The Future of Northeast Asian Countries - (6) Possible future scenarios
Possible future scenarios
Now, we will look at four future scenarios, focusing on the key drivers that can influence the future defined above.
Future Scenario #1: Everyone is happy. Except for the environment.
Everything goes well.
South Korea and Japan are receiving crude oil for their energy production along routes through the Middle East, South China Sea and East China Sea. China is also receiving a stable supply of crude oil through domestic oil fields and overseas routes.
Since China, Korea, and Japan are all highly dependent on foreign trade, their economies will continue to grow stably if the current stable global supply chain is maintained.
Since most countries in Northeast Asia reliably depend on crude oil for energy production, the willingness to develop alternative or clean energy source is low. Therefore, carbon dioxide emissions never decrease, and the problem of global warming is only getting worse.
Drivers that have shaped this future scenario
- Crude oil supply: Most countries' economies operate normally as crude oil supplies are normally supplied from abroad.
- Global Supply Chain: With the normal operation of the supply chain, the creation of added value through trade continues in most countries.
Future Scenario #2: Find a new way to survive
For South Korea and Japan, exports and imports decline. Since South Korea and Japan have a high proportion of foreign trade, total national sales will drop sharply. Also, their economic vitality is greatly reduced. South Korean and Japanese domestic markets are not big enough, and the aging process is rapidly progressing. In addition, the government's fiscal is difficult because the corporate taxes levied by major companies are reduced. Therefore, investment in national infrastructure, etc. is greatly reduced. Although there is no problem with the supply and demand of crude oil in these countries, the burden of importing crude oil is increased because the purchasing power of the country has decreased.
Meanwhile, Korea succeeds in creating a new cash cow in the culture/contents/service business instead of the manufacturing industry. However, Japan has entered an extremely aging population, and both manufacturing and cultural/content businesses lose their competitiveness.
For China, even if there are restrictions on overseas purchasing and sales due to constraints in the global supply chain, there is room to withstand. In addition, since they have a huge domestic market and a diverse manufacturing base, it is possible to achieve sustainable growth in the short term. As growth dependent on domestic demand is limited, it will be difficult to maintain China’s position as a global top 2 country with the US.
Drivers that have shaped this future scenario
- Global Supply Chain: As problems arise in the global supply chain, most countries strive to discover businesses that are less dependent on existing supply chains.
- Population Declining: As the proportion of the younger population declines, the ability to create new businesses is weakening, and purchasing power is also declining.
Future Scenario #3: The best defense is offensive.
In South Korea and Japan, global supply chains are paralyzed, leading to a significant decrease in sales at the national level due to a decrease in foreign trade. In addition, the supply and demand of crude oil, which is the only source of energy abroad, becomes difficult, and energy production is also difficult. If this situation persists, most countries in Northeast Asia may continue to grow backwards and become a global poor country.
Japan might consider using force to advance into the continent as they did in the early 20th century, but China's current defense power is too strong for Japan to subdue them. As an alternative, Japan could launch an all-out war to subdue Korea. However, Korea has the 6th largest military power in the world, which is marginally comparable to Japan, the 5th largest military power in the world. In particular, Korea's ground forces are the fourth largest in the world after the United States, Russia, and China, so it is a reckless attempt for Japan to enter the territory of Korea.
China is capable of producing its own crude oil and has the capacity to survive as a domestic market and outperforms the rest of the country in terms of its economic and national defense capabilities. Therefore, China is likely to take action to dominate Korea and Japan. However, it is highly likely that the United States will block China's actions to prevent China from dominating the entire Northeast Asia, and in the midst of this, economic and military clashes between China and the United States may intensify.
Drivers that have shaped this future scenario
- Crude oil supply: A disruption in the supply of crude oil is causing major disruptions to national energy production in South Korea and Japan.
- Global Supply Chain: Global supply chain disruptions disrupt production and trade in South Korea and Japan.
- Economic Crisis: There is a surge in public opinion that hates other countries among countries that are in the midst of an industrial downturn and economic crisis.
- Military Conflict: Japan's military action against neighboring countries amplifies tensions throughout Northeast Asia.
Future Scenario #4: Migration for survival
The key areas of the route through which crude oil is transported are occupied by China or the terrorist state. South Korea urgently dispatches troops to key areas for oil transport to secure the oil transport network. However, Japan falls into pardon because they are unable to engage in military action against foreign countries under international law. At the same time, South Korea and Japan are immediately seeking other sources of crude oil before the country's crude oil stocks are exhausted. Although the US and Brazil are promising candidates for crude oil, the distance is so far that the price of crude oil is very high. Eventually, the national competitiveness becomes weak due to the constraints on the supply of crude oil.
Due to the limited supply of crude oil, operation of manufacturing facilities in the country is limited. Instead of gradually reducing the proportion of domestic production bases, South Korea and Japan increase investments in production bases in countries where the supply of crude oil is easy and production costs are relatively low. Key manufacturers in South Korea and Japan will use Brazil and Saudi Arabia as production bases for supply to the American and European markets, respectively. These companies attempt to merge with their suppliers to overcome global supply chain constraints and relocate suppliers near major production points.
In addition, South Korea and Japan are focusing their efforts on developing alternative energy to solve the problem of supplying crude oil in the short term. However, it takes a long time to satisfy the supply and demand of alternative energy. Moreover, as the domestic market size of South Korea and Japan is getting smaller and smaller, their competitiveness in Northeast Asia continues to decline.
On the other hand, in the case of China, crude oil is supplied from Russia through oil pipelines, and they have a large domestic market, so they have enough room to withstand. However, it is difficult to grow into an economy that exceeds the size of the domestic market over time. This is because global trade is limited and the amount of crude oil that can be self-sufficient is limited.
Drivers that have shaped this future scenario
- Crude oil supply: A disruption in the supply of crude oil is causing major disruptions to national energy production in South Korea and Japan.
- Economic Crisis: South Korea and Japan expand offshoring to countries with better energy conditions to address restrictions on domestic production and trade functions.
- Military Conflict: Countries/organizations that illegally occupy crude oil transport routes are subject to military attack from some countries.
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