The Unbearable Smallness of Japan’s Economy (part 2)
Akio Kawato / Former Ambassador to Uzbekistan and Tajikistan, Newsweek Japan Columnist
May 14, 2024
Part 2: Will the Western "Modernity” Model Succumb to the “Global South” Headed by China and India?
The weak yen makes Japan’s economy look smaller, so it is said that Japan was overtaken by Germany in dollar GDP terms last year. It is slated to be overtaken by India next year, which cannot really be helped given that India’s population is 15 times that of Japan.
What is more problematic in the world economy these days is that the developed countries as a whole, which have represented "progress" in the world by practicing the "modern" model of free economy and democracy, may be overtaken by China, India, Brazil, and other emerging economic giants.
But will this really happen? Probably not. Rapid economic growth in any country will come to a halt at some point. The governments of developed countries are imitating China by increasing their intervention in business activities and lavishing subsidies. However, it is not wise for them to be overly alarmed by China's controlled economy and end up curbing the vitality of their own free economies.
China's economy—a hollow success
China's economy sounds hollow inside when you knock on the wall of its ostentatious numbers. Originally, in the 2000s, there was a massive influx of foreign capital helped by preferential treatment of foreign investment. This inflow, combined with the trade surplus earned by the factories built by Japan, the U.S., Europe, and Taiwan, amounted to about 10% of China’s GDP at the time. In 2007, foreign direct investment in China was about $80 billion and its trade surplus was about $180. In the context of today's Japan, this would be equivalent to about 50 trillion yen coming from abroad in one year.
Chinese companies convert this income into yuan and deposit it in banks, which then use it as capital to finance land development and infrastructure construction. Since land in China is either nationally or publicly owned and inexpensive, the added value generated by the investment is enormous. This has immeasurably swelled China's GDP.
Today, many infrastructure investments have turned out to be unprofitable, creating a mountain of bad loans, and many real estate companies are on the verge of bankruptcy. And China still relies upon foreign-affiliated companies for 35% of its exports.
Chinese EVs are now dominating the global market, but this is because of their low prices supported by government subsidies. Had it been in a foreign country, they would wither quickly because of the lack of dealer networks and power supply networks.
Trump's imposition of high tariffs was followed by the European countries erecting barriers to Chinese products. Thus, as China's external demand is at a standstill, its domestic demand is not doing particularly well.
Although China has always been considered a large market, its domestic consumption in 2023 was merely 40% of that of the United States. Since Chinese companies are competing for larger shares in that market, excessive competition is generated, forcing out Western companies.
In 2023, China's growth rate has fallen to just over 5% even in its official statistics. China managed to achieve high growth with the huge inflow of foreign capital, but its system is not up to sustaining high growth on its own.
Japan is similar in this respect. But China has been faced with the problem of an aging population far beyond that of Japan before it can accumulate enough capital for pensions and other purposes. Private companies such as Huawei and Haier can grow autonomously, but they alone cannot support the Chinese economy. The majority of Chinese big enterprises are state-owned and depend on government orders and subsidies. Even if the "Cultural Revolution generation" of Xi Jinping and his ilk, who were sent to the countryside during the Cultural Revolution and brainwashed in the ideology of socialist economy leave the leadership positions, and those who grew up during Deng Xiaoping's reform and opening-up period come in to take charge, foreign capital will no longer come in droves, nor will domestic companies change their behavior.
Waiting for Godot—a Rise of India
The current economic boom in India also lacks substance. Certainly, the middle class has grown, and cows hardly ever roam the boulevards of big cities. Consumption of passenger cars and other products has also increased dramatically. But the "India boom" has come and gone many times.
The economic growth of the 18th century Britain was supported by investments from the Netherlands and other countries (which purchased a large amount of British government bonds), and the rapid growth of postwar Japan was triggered by the huge procurement by the US Army during the Korean War. The rapid growth of the Chinese economy since the late 1990s has also been driven by "foreign investment," as already mentioned.
In India, a comparable massive inflow of foreign capital has not yet begun.
As can be seen from the World Bank statistics
"https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS?locations=IN", foreign direct investment is hovering around 3.5% of GDP, not on a trajectory of steady increase like in China in the 2000s. What is more, India’s trade balance is in deficit. This is a far cry from China in the 2000s, where foreign capital inflows and trade surpluses combined reached about 10% of GDP.
And India is entangled in a web of vested interests that tend to discourage foreign investment and imports. Even the Tata conglomerate gave up building a factory in West Bengal in 2014 because of difficulties in expropriating land. This difficulty in land expropriation is also an obstacle in the construction of railroads and highways. The ruling party does not have a majority in the upper house of parliament, which makes it impossible to amend the related laws.
The high import tariff rates, demanded by the country's weak manufacturing sector, are an obstacle to foreign manufacturers investing in India, when they import machineries and components for assembly of their products. The government asks foreign companies to invest, saying "make in India," but officials with licensing authority reportedly refuse to budge, or often demand bribes. And relevant laws are suddenly and arbitrarily changed.
Because of inadequate primary education, many young workers are not literate or even able to start work on time. Indians are active as executives in large corporations around the world, but in India there are family feuds within companies, and many managers engage in accounting frauds and stock price manipulation. Such things also happen in Japanese and Western companies, but the prevailing atmosphere does not allow such misconducts.
The hype around the “Global South”
This is why there are limits to the growth of China and India. It is only with a massive influx of foreign capital that the countries of the "Global South" can begin their rapid growth. They may be able to obstruct the moves of the developed countries at the United Nations and elsewhere, but, as things stand now, they do not have the power to initiate changes in the world.
The "rise of the Global South, led by China and India," is a media hype. If governments and businesses in developed countries are misled by this, they will make a big mistake in their policies.
KAWATO Akio is a Former Ambassador of Japan to Uzbekistan and a Former Chief Economist, Development Bank of Japan
The weak yen makes Japan’s economy look smaller, so it is said that Japan was overtaken by Germany in dollar GDP terms last year. It is slated to be overtaken by India next year, which cannot really be helped given that India’s population is 15 times that of Japan.
What is more problematic in the world economy these days is that the developed countries as a whole, which have represented "progress" in the world by practicing the "modern" model of free economy and democracy, may be overtaken by China, India, Brazil, and other emerging economic giants.
But will this really happen? Probably not. Rapid economic growth in any country will come to a halt at some point. The governments of developed countries are imitating China by increasing their intervention in business activities and lavishing subsidies. However, it is not wise for them to be overly alarmed by China's controlled economy and end up curbing the vitality of their own free economies.
China's economy—a hollow success
China's economy sounds hollow inside when you knock on the wall of its ostentatious numbers. Originally, in the 2000s, there was a massive influx of foreign capital helped by preferential treatment of foreign investment. This inflow, combined with the trade surplus earned by the factories built by Japan, the U.S., Europe, and Taiwan, amounted to about 10% of China’s GDP at the time. In 2007, foreign direct investment in China was about $80 billion and its trade surplus was about $180. In the context of today's Japan, this would be equivalent to about 50 trillion yen coming from abroad in one year.
Chinese companies convert this income into yuan and deposit it in banks, which then use it as capital to finance land development and infrastructure construction. Since land in China is either nationally or publicly owned and inexpensive, the added value generated by the investment is enormous. This has immeasurably swelled China's GDP.
Today, many infrastructure investments have turned out to be unprofitable, creating a mountain of bad loans, and many real estate companies are on the verge of bankruptcy. And China still relies upon foreign-affiliated companies for 35% of its exports.
Chinese EVs are now dominating the global market, but this is because of their low prices supported by government subsidies. Had it been in a foreign country, they would wither quickly because of the lack of dealer networks and power supply networks.
Trump's imposition of high tariffs was followed by the European countries erecting barriers to Chinese products. Thus, as China's external demand is at a standstill, its domestic demand is not doing particularly well.
Although China has always been considered a large market, its domestic consumption in 2023 was merely 40% of that of the United States. Since Chinese companies are competing for larger shares in that market, excessive competition is generated, forcing out Western companies.
In 2023, China's growth rate has fallen to just over 5% even in its official statistics. China managed to achieve high growth with the huge inflow of foreign capital, but its system is not up to sustaining high growth on its own.
Japan is similar in this respect. But China has been faced with the problem of an aging population far beyond that of Japan before it can accumulate enough capital for pensions and other purposes. Private companies such as Huawei and Haier can grow autonomously, but they alone cannot support the Chinese economy. The majority of Chinese big enterprises are state-owned and depend on government orders and subsidies. Even if the "Cultural Revolution generation" of Xi Jinping and his ilk, who were sent to the countryside during the Cultural Revolution and brainwashed in the ideology of socialist economy leave the leadership positions, and those who grew up during Deng Xiaoping's reform and opening-up period come in to take charge, foreign capital will no longer come in droves, nor will domestic companies change their behavior.
Waiting for Godot—a Rise of India
The current economic boom in India also lacks substance. Certainly, the middle class has grown, and cows hardly ever roam the boulevards of big cities. Consumption of passenger cars and other products has also increased dramatically. But the "India boom" has come and gone many times.
The economic growth of the 18th century Britain was supported by investments from the Netherlands and other countries (which purchased a large amount of British government bonds), and the rapid growth of postwar Japan was triggered by the huge procurement by the US Army during the Korean War. The rapid growth of the Chinese economy since the late 1990s has also been driven by "foreign investment," as already mentioned.
In India, a comparable massive inflow of foreign capital has not yet begun.
As can be seen from the World Bank statistics
"https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS?locations=IN", foreign direct investment is hovering around 3.5% of GDP, not on a trajectory of steady increase like in China in the 2000s. What is more, India’s trade balance is in deficit. This is a far cry from China in the 2000s, where foreign capital inflows and trade surpluses combined reached about 10% of GDP.
And India is entangled in a web of vested interests that tend to discourage foreign investment and imports. Even the Tata conglomerate gave up building a factory in West Bengal in 2014 because of difficulties in expropriating land. This difficulty in land expropriation is also an obstacle in the construction of railroads and highways. The ruling party does not have a majority in the upper house of parliament, which makes it impossible to amend the related laws.
The high import tariff rates, demanded by the country's weak manufacturing sector, are an obstacle to foreign manufacturers investing in India, when they import machineries and components for assembly of their products. The government asks foreign companies to invest, saying "make in India," but officials with licensing authority reportedly refuse to budge, or often demand bribes. And relevant laws are suddenly and arbitrarily changed.
Because of inadequate primary education, many young workers are not literate or even able to start work on time. Indians are active as executives in large corporations around the world, but in India there are family feuds within companies, and many managers engage in accounting frauds and stock price manipulation. Such things also happen in Japanese and Western companies, but the prevailing atmosphere does not allow such misconducts.
The hype around the “Global South”
This is why there are limits to the growth of China and India. It is only with a massive influx of foreign capital that the countries of the "Global South" can begin their rapid growth. They may be able to obstruct the moves of the developed countries at the United Nations and elsewhere, but, as things stand now, they do not have the power to initiate changes in the world.
The "rise of the Global South, led by China and India," is a media hype. If governments and businesses in developed countries are misled by this, they will make a big mistake in their policies.
KAWATO Akio is a Former Ambassador of Japan to Uzbekistan and a Former Chief Economist, Development Bank of Japan
The English-Speaking Union of Japan
不当に縮んで見える日本経済 (その2)
河東 哲夫 / 元日本政策投資銀行設備投資研究所上席主任研究員
2024年 5月 14日
その２：先進諸国「近代」モデルは中印グローバル・サウスに負けるか
円安で日本経済が縮んで見えるため、日本は昨年ドル表示のGDPでドイツに抜かれ、来年はインドに抜かれると言われる。日本がインドに抜かれるのは、人口で15分の1だから仕方ない。
それよりも、最近の世界経済で問題なのは、自由経済、民主主義の「近代」モデルを奉じて世界の「進歩」を演出してきた先進諸国全体が中国、インド、ブラジルなど新手の経済大国達に抜かれてしまうかもしれない、ということ。
しかし、本当にそうなるのか？ おそらくそうはなるまい。どの国でも、急速な経済成長はいつかは止まる。先進諸国は中国を真似て企業活動への介入を強め、助成金を乱発しているが、中国の統制経済に過度にアラームされて、自由経済の活力を自ら傷つけるのは賢いやり方ではない。
中味がうつろな中国経済
中国の経済は、その大仰な数字の壁を叩くと、中が空ろになっている音がする。元々2000年代、外資優遇で外資が大量に流入。日米欧・台湾が建てた工場がたたき出す貿易黒字を合わせると、当時のGDPの10％程に相当した。2007年の対中外国直接投資は約800億ドル貿易黒字は1800億ドルほど。日本の現在で言えば、50兆円相当の資金が外国から1年でやってきた感覚になる。
中国企業はこの収入を人民元に替えて銀行に預け、銀行はそれを資本に土地開発、インフラ建設に融資する。中国の土地は国有、公有で安いから、投資が生み出す付加価値は絶大。これで中国のGDPは膨れに膨れた。
今ではインフラ投資の多くは採算が取れずに不良債権の山となり、不動産業も倒産寸前の企業が続出。輸出の35％分近くは外資系企業が抑えたまま。中国のEVは世界市場を席巻しているが、これは政府助成金に支えられた安値販売の成果。外国ではディーラー網や給電網が整備されていないから、あだ花で終わるだろう。
トランプが高関税を課したのを皮切りに、欧州諸国も中国製品への障壁を築き始めた。こうして中国は外需が頭打ちの一方、内需も振るわない。もともと中国は大市場と言われながら、2023年になってもその国内消費の規模は米国の40％。その市場を中国の企業が取り合うから、過当競争もいいところで、はじき出されてしまう西側企業が増えている。
2023年、中国の成長率は公称5％強に落ちている。中国は外資の流入で高度成長を実現したが、それを自力で続けていける体制はなかったのだ。日本もその点は同じなのだが、中国は年金などのための資本を蓄積する前に、日本をはるかに上回る人口の老齢化に直面することとなった。華為技術有限公司（フアーウェイ）やハイアールのような民営企業は、自律的な成長力を持っているが、彼らだけでは中国経済を支え切れない。多くの企業は国営、或いは政府の発注、助成金に依存しているのだ。文化革命時代、農村に送られ社会主義経済を叩き込まれた習近平達、「文革世代」が指導的地位から去り、鄧小平の改革・開放時代に育った連中が指揮を取るようになっても、外資が大挙してやってくることはもうないし、国内企業が振る舞いを改めることもないだろう。
まだ始まってもいないインドの台頭
今のインド経済ブームも、内実が乏しい。確かに中産階級は育ってきたし、大都市の大通りを牛が我が物顔に徘徊することもほとんどなくなった。乗用車など消費も格段に増えている。しかし、「インド・ブーム」はこれまで何度も起きては、つぶれているのだ。
18世紀英国の経済成長は、オランダなどからの投資（英国の国債を大量に購入）に支えられていたし、戦後の日本の高度成長も朝鮮戦争での特需が引き金を引いている。1990年代後半からの中国経済の高度成長も、既に述べたとおり「外資」がエンジンになっている。
インドでは、これに類する外資の大量流入はまだ始まっていない。世銀の統計 https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS?locations=IN を見てもわかる通り、外国からの直接投資はGDPの3.5％周辺をうろついていて、2000年代の中国のような右肩上がりの増加はない。貿易収支は赤字で、2000年代中国で、外資流入と貿易黒字を合わせてGDPの10％程に達していたのには全く及ばない。
そしてインドは、既得権益の網の目に絡み取られていて、外国投資や輸入は阻害されがちである。土地の収用が難しいため、タタ財閥でさえ2014年、西ベンガルでの工場建設を断念している。鉄道やハイウェーの建設でも、この土地収用の難しさは障害になっている。議会上院で与党が多数を抑えていないため、法律改正ができないのだ。
国内の弱体な製造業の要求で、関税率が高止まりしていることは、外国の製造業がインドに投資して部品を輸入する場合の障害となる。政府はmake in Indiaとか言って、外国企業に投資をするよう求めるが、許認可権限を持つ役人達が動かない、あるいは賄賂を要求することが多いと伝えられる。そして関連法は突然、恣意的に変えられる。
初等教育が不備なため、識字率どころか、始業時刻も守れない若年労働者が多い。インド人は世界中の大企業で幹部として活躍しているが、インド国内では企業内のお家騒動があったり、不正会計や株価操作に手を染める者がいる。日本や欧米の企業でもそのようなことはあるが、全体の雰囲気はそのようなことを許さない。
「グローバル・サウス」騒ぎの虚しさ
こういうわけで、中国、インドの成長には限界がある。「グローバル・サウス」の国々は外資が大量に流入して初めて高度成長を開始するので、国連などで先進諸国の動きをいろいろ邪魔することはできても、世界の変化を主導する力はない。
「中国・インドを筆頭とするグローバル・サウスの台頭」は、マスコミの誇張によるものなのだ。先進国の政府・企業はこれに惑わされると、政策を誤ることになるだろう。
筆者は元駐ウズベキスタン大使
円安で日本経済が縮んで見えるため、日本は昨年ドル表示のGDPでドイツに抜かれ、来年はインドに抜かれると言われる。日本がインドに抜かれるのは、人口で15分の1だから仕方ない。
それよりも、最近の世界経済で問題なのは、自由経済、民主主義の「近代」モデルを奉じて世界の「進歩」を演出してきた先進諸国全体が中国、インド、ブラジルなど新手の経済大国達に抜かれてしまうかもしれない、ということ。
しかし、本当にそうなるのか？ おそらくそうはなるまい。どの国でも、急速な経済成長はいつかは止まる。先進諸国は中国を真似て企業活動への介入を強め、助成金を乱発しているが、中国の統制経済に過度にアラームされて、自由経済の活力を自ら傷つけるのは賢いやり方ではない。
中味がうつろな中国経済
中国の経済は、その大仰な数字の壁を叩くと、中が空ろになっている音がする。元々2000年代、外資優遇で外資が大量に流入。日米欧・台湾が建てた工場がたたき出す貿易黒字を合わせると、当時のGDPの10％程に相当した。2007年の対中外国直接投資は約800億ドル貿易黒字は1800億ドルほど。日本の現在で言えば、50兆円相当の資金が外国から1年でやってきた感覚になる。
中国企業はこの収入を人民元に替えて銀行に預け、銀行はそれを資本に土地開発、インフラ建設に融資する。中国の土地は国有、公有で安いから、投資が生み出す付加価値は絶大。これで中国のGDPは膨れに膨れた。
今ではインフラ投資の多くは採算が取れずに不良債権の山となり、不動産業も倒産寸前の企業が続出。輸出の35％分近くは外資系企業が抑えたまま。中国のEVは世界市場を席巻しているが、これは政府助成金に支えられた安値販売の成果。外国ではディーラー網や給電網が整備されていないから、あだ花で終わるだろう。
トランプが高関税を課したのを皮切りに、欧州諸国も中国製品への障壁を築き始めた。こうして中国は外需が頭打ちの一方、内需も振るわない。もともと中国は大市場と言われながら、2023年になってもその国内消費の規模は米国の40％。その市場を中国の企業が取り合うから、過当競争もいいところで、はじき出されてしまう西側企業が増えている。
2023年、中国の成長率は公称5％強に落ちている。中国は外資の流入で高度成長を実現したが、それを自力で続けていける体制はなかったのだ。日本もその点は同じなのだが、中国は年金などのための資本を蓄積する前に、日本をはるかに上回る人口の老齢化に直面することとなった。華為技術有限公司（フアーウェイ）やハイアールのような民営企業は、自律的な成長力を持っているが、彼らだけでは中国経済を支え切れない。多くの企業は国営、或いは政府の発注、助成金に依存しているのだ。文化革命時代、農村に送られ社会主義経済を叩き込まれた習近平達、「文革世代」が指導的地位から去り、鄧小平の改革・開放時代に育った連中が指揮を取るようになっても、外資が大挙してやってくることはもうないし、国内企業が振る舞いを改めることもないだろう。
まだ始まってもいないインドの台頭
今のインド経済ブームも、内実が乏しい。確かに中産階級は育ってきたし、大都市の大通りを牛が我が物顔に徘徊することもほとんどなくなった。乗用車など消費も格段に増えている。しかし、「インド・ブーム」はこれまで何度も起きては、つぶれているのだ。
18世紀英国の経済成長は、オランダなどからの投資（英国の国債を大量に購入）に支えられていたし、戦後の日本の高度成長も朝鮮戦争での特需が引き金を引いている。1990年代後半からの中国経済の高度成長も、既に述べたとおり「外資」がエンジンになっている。
インドでは、これに類する外資の大量流入はまだ始まっていない。世銀の統計 https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS?locations=IN を見てもわかる通り、外国からの直接投資はGDPの3.5％周辺をうろついていて、2000年代の中国のような右肩上がりの増加はない。貿易収支は赤字で、2000年代中国で、外資流入と貿易黒字を合わせてGDPの10％程に達していたのには全く及ばない。
そしてインドは、既得権益の網の目に絡み取られていて、外国投資や輸入は阻害されがちである。土地の収用が難しいため、タタ財閥でさえ2014年、西ベンガルでの工場建設を断念している。鉄道やハイウェーの建設でも、この土地収用の難しさは障害になっている。議会上院で与党が多数を抑えていないため、法律改正ができないのだ。
国内の弱体な製造業の要求で、関税率が高止まりしていることは、外国の製造業がインドに投資して部品を輸入する場合の障害となる。政府はmake in Indiaとか言って、外国企業に投資をするよう求めるが、許認可権限を持つ役人達が動かない、あるいは賄賂を要求することが多いと伝えられる。そして関連法は突然、恣意的に変えられる。
初等教育が不備なため、識字率どころか、始業時刻も守れない若年労働者が多い。インド人は世界中の大企業で幹部として活躍しているが、インド国内では企業内のお家騒動があったり、不正会計や株価操作に手を染める者がいる。日本や欧米の企業でもそのようなことはあるが、全体の雰囲気はそのようなことを許さない。
「グローバル・サウス」騒ぎの虚しさ
こういうわけで、中国、インドの成長には限界がある。「グローバル・サウス」の国々は外資が大量に流入して初めて高度成長を開始するので、国連などで先進諸国の動きをいろいろ邪魔することはできても、世界の変化を主導する力はない。
「中国・インドを筆頭とするグローバル・サウスの台頭」は、マスコミの誇張によるものなのだ。先進国の政府・企業はこれに惑わされると、政策を誤ることになるだろう。
筆者は元駐ウズベキスタン大使
一般社団法人 日本英語交流連盟