Asia’s Chains that Bind
Asia’s vast production networks are at the heart of Asia’s booming growth. Three changes in China may auger significant changes in how these networks invest and function in the years ahead. To manage Asia’s growing economic integration, its nations need greater coordination of monetary and fiscal policies, with leaders focusing as much on the regional good as well as individual national interests.
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TOKYO – Asian manufacturers have always migrated in search of cheaper labor. Until recently, China seemed their ultimate destination, claiming an ever larger share of investment by Asia’s huge production networks. But three developments in China – rising wage inflation, the coming of a new five-year plan that will seek to shift dramatically the Chinese economy’s focus from exports to domestic consumption, and a cut-off in the supply of rare earths to Japanese companies – may auger significant changes in how these networks invest and function in the years ahead.