Hyundai’s Market Share in South Korea

But this miracle came at a price. Outside the regime’s charmed circle, no entrepreneur could thrive. Petty-minded officials banned such “extravagances” as neon lights (until the 1970s), red cars (until the mid-1980s) and holidays abroad (until 1987). Successive governments used the supposed threat of subversion by the North to justify oppression, purges, incarceration, rigged elections, propaganda and a harsh national-security law.

South Korea’s great achievement in the past decade has been to begin to shed this legacy, peacefully. The country’s current president, Kim Dae Jung, is a former dissident who was almost assassinated on the orders of one general, and sentenced to death on trumped-up charges on the orders of another. In 1997 he was elected without a murmur from the armed forces. And the economy has come a long way since the days when the planning commission siphoned scarce capital into strategic industries under the country’s five-year plan.

Yet in the past few years South Korea’s continued shortcomings have also been plain for all to see. Politicians and bureaucrats became the instruments of big business. During the 1990s, large wage rises and foolhardy diversification diminished Korean companies’ competitiveness. The government, desperate to avoid failures, instructed banks to prop up large firms. But this did not work for long: the Asian crisis knocked the country sideways. From peak to trough, the won fell by 54% to 1,962 to the dollar, the stock market plunged by 65% between June 1997 and June 1998, and some of the country’s best-known companies went bankrupt. Last year GDP shrank by 5.8%. Just when the South Koreans thought they had made it, their economic miracle seemed to be evaporating.

To its credit, the country has acknowledged its faults with remarkable candor. It has not tried to blame foreigners for its troubles, nor has it hid behind tariff barriers or currency controls. Instead, it has pledged to abandon the economic system that took it from poverty to prosperity in a generation.

Social Climate:
To fully understand the South Korean social climate, one must recognize the tremendous highs and the dreadful lows Korea has faced in their economy, technology, financial markets, global relations, and their domestic politics. Over the past decade, seemingly, South Korea has experienced what most countries have faced in their whole history. Beginning in the early 1990’s, South Korea experienced an influx of technological advancements, increased political certainty, and a growing economy. With the introductions of these new aspects of Korean life, the accumulation of wealth seemed to increase as well. Although slow at first, the continuous global investments began to grow and soon Korea was considered one of the Four Dragons, nicknamed for having such a growing economy and having much potential in terms of global investment opportunities.

It was during this boom that Korea’s GDP exploded. Relative to some other Asian countries, East and South, Korea was thriving off of a booming automotive and electronics markets. Soon the GDP was seven times that of India, and nearly thirteen times that of its communist neighbors in the North. Korea’s GDP grew so much, in fact, that their GDP rivaled that of some European Union Countries. These were the times that Korea and its people were thriving. Socially, people were spending more on luxury goods and companies worldwide opened businesses and invested heavily in one of the Four Dragons. All of the growth, wealth, and investments, however, ultimately came to a crashing end during the Asian Financial Crisis.

As mentioned above, in 1997-1998, Korea, along with almost all of the other developing Asian countries experienced the worst of financial times. The growth these countries have faced in the past just could not continue. Countries now hesitated on investing in Asian countries, being that these countries potentially have tremendous risk involved with it. More important to the people, however, wealth, jobs, and pride were lost. Looking back on the crisis, now that the worst is over, South Korea has rebounded pretty nicely. In 2001, the South Korean economy has outperformed the majority of the other Asian Countries and has continued to show much improvement from just three years prior.
Political Condition of South Korea:
South Korea is a republic where the president, serving a term of 5 years, and the legislature, consisting of 273 members, share power. The country has nine provinces and six separate cities: Seoul, Pusan, Inchon, Taegu, Kwangju, and Taejon. There are several political parties that include the Millennium Democratic Party (MDP), the Grand National Party (GNP), the United Liberal Democrats (ULD), and the Democratic People's Party.

In 1997, Kim Dae-jung of the National Congress for New Politics (NCNP) won the presidential election, defeating Lee Hoi-Chang and Rhee In-Je. On his inauguration in February 1998, Kim stated an engagement policy toward the North based on the separation of economic and political issues but still wanted to take a firm stance on security. This approach has been maintained despite strong criticism from the opposing GNP and sometimes from the North, including attempted infiltrations into the South. In 2000, Kim was awarded the Nobel Peace Prize for his commitment to democracy and his efforts toward reconciliation with the North.

President Kim's relations with the opposition have often been contentious and heated. The GNP remains the largest-single party in the National Assembly. However, in January 2001, President Kim's party, renamed the Millennium Democratic Party (MDP), re-entered into a coalition with the United Liberal Democrats (ULD) led by former Prime Minister Kim Jong-Pil. With the new coalition and an agreement from the Democratic People's Party, President Kim established a majority power in the Assembly in February 2001.

From June 13 to 15, 2000, the leaders of the two Koreas held a historic meeting in Pyongyang and signed a joint declaration which promised continued dialogue, the reunion of separated family members, cultural exchanges, and the pursuit of reunification. Following the meeting, contacts between the Republic of Korea and the Democratic Republic of South Korea increased and the defense ministers from each country met for the first time on Cheju Island in South Korea on September 25. In August and November 2000 and in February 2001, the two Koreas sent delegations of 100 members of separated families to each other's capitals for reunion meetings. While South Koreans take pride in its democratic state, it is their hopes that their Northern counterparts can enjoy the same civil rights, economic freedom, and lifestyle that they possess; their foreign policy includes the peaceful resolve of their situation with Communist North and any action necessary to maintain its own state of democracy.

Recently, however, their northern neighbor has helped fuel a global concern of war. Armed with nuclear weapons and lead by an arguably crazy leader, North Korea has commanded attention on the global platform. Peace treaties, foreign interventions, and threats of war have all but decreased North Korea’s stance on communist threat.

China Macro Study

Overview:

China's doors were opened to the world in 1978 by Deng Xiaoping, and since, China has experienced over 20 years of unprecedented economic growth, with its economy growing faster than any other in history. China has had great success in converting from a command economy to a market economy, moving from a rural to an urban society, and maintaining political stability. However, China has even greater challenges ahead. Movement of workers from inefficient state-owned enterprises ("SOEs") into the private sector brought about corruption, regional income inequality, weak financial institutions, industrial over-capacity, price deflation and unemployment.

During China's economic development, SOEs had played a key role, providing employment, directing investment to strategic industries and providing various social services. Because of the broad role and importance the SOEs played in Chinese society, dismantling them is a major challenge. Because of this history, the transition to a market economy largely depends on the corresponding introduction of new private sector jobs and the pace at which SOEs can be restructured and their excess workers released. Rapid economic growth is essential in China’s restructuring. Maintaining the SOEs weighs down other sectors of the economy, but shutting them down precipitously could create a political instability.

China and the World Trade Organization:

After 15 years of attempts to secure membership, China joined the World Trade Organization ("WTO") on Sept. 15, 2001, and accessed into the WTO in December 2001. Entering the WTO will greatly benefit China in many ways. It will increase the speed of economic reform, improve external economic relations and bring in increased competition. Over the next five years, China will slash tariff and non-tariff barriers, as well as open up sectors of the economy that have long been blocked off to foreigners.

China's market-oriented reforms have had large success in economic transformation, helping hundreds of millions of people out of poverty. There has been large progress and increases in per capita incomes, a substantial rise in non-state sector activity, growing integration into the global economy and an effective start to resolution of financial sector reform. Economic growth gained momentum during 2000. Strong fiscal spending and private consumption drove domestic demand. Export growth accelerated to 28 percent as the global IT boom entered its final year.

The economy grew by 7.9 percent in the first half of 2001, but had a reduction in the growth rate in the second half of 2001 as the economic slump in the developed world affected Chinese exports, with import growth also slightly slowing. Nevertheless, reported GDP growth remains strong despite the weakening export sector. There has been a strong increase in private consumption and fixed investment, reflecting strongly rising incomes. China has not been affected by the weakening global economy as some of its "Asian Tiger" neighbors.

Three consecutive years of expansionary fiscal and monetary policy as well as fast-growing domestic demand helped China's economy escape the worst effects of contagion from the Asian and Russian financial crises and the global recession of 2001. During the period, the country has maintained the peg of its exchange rate to the US dollar, continued to attract strong external investment and achieved robust growth. China has substantial assets and advantages to confront future challenges. The country has mobilized large inflows of foreign direct investment and has an enormous potential market of newly empowered consumers with rapidly rising incomes.

In recent years, attracting foreign investment has had an irreplaceable status in economic development in China. For twenty years, China has achieved strong economy growth, social development and impressive improvement of living standards, which were witnessed by the world. China has become a popular country for foreign investment.

During 2002, China was the world's leading recipient of foreign direct investment (FDI), netting over $53 billion. China remained one of the developing world's main locations for FDI, attracting more capital than any of its neighbors in Asia.

After China’s accession to the World Trade Organization (WTO), the government agreed to give foreign companies increasing levels of market access for the following five years. Following China's entry into the WTO, there will be tremendous business opportunities for foreign companies in a large number of industries, including the automobile industry. China has reduced its tariff on automobiles to an average rate of 25%, and the import tariff on auto parts to an average rate of 10%. All reductions will be completed by January 1, 2006, with 10% of reduction each year starting from the year of 2000.

China's current automobile industry is in a state of undergrowth. Many car manufacturers cannot meet their quotas, and their production capacity has been idle for long periods of time. Factories have since been waiting to stimulate the demand and grow the market for automobiles. There are now about 25 factories producing various types of automobiles nationwide.

In the last couple of years or so, there has been some steady development and progress in the auto industry. The introduction of mass production and further reconstruction has brought about a bolstering of the industry and its economic benefits are beginning to show.

The automobile industry in China has a very promising future. There has increasingly been a boom in the automobile industry, and increasing demand from the local market presents great potentials to foreign companies. However, foreign companies have found great difficulty in accessing this market and dealing with Chinese government bodies and companies.

With quick development and further reformation of the Chinese economy, the auto industry shows new and strong signs. There has been a concentration on boosting the production of units on a yearly basis; investments in new, distracting projects have been minimized. Also, the recent implementation of mass production has helped to meet the high demands for cars. Manufacturing technology has also been enhanced, resulting in better cars and car parts. All these signs point to a positive outlook for the automobile industry in China in the future.
Asian Financial Crisis