| For those so inclined the big money in investing | | | | experience a surge in economic performance in |
| and high returns lies in the economic accession | | | | the coming generation. Assuming that the Chinese |
| and growth of India and particularly China. Chinese | | | | economy continues to maintain the pace to which |
| index funds returned more than 40% in 2006 and | | | | it has grown accustomed during the last 15 years |
| expect more of the same in 2007. Chinese and | | | | of globalization and liberalization (not a certainty |
| Indian demand will keep oil and commodity prices | | | | but not out of the question), its emergence as a |
| high for the next 5 years. Another play on the | | | | potential US rival in the Asian region may be |
| China syndrome? - buy Exxon and hold. For the | | | | reached faster than some experts expect. Such a |
| small investor the awakening of Napoleon's | | | | development will not only affect the dynamic of |
| sleeping giant is a boon but how about for the | | | | Japan's role in a re-vitalised East Asia, but also |
| political-economy of East Asia and the Pacific? | | | | may well introduce new stresses and strains in |
| How should we view China beyond being a place | | | | Sino-American economic and political relations as |
| of profits and high returns? China's inaction on | | | | both actors jostle for influence within an East Asia |
| North Korea and its stalking of Russian resources | | | | increasingly split between the second 'Greater |
| should provide some clear clues. | | | | Chinese' area and the rest who would still be |
| There are actually 2 China's. One China is the 1.3 | | | | dependent on the US and Japanese markets. The |
| billion strong Communist dictatorship that is | | | | splitting of East Asia into two spheres is a more |
| selectively opening up its markets in order to | | | | probable outcome of Sino-US IPE competition |
| survive and compete with the USA. This is the | | | | than a coalesced East Asian bloc of like-minded |
| China that bulled its way into the World Trade | | | | nation states. |
| Organization. There is a however a second and | | | | If Asia is splitting into 2 zones of influence than is |
| far more powerful China. The intertwined | | | | conflict inevitable? |
| economies of mainland China, Hong Kong, Taiwan, | | | | Conflict over Chinese ambition in Siberia, Taiwan |
| and the expatriate Chinese communities of | | | | or the oil deposits that may lie in the China Sea is |
| Southeast Asia are an extended Chinese state. | | | | almost assured. There is no multi-lateralism in East |
| The second and more powerful China is a regional | | | | Asia of the European variety that can defuse |
| unit based on Chinese economic and political | | | | escalating tensions. Even interdependent trade |
| power. Such a grouping will have important | | | | does not stop conflict if one side is powerful and |
| ramifications for the East Asian sphere in the | | | | driven by a one party dictatorship. In fact |
| future as China expands into Siberia taking over | | | | increased interdependence among unequal |
| Russian resources, and modernizes its army and | | | | partners can lead to friction, especially when one |
| navy. | | | | side sees the other party as being unfair, as were |
| The first China's recent 30 year economic | | | | the cases of the US-Japan or Korea-Japan |
| success has propelled more people from poverty | | | | relationships. This is especially certain when one |
| than other epoch in history. It is a blessing. Yet | | | | party perceives that its vital security interests are |
| recently heavy hitters of US trade policy | | | | at stake. In this case even rising economic |
| descended on China to discuss the implications of | | | | interdependence is not sufficient to keep the |
| the $60 billion per annum trade deficit with the US. | | | | peace. For instance, expanding economic ties with |
| This is really a political canard. China's trade surplus | | | | Taiwan have not dissuaded Beijing from |
| with the US is a little larger than Japan's and most | | | | threatening Taiwan with the use of force including |
| large exporters are US and Western firms | | | | firing missiles and sailing out the Chinese navy to |
| re-exporting product from China. In fact foreign | | | | threaten the island. |
| firms account for 75 % of Chinese exports. The | | | | And let's face facts East Asia has never been a |
| argument that a Chinese deficit means a loss of | | | | region of peace, cooperation or even shared |
| jobs in the US is sheer bunk. In fact it is the | | | | values and mores. All of the major actors in |
| opposite. Cheaper offshore products produce jobs | | | | North-East Asia - the US, China, Russia, Japan and |
| locally through expanded retail operations; more | | | | the two Koreas - have all fought each other in |
| product supply and spin-offs throughout the entire | | | | the past. Even having multilateral security |
| production cycle; and cheaper inputs and more | | | | dialogues is not sufficient to rule out the possibility |
| capital for consumers and businesses. | | | | of radical changes in the political map of the |
| In spite of its economic reformation in the past | | | | region. For example, major internal political |
| half century, China does suffer from some | | | | disruptions in Russia, China or North Korea can |
| serious problems. State bureaucracy still weighs | | | | result in radical shifts of the region's balance of |
| heavily on the economy. More than 50 % of | | | | power and threaten peace and stability. |
| China's factories are state owned and many | | | | Unresolved historical legacies, asymmetry in |
| industries receive generous government | | | | power, conflicting national interests such as |
| assistance. Nationalized firms are home for | | | | territorial disputes and national unification are |
| hundreds of thousands of redundant employees. | | | | limiting factors in the regional security system. |
| Wide scale unemployment and huge inequalities | | | | The region also lacks prior habits and experiences |
| throughout various regions are threats to Chinese | | | | of cooperation. Thus, in North-East Asia multilateral |
| political stability. There is also a close connection | | | | institutions are not only underdeveloped, but even |
| between government bureaucrats, business | | | | those existing are not looked upon as essential |
| people and party officials. It is still one of the | | | | for peace and security. |
| world's poorest countries where corruption, theft | | | | What does all this mean? |
| of intellectual property; a lack of legal processes, | | | | It means that a surging China, with its extended |
| undemocratic politics; state theft of profits and | | | | Chinese community of interests is a good |
| repression are supreme. Not many people I know | | | | candidate to bring about an East Asian conflict |
| would trade Chicago for Chungking. | | | | over Taiwan, Siberian resources or hegemonic |
| If China does not reform its political processes it | | | | aspirations of regional control. If China does not go |
| will most likely disintegrate. Market liberalism - | | | | through a political-cultural change that opens up |
| even one as controlled and narrowly targeted as | | | | democratic and government processes to |
| China's - creates a middle class that will demand | | | | Western concepts of transparency, honesty, |
| political power. If China ignores the rising wealth of | | | | legality and rights than don't expect peace. The |
| certain areas of the country and 'classes' it will | | | | Chinese are in many ways akin to the Russians. |
| dissolve into civil strife. Too many people remain | | | | They are in the game to win and selective |
| poor, disenfranchised, or repressed for the state | | | | market capitalism should not hide the fact that |
| to survive solely on government managed | | | | China is a one party Communist dictatorship who |
| capitalism. The Chinese state has about 15-20 | | | | still believes the universe revolves around the |
| years it is estimated to bring reform and | | | | Middle Kingdom. |
| accountability to both its political and economic | | | | In any event before China melts down into civil |
| processes before civil strife appears. | | | | and international conflict enjoy investing in Chinese |
| If one assumes that China will do nothing major | | | | funds and earning high returns. |
| about reforms it will still almost certainly | | | | |