intra-regional trade should be placed within the global context and be viewed as part
of the profound restructuring process which occurred in the global economy. U.S.-Japan
trade frictions have generated significant spill-over effects on the region. In particular,
it has created closer ties between Japan and the rest of Asia. The "Asianization" of
capital, which increases the intra-regional flow of FDI, has also boosted intra-firm trade
within the region. The buoyant intra-regional direct investment flow is basically a consequence of the realignments of exchange rates in Japan and the ANIES in the
mid-1980s. Furthermore, the appreciation of the Japanese Yen has made many of the
Asian countries shift their exports from the U.S. to Japan and to procure parts and
components from the ASEAN-4 rather than from Japan. The economic reform in China
since the late 1970s has helped to open up its vast and untapped domestic market, and
to revitalize re-export trade in Hong Kong and Japan. Above all, the implementation
of trade liberalization policy in countries such as Taiwan and South Korea and the
ASEAN-4 has significantly opened up the domestic markets of these economies. As a
result of rapid economic growth, GDP per capita (and therefore the living standard) of
many Asian countries has been increasing at a spectacular rate. Among the four
ANIES, Taiwan experienced the most rapid growth in GDP per capita between 1979-89.
In absolute terms, Hong Kong has the highest GDP per capita when compared to the
other three economies.
An important region-wide impact which results from a richer Asia is to reduce dependence on the markets outside the region. As a matter of fact, for economies with
relatively larger domestic markets, such as Taiwan and South Korea, economic growth recent years can be described as "export-led" and "domestic demand-driven"
concurrently. A richer Asia helps the region to promote intra-regional flow of capital,
in
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