By GERALD SEGAL
Of East Asia's
East Asia's economic crises have shattered many supposed certainties,
including the notion that Asians are destined to enjoy a stable political
order. The belief that Asians do not need political pluralism was often
encapsulated in the notion of Asian Values. But just as so-called "economic
fundamentals" are now called into question, so there will be a reassessment
of East Asia's political future. And as domestic politics change in many
East Asian countries, the ground will be laid for a new pattern of international
relations. For China in particular, this crisis could provide a tempting
and dangerous opportunity.
When the problems first struck down the Thai baht in July, the region's
economic powerhouse--Japan--fluffed an opportunity to lead a regional response.
Then the collapse of Tokyo's Asian Fund proposal left Japan visibly humiliated,
even in an area--economics and finance--where it claimed to be Asia's leader.
Today, as Japan's already stuttering economy starts to unravel, there is
little hope of Japan recapturing a window of leadership opportunity. Asia's
economic crisis thus provokes the obvious question: Who will fill the vacuum?
For many, the obvious answer is China, whose economy seems to have escaped
the regional meltdown. Yet there is reason to doubt both China's ability
to lead and the region's willingness to follow. In fact, some indicators
point to China and Southeast Asia becoming serious economic rivals with
dangerous political and ethnic implications. Many Southeast Asians believe--correctly
or not--that China's devaluation in 1994 and its emergence as a light-industrial
competitor for Southeast Asia was a prime cause of their current economic
crisis. Therefore, China's neighbors are bound to begin rethinking their
strategy of unbounded welcome for Beijing into the international community,
and especially into the WTO. If China gains entry without the constraints
that restrain Asean states, then places like Indonesia, Thailand and even
Malaysia stand to lose more than the United States and other more developed
countries currently blocking Beijing's entry into the organization.
Many Asean states already harbor a finely balanced attitude toward China
and the ethnic Chinese among their own citizenry. A more hostile view of
China as an economic competitor could easily translate into open hostility
to Chinese elsewhere. If overseas Chinese decide that they can make more
money by investing in China than "at home" in Southeast Asia--or are accused
of doing so--the racial issue could rise to the surface with serious consequences.
As feasible as these scenarios of divisiveness are, the greater risk
is that China will seek unity with Southeast Asians on the basis of a shared
distrust of the global economic order. Ultimately, China will be a competitor
to Southeast Asia, but in the short term it is unlikely to escape the regional
economic crisis unscathed. Beijing knows that Southeast Asian devaluations
have hurt Chinese competitiveness. Yet a competitive devaluation by China
would import inflation--a neuralgic issue for Chinese leaders struggling
with the need to reduce debt, especially from state-owned industries. China
is also very nearly a bubble economy. As growth rates tumble to 8% they
come worryingly close to the 6-7% level that is said to be the point below
which China is in fact in recession. Growing stockpiles and debts from
SOEs, coupled with a 3% annual increase in the labor force, requires 6%
growth just to stand still.
In short, even as China is being told by the West that it should speed
up reform, privatize SOEs, reform its financial system, cut tariffs and
generally open itself to competition, current economic realities may well
lead China to reassess the notion of ever-closer interdependence with the
global economy and the far- reaching domestic reforms that are its corollary.
As WTO membership recedes into a less welcoming future, so does a freely
convertible yuan. The upshot is a China less committed to interdependence
and thus more worrying to neighbors and more distant great powers. If China
grows more resistant to the constraining powers of the global economy,
then there will be more reason to worry about its military muscle-flexing.
This is also the point where China may seek to build East Asian unity
on an anti-Western basis. There is clearly a debate in Beijing about how
to cope with a world dominated by a single American superpower. Jiang Zemin
has experimented with the idea of seeking parity and partnership in global
governance with the United States, but this strategy was rebuffed at the
Washington summit in October. President Bill Clinton's comments portraying
the West as the judge of who was on the right and wrong side of history
were a graphic reminder that the United States is not prepared to share
power, least of all with China.
For a growing cohort of Chinese nationalists, a far more appealing vision
is to build an anti-Western coalition in Asia. It has already begun in
Beijing's clarion calls for Asians to join China in rejecting Western pressure
on human-rights issues or on the rules of arms-control accords. China uses
its seat on the United Nations Security Council to champion an Asian view
supposedly not represented by a Japan said to be compliant to American
whims. Another important signal of China's intent comes in its strong support
for Malaysian Prime Minister Mahathir Mohamad's notion of an East Asian
Economic Caucus without the Caucasians. The mid-December summit in Kuala
Lumpur of what may be called the Pacific Asia Caucus (PAC) will be a key
test of the Chinese strategy. At the recent Vancouver APEC summit, with
a strong American presence, we were never likely to see support for the
notion of there being Asian solutions to Asian economic travails. But at
the PAC summit in Kuala Lumpur, the conclusions may be very different.
There, China will find vociferous Asian allies for the notion that stressing
the role of the IMF is a way of perpetuating Western dominance. China will
seek to assuage Asean concern about Beijing as an economic competitor by
arguing that a China in the WTO will help turn the body away from Western
domination. China will argue that it is the same Westerners who are out
to change the domestic political orders in East Asia and who go on about
human rights who also want to tell Asians how to spend their money and
how they should submit to the rigors of the global economy.
Until recently, Japan and South Korea might have been counted on to
defend the values and norms of the global system. Now, distracted by their
own domestic crises, they may even be less confident themselves about the
path to modernization. Yet as China explores the possibility of creating
a PAC, Japan, South Korea and Singapore--who profess commitment to an open
global trading system-- can no longer avoid deciding whether or not to
resist China in economic as well as security terms. These choices and risks
were always going to have to be confronted as China grew and Southeast
Asia grew up. The economic crises have only brought forward the days of
Mr. Segal is director of studies at the International Institute for
Strategic Studies in London and director of Britain's Pacific Asia Programme.