How Asian Countries Get Rich (and How to Profit)
No one gets rich from farming… at least not in the long-term. But agriculture is the essential first step on the road to riches. Japan, South Korea, Taiwan (and later China) understood this… and set a path for others to follow.
For developing countries, the state (and not the free market) is the secret to success. First, the state reforms land ownership to make farming more productive… and more profitable. Then those profits are directed towards hand-picked domestic manufacturing companies in the form of low-interest loans and state subsidies.
Governments then restrict global imports of manufactured goods, protecting their domestic companies from international competition until their products are good enough to compete in the global marketplace. Later, governments incentivise research and development (R&D) to help domestic companies move up the value chain from manufacturing to services, and continue to drive economic growth through supporting export-oriented companies.
Japan, South Korea and Taiwan succeeded because their governments invested in specific hand-picked sectors and protected fledgling industries until domestic companies and their products could compete in the global marketplace. It wasn’t a miracle of the market. It was the result of deliberate, state-sponsored reform… what we call Asian Capital Development (ACD).
Asian Capital Development in Action
The top 5 chaebols (conglomerates with close ties to the government) made up almost 60 percent of South Korea’s gross domestic product (GDP) in 2015, and these companies continue to dominate the manufacturing sector.
Exports continue to have a major impact on domestic economic growth… the export indices in Japan, for example, trace a similar path to its stock market, as the graph below shows.
Making profit from models
So how can investors profit from the Asian Capital Development (ACD) model? Below are the top 10 major exporting companies in Japan. As we showed above, these are the companies that drive much of the growth of their domestic economy by winning in the global marketplace.
BIGGEST JAPANESE EXPORTERS IN THE NIKKEI
|Ticker||Name||Foreign Revenue (%)||Market Cap (US$ Million)|
|7203 JT Equity||Toyota Motor Corp||75.13||1,748|
|8306 JT Equity||Mitsubishi UFJ FinGr Inc||41.05||810|
|9984 JT Equity||SoftBank Group Corp||51.02||799|
|2914 JT Equity||Japan Tobacco Inc||58.49||589|
|7267 JT Equity||Honda Motor Co Ltd||87.14||487|
|8316 JT Equity||Sumitomo Mitsui FinGr Inc||26.99||483|
|6758 JT Equity||Sony Corp||68.53||423|
|7751 JT Equity||Canon Inc||79.22||410|
|8411 JT Equity||Mizuho FinGr Inc||30.37||398|
|4502 JT Equity||Takeda Pharmaceutical Co Ltd||62.16||390|