Asian rivals to shape global politics
Updated
The global financial crisis may have caused the world's developed economies to slow down but it's done little to dampen China's economic outlook.
Despite a drastic drop in exports, China's economy is expected to grow by up to six percent this year, according to the International Monetary Fund. In fact, the long-term prediction is that China will become the world's largest economy in about twenty years from now. Following a close second is India, which would also like to see itself as a regional leading power. And then there's Japan, which for decades was the region's economic powerhouse. Now, a respected Asia specialist says the region is entering a new period of balance-of-power politics.
Presenter: Sen Lam
Speaker: Bill Emmott, former editor-in-chief of the Economist and author of 'Rivals - How the Power Struggle between China, India and Japan Will Shape Our Next Decade'
- Listen:
- Windows Media
EMMOTT: Well I think that the key question is whether you have domestic capital, domestic resources or not. China is insulated from the global financial crisis; its banks were not participating in global credit boom first of all. Second it has a very high savings rate. Third, it's really following its own cycle; you know the Chinese slow-down is mainly caused by the anti-inflation policies that China brought in itself last year to slow the economy down. They're not heavily influenced by what's going on globally. So China's playing to its own tune, it's a lot slower than it was two years ago that tune, but nevertheless it's healthy.
LAM: So the fact that it's invested very heavily in America is not a cause for concern for Beijing?
EMMOTT: Not at all, I don't think, except that it puts Beijing on the spot as far as the Chinese currency is concerned. China has two trillion dollars of foreign exchange reserves, yes, but that's because it bought dollars to try to manage its own currency, and to keep it rigidly controlled, not freely floating, not participating in international exchange markets. But the pressure is on China to revalue that currency, but at the same time, it doesn't want to take big losses on its foreign exchange reserve. A lot of people say the dollar's got a problem; I would say that China's got a problem.
LAM: Well it would seem that India is keeping up, its economy is expected to grow by six-point-seven per cent this year. What do you make of the prediction that China and India will overtake America's economy by 2030?
EMMOTT: Well I think first of all, all economic forecasts should be treated sceptically. Life can change quite quickly as the Japanese can tell us since they were projected to overtake America already, and then they had their own financial crisis in the 1990s. So let's be cautious, but it's certainly true that China and India have the potential to overtake America with a billion people each. In fact, it would be good for the world if they did overtake America because it would mean that millions, hundreds of millions of people were coming out of poverty. So I hope that they will, and they certainly have the potential to do so.
LAM: But in regional terms though, do you see a race shaping up between India and China, and might that necessarily be a negative thing?
EMMOTT: I think it's a good thing if each wants to out-do the other in economic terms. That would help spur reform, it helps spur modernisation, and I think that India's modernisation is getting a really good boost from the fear that it's going to fall behind China. The problem is if it turns into political and military competition, and there is some sign of that. The problem is that both countries' economic interests are getting much wider, particularly getting resources across the Indian Ocean from Africa, the Gulf, and from Australia of course. That means they start expanding their military forces to protect the sea lanes and communication, and then they start rubbing up against each other in the Indian Ocean, in the South China Sea, in competition for access to resources in a way that they didn't do before. So that's where the potential for problem arises.
LAM: And as you said, the world's natural resources are finite. So do you see this translating into a kind of Asian Cold War if you like between India and China?
EMMOTT: I don't think it'll be an Asian Cold War but this is a tension and a competition that needs to be managed. I think that the Australian Prime Minister Kevin Rudd's proposal for an Asia-Pacific community is in the right direction. There's no tradition of collaboration and cooperation between China and India. There are no pan-Asian institutions of any depth within which these countries are forced to collaborate and to acknowledge each other's interests. And the same with Japan. What we need are pan-Asian institutions on the pattern of the European Union if not exactly the same, in order to channel and defuse these tensions and overlapping interests.
LAM: And Bill Emmott where do you see the one-time regional powerhouse Japan in all of this?
EMMOTT: Japan is on the defensive. Japan is worried that its position is being usurped by China, but most of all, Japan needs to reform its own economy, it's got an election coming up in September. I hope that this is going to be a seminal election, in that the ruling party that's governed Japan for the last half a century, the Liberal Democratic Party, are finally going to get kicked out and replaced by the Democratic Party of Japan. And that should produce a real turning point for the country. It needs a turning point because Japan needs to get its act together, if it's not to be overtaken politically and economically by China.
