East Asia, especially the nations of China, Japan, and South Korea, have been in the forefront of industrial and economic development beginning in the1950s. The "Japanese Economic Miracle" denotes the rise of Japan from the ashes of World War II to become one of the world's most successful, modern economies within the span of 40 years.
During the 19th century, Japan was already the most successful among Asian countries in adapting Western technology and administration during the Meiji Restoration. However, Japan's rise to become the dominating power in East Asia that began under the Meiji emperor was abruptly stopped with Japan's defeat in World War II. Industry and basic infrastructure were widely destroyed, territorial acquisitions that followed 1894 were separated from Japan, and the United States governed the country through the Supreme Command of the Allied Powers. Inflation, unemployment, and shortages threatened the stability of Japan.
Japan's Economic Miracle Begins
With the onset of the Korean War and its industrial demands in 1950, Japan's economy grew rapidly. Industrial production increased by about 37% in 1951 alone. Overall, from 1950 to 1973, the Japanese economy expanded by almost 10% per year. In the 1970s, it still grew by an average of 5% per year, and by 4% per year in the 1980s.
Among the characteristics of the Japanese postwar economy were the strong influence of the state on industrial planning, the reemergence of dominant business groups, called keiretsu, with so-called house banks catering to the needs of a certain conglomerate; a labor market with enterprise unions open only to employees of one company and therefore closely interested in the fate of their companies; lifetime employment; and the rapid adaptation of technology. From 1950 to 1973, the strong contribution of productivity to growth was particularly remarkable.
A key factor of this growth was the export orientation of Japan's industry, which at the same time was protected by selective liberalization, allowing the free importation of inputs and intermediate goods and a closed market for consumer goods from foreign countries. Japanese economic growth remained impressive until 1989, and the miracle had enormous impact on Japan's East and Southeast Asian neighbors, as did direct Japanese investment. However, in the 1980s, major debts of companies too big to fail led to two decades of slump in the 1990s that continued into the 2000s, and has greatly diminished the appeal of the Japanese economic model.
The Tiger Economies
East Asia entered a new era following the end of the Cold War around 1990, as Russian involvement in the region declined significantly after the collapse of the Soviet Union. The end of the Cold War, however, did not result in the fall of the Chinese Communist Party. The People's Republic of China, after a decade of reform in the 1980s, continued economic reform to develop into one of the world's fastest-growing economies. Japan's economic success declined at the beginning of the 1990s, and all of the Asian Tiger economies suffered in the East Asian financial crisis of 1997. In the 1990s and 2000s, there was political liberalization throughout the region, though security issues regarding the Korean peninsula and Taiwan remained.
In South Korea in 1992, Kim Young Sam became the country's first nonmilitary president in more than 30 years. He launched a drive against corruption and announced a series of new policies to reform the South Korean economy. These measures were considered a success, although the issue of corruption returned to Korean headlines during the 21st century.
Since the mid-1990s, Taiwan's economy has grown to be the seventh largest in Asia. Trade conflicts with China have been ongoing—40% of Taiwan's exports go to China—as have political conflicts. China continues to push Taiwan for a unification agreement, which Taiwan continues to resist.
On July 1, 1997, the British government handed Hong Kong over to China. Political liberalization had also been taking place in Hong Kong, as British governors introduced democratic reforms in the years leading up to the handover. Hong Kong became a Special Administrative Region (SAR) of China, under the One Country, Two Systems policy developed by the late Chinese leader Deng Xiaoping. However, border controls between Hong Kong and China were not relaxed. Since then, Hong Kong has often been the site of popular protest against the communist Chinese government.
China's economic and international relations reached a turning point in 1972. Internal unrest and external threats inspired China to find practical strategies and new international alignments. In early February 1972, U.S. president Richard Nixon visited China and had meetings with Chinese leaders Mao Zedong and Zhou Enlai. Then, on February 28, 1972, China and the United States announced a joint communiqué in Shanghai that marked the normalization of relations after more than 20 years of hostility.
Also in 1972, China's leaders initiated new economic policies, which expanded China's import and export channels and enlarged the scale of foreign economic exchanges. It also broke the deadlock that had closed China from the noncommunist world since 1949. From then on, China concentrated on the development of the national economy. After Mao's death in September 1976, the country began reform efforts to become a more modern and economically developed nation. Beginning in 1978, Chinese leader Deng Xiaoping led a new economic revolution.
In 1992, Deng traveled to southern China and declared that the free market was not only for capitalist societies; Deng insisted that a socialist society also needed a market orientation. This historical declaration continued the era of China's rapid industrialization and economic development, and its launch into a new multipolar world.