ECONOMICS

Economics

Economics

The most suitable label for East Asian economies is "relation-based capitalism." In contrast, western economies such as the United States and UK can be best characterized as "rule-based capitalism." Relation-based capitalism is characterized by personal and implicit agreements that are governed by second-party enforcement and widely based on mutual trust between transaction parties. In China, it is widely recognized that 'guanxi' (relationship) is a significant determinant influencing business and social performance. Rule-based capitalism, in contrast, is signified by formal contracts that are enforced by third parties (usually the courts) whereby transactions are based on impersonal and explicit agreements (Jomo ...