Pacific Affairs: An International Review of Asia and the Pacific

Volume 73, No. 2

 

The Changing Nature of East Asia as an Economic Region
By Dajin Peng

 

Abstract

East Asia integration is characterized by informal integration, which distinguish East Asia from other regions emphasizing formal integration. The Regional Production Network (RPN) is a major type of informal integration. It was built by Japanese rms trying to create a Japanese-led multi-tier division of labor in East Asia. The theoretical basis of the RPN is the flying geese model (proposed by Akamatsu) and its modern variants. The RPN was instrumental in forging production ties among East Asian countries and has helped the export-led industrialization of East Asian economies. The RPN helped to drive Asian integration in the absence of strong formal integrative institutions in the region.

However, the RPN is built upon the dependence of other East Asian economies on Japan for technology and on the US for market. The system is likely to break down when the Japanese economy stagnates or when the US can no longer absorb the increasing exports. The breakdown of the RPN is the production factor for the Asian nancial crisis. The flying geese model is also static in that it does not reflect the rapid catching up of certain followers. The dominance of the RPN has been challenged by the ethnic Chinese business networks, another type of informal integration. The Chinese networks have helped some ethnic Chinese economies, such as Taiwan and China, enabling them to perform better in the Asian crisis and to catch up with the industrialized countries in global competition. The evolution of the RPN reflects the changing nature of East Asian political economy.