These intercoperate relations are also embodied in mutual stock holding among corporations. Unlike the United States and the United Kingdom where financial institutions own stocks as agent of others, Japanese corporations holding stocks is in order to control the companies. In other words, many companies own a great amount of other related corporations’ stocks to enhance their business groups’ relations and control them tightly rather than list gaining profits as a priority.
In 1986, there were 3899 subsidiary companies, which belonged to the greatest 100 Japanese non-financial corporations, had more than half stocks owned by the parent companies (Hiroshi, 1996, p180). This type of ownership promotes the vertical and horizontal integration among companies, which strengthens the dominate role of large business groups in Japan. For about China, because of its socialism, the industrial organization of State Owned Enterprises (SOE) is the highest characteristic distinction between Japanese system and other capitalistic systems.
Although the gradual reform of SOE happened in 1978, these large enterprises had dominated the whole industrial production of China for almost half a century. After the initial SOE reform was implemented in Sichuan Province, particularly after the 14th Chinese Communist Party National Congress established the ‘socialist market’ economic policy, the whole society began to change (J, Hassard, etc, 2007, pp 86-88&94).
By practicing effective policies, such as ‘responsible system’ for profit and losses and a innovation of shareholding that the government allowed non-state entities and potentially individuals enter the SOE shareholding, SOE have achieved a great improvement from market competition to modern management capacity. Compared with Japanese large business groups usually are advanced technologies holders and internally integrated, Chinese-dominated business groups are segmented and have a disadvantage of independent innovations (Redding and Witt, 2008).
More recently, those reformed SOE have been free from government fully owned, funded and run, but they still tend to be large, capital and labor intensive and even at a high standard of efficiency. Certainly, local corporations and small and medium private companies are also cannot to be neglected, which account for more than 80 percent of the whole economy (Redding and Witt, 2008). In addition, foreign direct investment and foreign companies have helped Chinese economic boom since 1980s. By 2006, China has attracted $622. 4 billion in investment.
Some statistics even show that the number of money poured into China in two months is more than cash flows in sub-Sahara Africa for an entire year (Hays, 2012). Because of cheap labor, stable prices and stable politics, overseas investors can gain extremely capital efficiency in a huge market in China. For the business strategy of foreign corporations, as Jeffrey Hays said (2012), ‘Foreign companies doing business in China are generally required to form joint ventures with Chinese companies instead of forming wholly owned subsidiaries.
’ Although whether they can enter the Chinese market is determined by how many technologies are available to Chinese companies, those massive numbers of foreign investors are not closely related a great amount of high-tech import. Therefore, the lacking of technology import is one of the most important problems need to be handled by the government in the following years. However, there are some common features share with China and Japan. During their rapid business growth periods, governments play vitally important roles in leading booms in their domestic economies.
Reviewing the history of Japan from 1925 to1975, Japanese government was regulatory not a “capitalist regulatory state”, for example the United States government (C. H. Tzeng, 2005i?. Thus, its first priority was encouraging economic development rather than maintaining competition and consumer protection. In order to achieve this goal, The Ministry of International Trade and Industry i? MITIi? that was regarded as the most influential institution of the Japanese economy was established.
This institution has responsibilities to help domestic and foreign industries develop their performance via providing administrative guidance among every area. As well, MITI served as an architect of industrial policy or even a regulator, and handled disputes and problem occurred in industries (Iscream, 2009). From a different perspective, MITI makes the communication between the state and enterprises smoothly and efficiently, which was a key point of the Japanese success.
Similarly, Chinese government makes its every effort to push the economic development. A famous policy, ‘special economic zones’ began to be enforced in several small coastal sites and implemented later in 14 costal cities and 3 regions. In these zones, foreign investor can receive many preferential policies, such as favoured tax treatment, protections of patents and special laws on contracts, all of them are provided to attract more and more international capital investment to help Chinese development (W. Ge, 1999).
The Open Door Policy also promoted the whole society improvement by an increasing amount of foreign direct investment. Nevertheless, this policy leads to a big growing gap between the coastal provinces and the inland provinces, which is highly concerned about authority now. Moreover, both China and Japan realise the importance of knowledge and technology of production factor. In Japan, during the post World War II, Japanese government identified key sectors that concentrated its technological capability to help those sectors booming.
Furthermore, R&D consortia organizations supported by the Japanese government have played a very active role in not only in Japanese technology catching up in the 1970s and 1980s, but also in the creation of new knowledge in the 1980s and 1990s (Fan and Watanabe, 2006). Japanese firms, research institutes and university have a strong bond with each other through some necessary aids from government. Under this consortium, young researchers from universities can be fully trained in those firms.
In turn, they can update the latest information which is lacking of large Japanese companies caused by long- term employment system to managers. In China, government also raised many plans to improve the level of technology, such as 863 Plan and the Torch Program. 863 Plan is designed to foster high-quality fundamental research in China. Even it only included basic pure science researches, it made companies become familiar with how the knowledge breakthroughs can be achieved and help the industry improvement (Fan and Watanabe, 2006).
For about the Torch Program that sponsored by the State Science and Technology Commission, it forces on the development of commercialization technology under the market-oriented situation (Fan and Watanabe, 2006). After those plans, the government made a significant decision to contribute technological progress to economic growth. In this decision, it outlined China’s S&T progress for the next several decades and emphasized that S&T research should be closely tied to the market (Fan and Watanabe, 2006).
All of these actions, no matter taken by China or Japan, built a substantial foundation to help them obtain remarking economic developments in the following years. In conclusion, it is clear that China and Japan share some common, such as the same great influence of government and maintaining government’s focuses on education and technology, but the differences of them occupy more aspects of their business systems. They share similar historical cultures but they form different modern cultures, which reflect in diverse business cultures.
For the business structure, in Japan, cross-shareholding and strong relationship of business groups formulate the special business networks. Nevertheless, to some extent, those stable relations reduce the mobility of capital and weaken competitive advantages of small and medium companies that out of the business groups. Differs from Japanese system, the SOE hold the main part of the domestic market such as energy supply and distribution, transportation and materials production in China.
Though after the reform of SOE those enterprises’ market share are much less than private parts’, many industries that support the lifeblood of the country are still nationalized. Facing to an increasing cost and more regulations published by government, foreign enterprises have to overcome more difficulties than before. Currently, Japan has become China’s second-biggest trading partner after the United States (Chan and Kuo, 2005).
With the increasing of international economic status of China, maintaining their strong trade partnership is essential to each other and the whole global economy. If they can reach a win-win situation for themselves, it will be a great help of themselves to recover from the recession in 2008 more quickly. However, facing unpredictable changes in the international situation and some conflicts centre on contentious territorial affairs, both sides need to make greater efforts to fill the gap between the two economic giants.