Economic power shift to East Asia

The Jakarta Post, Jusuf Wanandi, Jakarta, Mon, 12/21/2009 11:06 AM, Review & Outlook

It has been widely accepted that recently economic power has been gradually shifting toward East Asia.

The global economic crisis has only quickened this process. It began with the excesses at the centers of international finance, namely the US and Europe.

East Asia has been more resilient to impacts of this crisis. Therefore, this region has been able to overcome the crisis sooner.

This situation has come about (in part) because of lessons East Asia learned from the crisis of 1997-1998, which resulted in all East Asian states retaining greater financial reserves.

In addition, they also became more willing to adopt pro-active stances in counter-cyclical spending to get their economies moving again. Furthermore, they worked to establish new development paradigms that were less dependent on exports.

Today, the region is better prepared and has been more willing to carry out necessary structural reforms. This needs to be undertaken to achieve a certain levels of national resilience and to allow countries to face future crises more effectively.

This requires more domestic-oriented structural reforms, providing better safety nets; more attention to healthcare, education and green policies; and ensuring adequate funding for these.

Even as these changes and shifts are happening in East Asia, the region should understand that the processes of change have global implications, and need time to develop fully. The most important among these processes is of course the relative decline of the US.

It is a fact that the US will remain the biggest economy for two to three decades to come, and it is expected that the recovery of its economy will take place next year, although unemployment will be the limiting factor in this recovery. However, the US does recognize that it can no longer go alone in trying to solve the many global problems and challenges.

This is why President Barack Obama is reaching out to the East Asia region, in trying to get the US to look again at the most dynamic region in terms of the recovery of the world economy, including the US economy.

In this regard, China, as the center of East Asia, has a crucial role to play. President Obama understands that for solving world problems — such as the recovery of the global economy; climate change; energy security; and the proliferation of Weapon Mass Destruction (WMD) — China’ s role will be crucial.

It will not be a G2 arrangement or an agreement on every global issue, and in fact the strength and weight of both are not completely equal, but China, as a huge emerging economy, has the size and the growth potential that will be decisive in solving common challenges. China remains reluctant to take up obligations and to share the duties of a great power in delivering public goods — a responsibility the US, as the superpower, has had to carry since World War II.

This may be because China still has many domestic problems that naturally must remain its first priority. Also, for China, which never has had allies before (except for the USSR during the first decade after the PRC was established) this type of obligation is something new.

In some cases, such as Iran or Darfur, China’s national interest in securing energy or resources is clearly at stake, and therefore are a priority.

However, expectations are high that China will be more willing to provide public goods in the future in accordance with its growing power. While China’s situation and developments are still below those of the US at all levels and in all fields of interest, in the economic field it has some advantages.

This has been demonstrated in the recent crisis, and its role is therefore important in overcoming the global crisis. And if one adopts a long-term prospective, that role will be even more important, especially if China is going to grow at around 8 percent per year for the next two decades.

In several political security issues, especially on nuclear proliferation in North Korea and Iran, China has a critical role in helping resolve those issues. On the North Korean issue, this is so because China may be the only power that the DPRK is willing to listen to, because of its dependence on food and energy from China.

In the case of Iran, China is a member of the Perm-5 of the UNSC that plays an important role, especially in employing sanctions for proliferators. One could argue whether in the long term China will be able to sustain its economic growth in view of its weaknesses in political development.

However, China should be able to overcome this because it is willing to learn about the necessity for political development. One can argue whether its strategy on political development will be adequate or quick enough to keep stability in the future.

However, the leadership does understand this need and they are trying hard to calibrate it, because above all they want to maintain stability, to be able to develop economically as fast as they need, which will strengthen the legitimacy of the leadership.

The writer is the deputy chairman of the Board of Trustees, the CSIS Foundation.