NRI Papers
No.112 December 1 , 2006
  Asia's New Growth Mechanisms Toward 2010 and Beyond
— Suggested strategies for Japanese companies —
Shingo KONOMOTO, Hiroshi UENO, Yoshihiko IWADARE,
Takeshi MORI, Hiroyasu AMANO
   As we approach the 2010s, China and India are assuming greater prominence. In Asia, new growth mechanisms have been emerging in which Japan, NIEs (South Korea, Taiwan, Hong Kong, Singapore), the ASEAN countries, China and India are mutually depending on each other and growing dynamically.
   Attention should be given to the Greater Mekong Subregion (GMS) where Vietnam is forming a growth center benefiting from a rapidly developing infrastructure in the region. The GMS is expected to undergo the most significant changes in Asia in the next ten years. Spurred on by the elimination of intra-region tariffs by 2010, production bases within the ASEAN region will be rearranged and most will be relocated to the GMS.
   New, remarkable market segments that could be described as the "Asian middle class," chiefly consisting of people in their 20s and 30s who have new awareness and sense of value, are becoming influential. In order to take advantage of the consumption boom in Asia as opportunities to increase companies' revenues, it is essential to deploy marketing and product strategies that specifically appeal to these segments.
   In the 2010s, the economic scale of China will exceed that of Japan. Enormous consumption markets will appear in China's costal areas and China will assume leadership of the Asian economy. To take "aggressive approaches" to evolve business in China, the key to success for Japanese companies in expanding business operations in China is whether they can deploy appropriate human resource strategies.
   In India, a consumption market is finally in place leading to economic growth. However, such growth involves risks such as undeveloped infrastructure and deficiencies in the legal and structural framework. For firms to fully expand their businesses in India, resolute "defensive approaches" must be taken. Winning the competition in such a challenging market requires fundamental commitment by the top executives at the head offices.
   In the future, Asian business should be promoted under an organizational structure that enables business operations covering all Asian countries by envisioning network and division of labor throughout the region, rather than vertically dividing Asian countries by country. This will require the development of human resources well versed in all of Asia and the building of functions of an all-Asia headquarters that will enable decision making based on the circumstances in the whole region of Asia.

I Growth in China and India Vitalizing the Asian Economy
II Change in Competitive Landscape in ASEAN and the Rise of GMS
III The Rise of the Middle Class and the Expansion of Consumption Markets in Asia
IV Growth and Risks Exist Together in the Chinese Market
V India's Prospects and Inherent Business Risks
VI Asia in the 2010s and Suggested Strategies for Japanese Companies


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