East Asian model

The East Asian model[1] pioneered by Japan, is a plan for economic growth whereby the government invests in certain sectors of the economy in order to stimulate the growth of specific industries in the private sector. It generally refers to the model of development pursued in East Asian economies such as Japan, South Korea and Taiwan.[2] It has also been used by some to describe the contemporary economic system in Mainland China after Deng Xiaoping's economic reforms during the late 1970s[3] and the current economic system of Vietnam after its Đổi Mới policy was implemented in 1986.[4]

The main shared approach of East Asian economies is the role of the government. For East Asian governments have recognized the limitations of markets in allocation of scarce resources in the economy, thus the governments have used interventions to promote economic development.[5] Where key aspects of the East Asian model include state control of finance, direct support for state-owned enterprises in strategic sectors of the economy or the creation of privately owned national champions, high dependence on the export market for growth and a high rate of savings. It is similar to dirigisme.[6][7]

Although there is a common theme, there is not one single approach to economy of Asian countries and it widely varies in economic structure as well as development experiences among the East Asian economies. Especially then between Northeast and Southeast Asian countries.[5] (e.g. Malaysia, Indonesia and Thailand relied much more on FDI (Foreign direct investment) than Taiwan or Singapore)[8]

This economic system differs from a centrally planned economy, where the national government would mobilize its own resources to create the needed industries which would themselves end up being state-owned and operated. East Asian model of capitalism refers to the high rate of savings and investments, high educational standards, assiduity and export-oriented policy.[9]


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