Sunday, April 24, 2005

BBC NEWS | Programmes | From Our Own Correspondent | China suffers memory lapses too

It used to be pretty simple. China was a political and military heavyweight but a relative economic pygmy. On the other hand, Japan while economically powerful, was nevertheless constrained by both its pacifist constitution as well as its alliance/dependence/stranglehold with and on the US.

Hence the balance of power was maintain and the status quo stayed well quo. But with breakneck speed and insane growth rates, China looks less and less like a sleeping dragon, heck not even sleepy or drowsy anymore. It's up and limbering its various limbs. And on the other hand, Japan wants a political position and influence more commensurate with its position as the 2nd largest economy in the world and the largest contributor of aid in absolute terms (and pretty high up in relative terms as well).

Along the way, a number of highly questionable decisions were made, decisions that in hindsight were bad, disasterous or even murderous. Whether they were similarly necessary will be an issue to debate over the next few centuries. As the German Chancellor Bismarck was once said to have quipped when asked about the effects of the French Revolution, "It's still too early to tell"

Alright, geo-political history aside. What does it mean for our region? Locally, I will admit to being utterly intimidated by CITIES like Shanghai and Beijing, and lest we forget that 'little' Special Administrative Region (SAR) Hong Kong. What we can do China can probably do better in time. So things like social stability and accountability and rule of law, which we are spades ahead at the moment would diminish. Because they, I would argue, are historical inevitabilities. Every nation with a GDP of above USD 15,000 is a democracy (all liberal ones except for our sunny island which should change). So it's a huge matter of trying to keep ahead and leverage ourselves into niche spots, which fortunately as a small country is the logical thing to do.

But before we worry ourselves into a tizzy, a rising tide does raise all the boats so I think looking at the scenario now and into the middle term, China (and India to follow) drawing of attention and FDI will be generally beneficial to us. We don't yet compete in quite the same areas (with the exception of Hong Kong) and the competiton is not necessary bad if as a result, we start drawing a larger market here. So even if we have to split the pie, in absolute terms we end up with more.

What about ASEAN? As far as I can tell, we are hedging our bets by pulling yet more nations in. So East Asia is in (Korea and Japan), China and North America via APEC, and now NZ and Australia. The way things are developing, ASEAN is a very diverse organisation with pretty diverse nations that can leverage on different strengths. Even where competition appears to be direct, say manufacturing, the nations are focusing on different ends of the value chain. Admittedly though, our (high end) manufacturing sector is having to compete really hard with the Taiwanese.

So if China can stop thinking of its most immediate selfish interests for a while (territorial sovereignity and being the all round bad ass in the region), I think they will 'dicover' that a strong Japan is in their interests. After all, 30 billion in aid over the past 28 years is nothing to sneeze at. Neither is alienating your second largest trading partner after the US (applies to both nation). Once this mutual antagonism is somewhat resolved, then maybe the CCP will be able to control the use of nationalism again. Right now, it's a double-edged sword that they are trying to use. To the extent it works, it works well. But the time it took for them to control the demonstrations this time is indicative that other forces are working against their political survival as well. Reflex nationalism is generally too dangerous a card to play in international politics much less domestic ones, the CCP might well want to heed that



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