By Pietro A. Doran The Yellow Sea, whose tides once marked the passage of history and impeded no travelers from their charted course, was later locked behind a wall of ideological conflict and war, causing it to slowly fade from the international consciousness. Today, with a new perspective made possible by the substantial changes of the past two decades, it is now possible to gain a new understanding of the extraordinary changes occurring within what now is referred to as the Yellow Sea Economic Basin (YSEB), the region lying within 300 miles inland of the Yellow Sea rim and encompassing China's Bohai region; the Korean peninsula; and Kyushu, Japan. The world's second-, sixth- (for now, in the case of China) and tenth-largest economies border the YSEB. Furthermore, the world's largest militaries are concentrated within this region. From these facts alone, one can see what the dragon truly represents -- the economic, cultural, military and political epicenter of Asia. The YSEB -- not any one of its component regions -- is itself the true North Asian hub. Like any animal, the once individual parts of the dragon are now so interlinked that when the head is sick, so is the body and so, immediately, is the tail affected. This new economic paradigm of interdependence within the YSEB brings with it significant ramifications for each of the countries that make up the dragon -- in terms of their interrelationships; their individual relationships within the international community; and their own futures as independent, political and cultural entities. An even more microeconomic view reveals several critical factors. Located within the YSEB are most of Asia's greatest political and financial centers: Shanghai, Beijing, and Seoul. In addition, Tokyo is within close proximity to the YSEB rim. Demographically, no place in world has so high a population density, with such concentrated economic growth in so condensed a region, as the YSEB. Also within this booming region are more than 60 mega-cities, each boasting a population of more than one million. Counted among these are some of the world's fastest-growing and increasingly influential financial and political megalopolises, including the fabled Shanghai (with a population of 13.3 million); the powerful political center of China, Beijing (population 9.8 million); and the ambitious and frenetically energetic city of Seoul (population 9.9 million), all lying just over 1 hour's flight from each other, all within one day's voyage of each others' major ports. Taking a look at trade statistics, one sees just how important the YSEB is to its component countries. Nearly 57% of China's total trade volume emanates from within the Yellow Sea. In 2003, Korea depended on the free flow of goods within the YSEB for 71% of its exports to, and nearly 67% of its imports from China. The story for Kyushu Island, that region of Japan lying within the YSEB, is the same. With an economy the size of the Netherlands and a population of more than 15 million, Kyushu and its two principal cities are heavily dependent on the YSEB for their economic well being. For example, the city of Fukuoka depends upon the YSEB for 16% of its exports and nearly 34% of its imports, while the city of Kitakyushu looks to the YSEB to absorb 27% of its exports and to provide nearly 50% of its imports. In the hypothetical case of an investor's desire to establish a vertically integrated information technology base in the YSEB, the complementary core competencies inherent in the region become evident. Taking advantage of Korea's famously educated and highly skilled workforce, for example, a firm could establish a research and design facility within the city of Incheon. Then, taking advantage of low labor costs, the same firm could then locate manufacturing plants in places such as Gaeseong, North Korea or Dalian, China. This entire endeavor could be financed through a consortium that would include financial institutions in Shanghai, Seoul and Beijing. Any glitches in product design or production could easily be handled by a highly paid technician living in one of the increasingly cosmopolitan urban centers of the YSEB who could reach any destination within two hours of takeoff and still be home for dinner. Products could then be shipped to any point within the YSEB within one day (or within a few hours by air). A marketing team could then oversee the distribution of products throughout the region on daily visits to key markets located throughout the YSEB. By leveraging complementary advantages, not competitive disadvantages, the extraordinary market forces of the YSEB could be unleashed. It is these internal mechanisms of trade, all dependent on peace and stability within the YSEB, that are now driving the economic integration of the region. For Korea, a vital component of the Yellow Sea, harnessing the momentum of the rising dragon promises an unmatched opportunity to overcome 50 years of internal discord. For China, stability within the YSEB is a cornerstone of achieving its goals to become a major political and economic force in world councils. For Japan, YSEB stability and growth represent enormous market opportunities to feed its own industries. For East Asia as a whole, the rising dragon -- the YSEB -- represents both opportunities and challenges as the drivers of economic growth throughout Asia continue to shift from South to North. The dragon is rising, and the world is on notice. Note: This is an abbreviated version of a more comprehensive article that will appear in Korea's Economy, an annual journal published by the Korea Economic Institute. Mr. Doran is a partner at Doran Capital Partners Korea. He is also the managing director and chief investment officer at Gale International (Korea) and is leading the project financing team for the development of New Songdo City in Incheon, South Korea.