THE trade liberalization movement after the Second World War has led to a rapid growth of trade among nations. In the process of trade expansion and the subsequent internationalization of production, we can observe a number of cases of regional economic integration evolving and running parallel with the global tendency of freer trade. In these regional trade arrangements, such as the European Union and the North American Free Trade Agreement, participating countries more often than not actively promote trade relations among each other, and, sometimes, the integration goes further to include economic policy coordination.

Different from these government-sponsored regional efforts, a close economic relationship among mainland China, Hong Kong, and Taiwan has gradually evolved – despite lack of support from the governments involved. This integration is led not by a bureaucracy but by businesspeople, sometimes against the political will of governments. The convergence is characterized by the rapidly expanding trade and capital flows among these three economies. People use the term “Greater China” to describe this phenomenon.

The growth of Greater China started in 1979 when mainland China initiated its economic reform policy, thereby opening itself to the outside world. In the eighteen years since then, growing trade and capital flows have led to specialization and division of labor in the region.