Sail across the sea

Chapter 459 The Pigs Have Been Fattened
"What is President Cui's view on the Plaza Accord?"

Gao Fan didn't rush to talk about photoresist, but instead started a conversation with Cui Jingran about a seemingly unrelated topic.

Cui Jingran raised an eyebrow and asked in return, "Has Mr. Gao also taken note of the Plaza Accord?"

No wonder he asked that question.

The Plaza Accord happened only last month, and not many people in South Korea paid much attention to it. Some economists wrote articles about it and published them in newspapers, but Choi Kyung-yeon felt a chill run down his spine when he read them, because he believed that these economists had no idea what the real meaning of the matter was.

In Cui Jingran's view, even South Korean scholars lacked a necessary understanding of the Plaza Accord, so it was even less likely that the Chinese would pay attention to it. After all, South Korea was still a member of the Western camp, while China was a country in the Eastern camp, and had no reason to care about changes in the Western market.

But Gao Fan brought up the Plaza Accord to him, which surprised Cui Jingran.

He began to realize that he could not underestimate this young Chinese man in front of him.

"So, Mr. Gao, what's your opinion on the Plaza Accord?" Cui Jingran asked. This was exactly the question Gao Fan had just asked him.

Gao Fan smiled faintly: "It's very simple. Once the pig is fattened up, the owner will slaughter it."

“Pig…” Cui Jingran was taken aback, but then he realized what Gao Fan meant. He had thought Gao Fan’s metaphor was interesting and was about to laugh and agree, but then he remembered something else and his face immediately turned ugly.

The Plaza Accord was a joint agreement signed in September 1985 at the Plaza Hotel in New York City, led by the United States, Japan, West Germany, France, and the United Kingdom. Its core content was that the five countries jointly intervened in the foreign exchange market to induce the depreciation of the US dollar against the Japanese yen and the German mark in order to cope with the huge trade deficit faced by the United States.

As for Japan, it made commitments in the Plaza Accord including opening markets, financial liberalization, and flexible adjustment of the yen exchange rate to ensure the continued appreciation of the yen against the dollar.

In real history, Japan was affected by the Plaza Accord, and the yen appreciated continuously over the next 10 years, leading to a corresponding decline in the export competitiveness of its products. At the same time, a large amount of speculative capital entered Japan, fueling bubbles in the stock market and real estate market. By the early 90s, Japan's asset bubble burst, and its economy slumped ever since, triggering the so-called "lost 30 years."

At present, the negative consequences of the Plaza Accord have not yet materialized, and most people, including politicians and scholars in Japan, generally underestimate the potential impact of the Plaza Accord.

Some scholars believe that the appreciation of the yen may affect the export of Japanese goods, but only to a limited extent, and will not have a significant impact on the Japanese economy.

After all, Japan has just experienced a 30-year economic miracle, and people are full of hope for the vitality of the Japanese economy.

Choi Kyung-yeon was someone who had a relatively clear understanding of the impact of the Plaza Accord. In addition to economic factors, another factor was Choi Kyung-yeon's own expectation of Japan's decline.

Well, to put it simply, Choi Kyung-ran has always hoped that Japan would suffer.

This is why he subconsciously overestimates anything that could bring misfortune to Japan.

The good news is that this time, he guessed right.

Japan's postwar economic recovery benefited from strong American support; it's not wrong to say that Japan was raised like a pig by the United States. When the Japanese economy was booming and the Japanese boasted that they could buy New York, the United States used measures like the Plaza Accord, which brought Japan back to reality in an instant.

Gao Fan said that once the pig is fattened up, the owner will slaughter it; that's what he meant.

Cui Jingran understood this implication; he felt the same way, which is why Gao Fan's words resonated with him. However, just as he was about to gloat over Japan's misfortune, a question suddenly occurred to him:
Japan is like a pig raised by Americans, and so is South Korea!
We're all pigs in the same circle, so I really have no right to laugh at the others.

"The friction between the United States and Japan over semiconductor trade is becoming increasingly apparent. A large part of the reason why South Korea's semiconductor industry has been able to develop rapidly is that the United States is trying to suppress Japan's semiconductor industry and therefore supporting South Korea as an alternative to Japan," Gao Fan said.

Choi Kyung-ran paused for a moment, then nodded and said, "I don't deny that. In the past five years, the United States has transferred many orders that originally belonged to Japan to South Korea, thereby stimulating the rapid development of South Korea's semiconductor industry."

Gao Fan asked, "If you were an American, would you worry that one day South Korea might become another Japan, similarly threatening the interests of the American semiconductor industry?"

“At least… South Korea can’t do that yet,” Choi Kyung-ran replied. His voice was hoarse, clearly indicating that he wasn’t entirely sincere.

Indeed, at present, South Korea's semiconductor industry is still in its infancy and cannot be compared with Japan's, so it is certainly not a threat to the United States.

Taking Guangchen Semiconductor as an example, most of its current business involves contract manufacturing for American companies, undertaking low-profit processes that American companies are unwilling to undertake. By leveraging contract manufacturing in South Korea, American companies can effectively reduce production costs, thereby gaining some advantages in competition with Japanese manufacturers.

In this sense, the United States and South Korea are complementary rather than competitive in the semiconductor industry.

However, Choi Kyung-ran understood very well that South Korean companies could not remain at the bottom of the industrial chain forever. They would inevitably grow and gradually move into the mid-range and high-end, at which point they would become competitors of the United States, just like Japanese companies are now.

So the question is, will Americans see this? Will they be worried about it?

In the past, Americans might not have been so aware of or worried about an Asian country posing a threat. But after the semiconductor trade friction with Japan, will Americans still be so complacent?

Cui Jingran believes the answer is no.

Even a pig knows to turn back after hitting a wall. Americans are so smart and wise, with so many great economists, how could they possibly fall into the same trap again and again?
If Cui Jingran were also a time traveler, he probably wouldn't think that way.

After the Plaza Accord eliminated its competitor Japan, the United States watched helplessly as another country called East Big slowly rose to prominence. Indeed, the number of Made-in-Japan products on Walmart shelves decreased, replaced by Made-in-East Big items.

When politicians put away their golf clubs and casually picked up their reports, they discovered that their trade deficit had not decreased but had increased several times over.

Yes, they fell into the same trap twice. Only this time, there will be no Plaza Accord.

Do Americans not understand the rules of industrial competition?

Is it that Americans can't understand trade data?

neither.

There is only one sentence that can explain this phenomenon:

Weakness and ignorance are not obstacles to survival, arrogance is.

(End of this chapter)