The EconomistDecember 7th 2019 Special reportAsian tigers 52
1found that local Taiwanese suppliers were
not reliable: rubber tyres had a habit of fall-
ing off rims. So Mr Liu travelled around the
island to persuade other manufacturers
that they would all fare better if they ad-
hered to the same dimensions.
Singapore and Hong Kong are often seen
as entrepots. But they, too, were once exem-
plars of labour-intensive manufacturing.
For a time, in the 1970s, Hong Kong was the
world’s biggest toy producer. When Singa-
pore became independent in 1965, it
pitched itself as a base of production. Rival-
ry with Hong Kong was there from the out-
set: one of Singapore’s first big catches was
ge, which chose to set up a clock-radio fac-
tory in the city-state, worried that the vio-
lence of China’s Cultural Revolution might
spill over to Hong Kong.
Even as the tigers have grown far
wealthier, exports have remained part of
their dna. Their companies became more
sophisticated over time, prodded by their
governments (which were themselves of-
ten prodded by ambitious industrialists).
In South Korea, after a decade of success in
light industry, officials promoted heavier
industries, such as shipbuilding and chem-
icals. Taiwan created science parks for advanced industries from
optoelectronics to semiconductors. Singapore established a Na-
tional Computer Board in 1981 to train high-tech workers.
Much of the world has lost ground to China over the past 20
years. Yet the tigers’ share of global merchandise exports has been
steady at 10% (see chart). Japan, their erstwhile mentor, has seen
its share fall to less than 4%, half what it was in 2000.
Like other wealthy economies, they have shifted much of their
basic manufacturing to China. Most emblematic is Foxconn, a Tai-
wanese electronics company known now as the main assembler of
iPhones. It opened its first plant in China in 1988; 30 years later it
employs roughly 1m people there. But as they offloaded low-end
work to China, the tigers moved upstream. South Korea is the
world’s biggest maker of memory chips. Taiwan has the biggest ca-
pacity for fabricating semiconductors. As a result, they each ac-
count for more than 12% of China’s final demand for electronic and
computer products, twice as much as any other trade partner. They
are, put simply, making things that China cannot.They have also ridden on China’s coat-tails. As firms have clus-
tered together in China, Asia as a whole has become a more pow-
erful manufacturing region. Asia’s share of the global trade in parts
and components rose from 19% to 30% between 2000 and 2016.
Mainland China is home to four of the world’s seven busiest con-
tainer ports; the others are in Singapore, Busan and Hong Kong.
Both Singapore and Hong Kong have strengthened their roles as
the management hubs of “Factory Asia”. More than 4,000 compa-
nies have chosen Singapore as a regional headquarters, often to
oversee South-East Asia. Hong Kong has fewer, with roughly 1,500
headquarters, but it has been far more successful than Singapore
at luring Chinese companies to its stock exchange. Its stockmarket
is worth more than $4trn; Singapore’s is closer to $700bn.
All these connections, however enriching, create vulnerabili-
ties. America’s trade war is intended to inflict pain on China. But
the tigers are, in many ways, more exposed to the damage because
they are smaller and more open. In China, exports are worth about
20% of gdp. In South Korea it is more like 45%; in Taiwan, 65%; and
in Singapore and Hong Kong, closer to 200%.
In tearing supply chains asunder, Mr Trump’s tactics pose a par-
ticular danger to the tigers’ cosmopolitan model of manufactur-
ing. They remain highly dependent on inputs from other coun-
tries. They also serve an ecumenical range of clients, including
some whom the Americans distrust. Taiwanese foundries produce
chips for top American firms but also for Huawei, the Chinese tele-
coms giant that Americans accuse of spying. “We are everyone’s
foundry. We exclude no one,” says an official at tsmc.
Faced with all the uncertainty, the tigers have a couple of op-
tions. One is to diversify their customers and their products. Tai-
wan has long pushed its companies to explore emerging markets
other than China. South Korea’s government is keen to promote a
wider range of products. On the most recent “trade day”, President
Moon Jae-in of South Korea applauded new industries such as
electrical vehicles and robots.
Another response is to try to patch up the global trading order.
Before 2000 the tigers were party to just five regional trade agree-
ments; they have since joined 49 more. Singapore was an origina-Every day is export day in South KoreaHolding their ownSource: WTOShare of global merchandise exports, %010203040501986 90 95 2000 05 10 15 18Four Asian TigersGermanyUnited StatesJapanChina