The deepening integration of Asia into the global markets has been instrumental in its phenomenal growth. During the past two decades, the world has witnessed the rise of Factory Asia. Fueled by cheap and abundant labor, Asia has supplied many of the manufactured consumer goods the world needs, particularly final goods destined for the United States and eurozone economies. This model, i.e., “supply from the East, consume in the West”, has driven global economic prosperity to unprecedented heights. Such a pattern has resulted in a win-win situation: Western consumers enjoyed an increase in their purchasing power, and Eastern workers found their incomes rising. The Factory Asia model has helped lift millions of Asians out of poverty.

The People’s Republic of China (PRC), Japan and the Republic of Korea have been the main drivers of Factory Asia. For some time, the PRC has been the main recipient of investment from the Republic of Korea and Japan, with products being assembled in the PRC using key intermediary inputs from the Republic of Korea and Japan. This early pattern of a regional supply chain has further evolved, now with more participating economies, as wages in the PRC rose steadily due to its rapid economic growth. As a result, more and more foreign firms are exiting from the PRC and moving into other Asian countries. Currently, Factory Asia maps a vast regional production network with the Republic of Korea and Japan as major outsourcing countries, and the PRC and most South-East Asian economies as assemblers of parts and components into final products.

Recently, questions have been mounting on the sustainability of Factory Asia. Since the onset of the global financial crisis, demand from advanced economies has remained subdued. Political pressure to protect Western manufacturers has always been strong, giving rise to various forms of both visible and hidden barriers. Furthermore, the Western public perception of Factory Asia has turned sour: Factory Asia has been seen as one of the main causes of the financial crisis through its contribution to a global imbalance. Unless Asia effectively addresses these concerns, the future of Factory Asia looks nebulous. This book has been initiated to assess the challenges confronting the Factory Asia model and provide suggestions and strategies to effectively handle such challenges.