was successful, because the central-local interactions demonstrated mutual accountability and thus brought policy innovation. After 2004, however, the auto industrial policy became ineffective, when the environment and the central-local relationship changed. It remains to be seen whether relevant parties could improve their coordination to produce a better result.

Special issue on economic development and industrial upgrading: East Asia and China

This Journal of the Asia Pacific Economy (JAPE) special issue brings together keynote speeches and a few selected papers from a conference entitled ‘Economic Development and Industrial Upgrading: East Asia and China.’ The conference was organized by the China Center for Economic Studies at Fudan University, and financially supported by the National Natural Science Foundation of China through its research grant (grant no. 71333002). It was held at Fudan University in Shanghai on 16 17 April 2014. The conference featured four keynote speakers, namely Keun Lee of Seoul National University, Wan-wen Chu of National Taiwan University, Naoki Murakami of Nihon University and Deqiang Liu of Kyoto University. Fifteen other papers were also presented at the conference. Keun Lee’s speech revisits the determinants of economic growth in developing countries with a focus on international integration variables. He finds that, aside from export specialization, export growth is the most robust and that the traditional variables of trade openness and FDI are not robust. In her speech, Wan-wen Chu examines how Taiwan achieved latecomer upgrading, by exploring the process by which latecomer firms entered high-tech and modern services. It is found that Taiwan, the advanced latecomer, achieved upgrading by relying upon domestically owned large-scale firms and with much help from the government. Naoki Murakami presents his study on the relationship between the change in industrial structure and urbanization by using post-WWII dataset from Japanese prefectures. Focusing on different patterns of migration in the process of urbanization, namely intra-prefectural and inter-prefectural migration, he demonstrates that these differences in migration pattern influence the relationship between the change of industrial structure and urbanization. Deqiang Liu estimates the marginal productivity of labor in China’s primary industry based on province-level data and suggests a different proxy for the survival wage compared to previous studies. He discovers that China’s economy has passed through the Lewis turning point around 2002 2004. The full written versions of the above keynote speeches are presented in this special issue. Five other papers examining different but important dimensions of economic development and industrial upgrading have also been selected for inclusion in this special issue. Meng-chun Liu provides empirical evidence that ‘manufacturing servitization’ has been influencing the formation of R&D alliances, allocating R&D resource bias to highdevelopment regions and industrial sectors, rather than revitalizing industrial clusters.