Economic Issues, Vol.
29, Part 1, 2024
Introduction to the Special Issue
on the Asia and Pacific Economies
Nimesh Salike1, King Yoong Lim2 and Chunping Liu3
T
he Asia-Pacific region has long served as the epicentre of the global
economy. The significant transformation the region experienced,
particularly post-World War II, stands as a model for the rest of the world.
Japan took the lead in the 1960s with rapid industrialisation and robust
economic growth, setting an example for other economies in the region. This
trend continued until the recent ascent of China as a formidable economic
power. Japan, recognised as a technology leader, facilitated the transfer of its
technology to other regional economies through vertical integration, leading to
structural changes in production and exports for other major players in the
region.
Akamatsu (1962) elucidated this phenomenon by drawing parallels with
the flying pattern of geese, where the first goose leads and others follow. This
concept, termed the “Flying Geese Paradigm”, posits that the production of
goods migrates from advanced to less advanced economies as production costs
rise in advanced nations. The Flying Geese Paradigm underscores the idea
that a lead goose initiates industrialisation, breaking the boundary of primary
goods production, with firms diversifying production to accommodate newly
available or created technology. This pattern was observed in East Asia, where
production shifted from Japan to the Newly Industrialised Economies (NIEs)
like Hong Kong, Singapore, South Korea, and Taiwan in the 1980s, followed
by the ASEAN-4 economies (Indonesia, Malaysia, Philippines, and Thailand) in
the 1990s. China’s economic success in recent decades has been an incredible
contributor to the rapid industrialisation of the region and has helped to lift
over 800 million people out of poverty. Vietnam subsequently followed suit in
the most recent time period.
Hidalgo et al (2007) emphasise the need to upgrade products that countries
produce and export to keep the momentum of economic growth. Key factors for
such upgrading include technology, capital, institutions, and skills needed to
make newer products that could be more easily adapted from ‘nearby’ products
that these countries are producing. The pattern of industrialisation is explained
by introducing concepts such as economic complexity, product complexity,
and the “Product Space.” Product Space highlights the interconnectedness
of products’ capabilities, with core products possessing closely connected
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capabilities and peripheral products having less interconnected capabilities.
The process of industrialisation and economic development involves acquiring
more complex sets of capabilities to engage in activities associated with higher
productivity (Hidalgo and Hausmann 2009).
The Product Space signifies the industrialisation path for a country,
emphasising the need for countries to diversify their production bases from low
technology-intensive items to more complex ones. This diversification involves
migrating from existing exports to products requiring similar capabilities. The
process may vary among countries based on their initial positions in the space
and their ability to acquire necessary capabilities. An analysis of the Product
Space reveals the evolving product structure of East Asian economies over time.
Initially exporting natural resources and agricultural items, these economies
progressed to textiles, and toys, and eventually diversified into manufacturing
items. In recent years, industry has expanded to include technologically
advanced products such as computers, smartphones, and microcircuits (Chen
et al 2020).
Analysing the Product Space assists in assessing a country’s capacity to
manufacture various products and forecasting its growth trajectory based on its
current capabilities. China, in particular, is forging a new trajectory of growth
by continuously enhancing its export portfolio. In the 1990s and early 2000s,
China primarily exported less sophisticated products but, over time, it has
transitioned to including more sophisticated products in its export repertoire.
This evolution highlights China’s adeptness in diversifying its production
capabilities and upgrading its production portfolio (Chen et al 2023).
Nevertheless, the region is currently grappling with difficulties amidst global
headwinds induced by both regional and global factors, prominently marked
by perceived protectionism among nations and an escalating trend of geo-
economic fragmentation. Worldwide, nations are more frequently articulating
their positions based on national strategic interests, economic competition, and
a focus on domestic economic policy goals. Countries must strive to mitigate
geo-economic fragmentation, which hinders collaborative efforts toward shared
objectives including climate change, future pandemics and ensuring energy and
food security. Instead, efforts should be directed towards rebuilding confidence
in rules-based multilateral frameworks that promote transparency and policy
predictability, fostering collective global prosperity (IMF 2023). Embracing
multilateral cooperation is deemed the most effective approach to addressing
these challenges.
The Conference on Asia and Pacific Economies (CAPE), co-hosted by Xi’an
Jiaotong-Liverpool University (Suzhou, China) and the Asian Development
Bank Institute (Tokyo, Japan), is a collaborative initiative aimed at addressing
challenges faced by the Asia-Pacific region. The conference focuses on some
of the most pertinent and urgent topics, fostering in-depth presentations
and discussions of high quality. As a flagship event organised under the
Society for the Advancement in Economic Studies (SAES), CAPE promotes
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Economic Issues, Vol. 29, Part 1, 2024
interdisciplinary research among academics, business communities, and
policymakers. Celebrating its 10th year of continuous organisation in 2023,
CAPE has partnered with Economic Issues for a Special Issue featuring top-
notch research papers.
This special edition features three papers addressing diverse economic issues
in the region. The first paper, titled ‘Does methodology matter? A revisit of the
energy-growth nexus in Asia and Pacific economies’, explores the relationship
between energy consumption and economic growth in the Asia-Pacific region.
The authors employ various econometric methodologies, including time series
and panel data analysis, emphasising the importance of following proper
procedures for such studies. The authors find a causal relationship between
energy consumption, factor inputs, and GDP in several economies and suggest
a positive impact of physical and human capital on GDP.
In the second paper, ‘Analysis on Co-movement of Asia-Pacific Stock Markets
under the Background of US-China Trade War’, the authors utilise an “event
study” to assess the impact of news announcements related to the US-China
trade war on the co-movement among stock markets in Mainland China, Hong
Kong, the US, Japan, and Singapore. The empirical results reveal a significant
influence of news releases on overall market co-movements in Asia-Pacific
economies. The authors argue for a prompt resolution of disruptions such as
the China-US trade war based on these findings.
The third paper focuses on financial literacy, particularly in a province
of Sri Lanka. Titled ‘Financial Literacy and Its Impact on Loan Repayment
Decision: Evidence from Rural Households in Sri Lanka,’ the paper examines
the influence of financial literacy on the loan repayment decisions of rural
households in the Uva Province of Sri Lanka. Using Probit regression analysis,
the authors find that higher financial literacy increases the probability of rural
households repaying loans. Moreover, a non-linear relationship between age
and loan repayment decision is observed, and factors such as marital status,
receiving remittances, non-disability, and debt-to-income ratio significantly
affect loan repayment decisions. The authors strongly recommend improving
the financial literacy of rural households based on their findings.
Endnotes
1. Nimesh Salike, International Business School Suzhou, Xi’an Jiaotong-Liverpool
University, Suzhou Dushu Lake Science and Education Innovation District, Suzhou
Industrial Park, Suzhou 215123 P.R. China, email address: [email protected].
2. King Yoong Lim, International Business School Suzhou, Xi’an Jiaotong-Liverpool
University, Suzhou Dushu Lake Science and Education Innovation District, Suzhou
Industrial Park, Suzhou 215123 P.R. China, email address: [email protected].
3. Chunping Liu, Nottingham Trent University, 50 Shakespeare St, Nottingham NG1
4FQ, U.K., email address: [email protected].
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References
Akamatsu K (1962) ‘Historical pattern of economic growth in developing countries’,
The Development Economies, 1, 3-25.
Chen C, Salike N and Thorbecke W (2020) ‘East Asian Flying Geese Paradigm and
Product Space’, Journal of Asia-Pacific Studies, 38, 24-43.
Chen C, Salike N and Thorbecke W (2023) ‘Exchange rate effects on China’s exports:
Product sophistication and exchange rate elasticity’, Asian Economic Journal, 37, 371-
400.
Hidalgo C, Klinger B, Barabasi A-L and Hausmann R (2007) ‘The Product Space
Conditions the Development of Nations’, Science, 317, 482-487.
Hidalgo C and Hausmann R (2009) ‘The building blocks of economic complexity’,
Proceedings of the National Academy of Sciences of the United States of America,
106(26), 10570-10575.
IMF (2023) ‘World Economic Outlook: Navigating Global Divergences’, International
Monetary Fund, Washington, DC.
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