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China's long-term role in Asian
stability
By Shen Luoyan
 There are many long-
and short-term issues combined in the question of Asian
common development. To put it bluntly, the United States
and the West were not present in East Asia 200 years
ago, or their presence was marginal and uninfluential in
local politics. Since then, they have become a decisive
force, but it is possible that in 500 years the US and
the West might become once again unimportant for Asian
politics.
In any case, geography will not change
as it has not changed for millennia: we will still have
the presence of China, located west of Japan and Korea
and north of South Asia and Southeast Asia. The distinct
cultural identities of these areas have been a constant
factor for many centuries. Despite minor changes in
areas of influence, constant exchanges and some attempts
to dominate the whole region (conducted mainly by
Central Asian conquerors), none of these powers has ever
managed to control for a long time the whole of Asia.
Therefore, if we can think of - even prepare for - the
time when the West, like a flood, will recede back to
its basin, we Chinese shall similarly prepare for a long
co-existence with other parts of Asia.
All the
future long-term perspectives are at the moment affected
by the short-term reality, which is a strong US presence
in the region. Despite past official rhetoric, one must
recognize that on the whole it has had a positive impact
on the peace and stability of the region. The US
presence in South Korea, with the existence of the
potential North Korean threat, has been for decades the
single most important reason forestalling a full
rearmament program of Japan, something that would be
dreaded by China and other Asian neighbors. Furthermore,
the very language of exchanges in Asia is English. This
is partly because of convenience, as English is the
international language and it is far easier to learn and
use than most other Asian languages, such as Chinese,
Japanese, Korean, Thai, Hindi or Tamil, but it is also
because of politics. The preference of any Asian
language over another would taint politically the
discussion, whereas English, a neutral language, puts
everybody on the same basis. It could be like the role
of English in India, where it is the lingua franca of
the subcontinent providing an equal footing to speakers
of indigenous languages.
The overall US presence
in Asia is also the single element that does most to
assuage tension in the whole continent, which is still
rife with bilateral frictions and border disputes. The
US presence can be conducive to a greater relaxation in
bilateral dealings in Asia. This has been true even in
the most explosive cases, such as the Kashmir issue,
where the US presence, along with the Chinese one,
played an important role in forestalling a war that
could well have become the first open conflict between
two nuclear powers.
But the positive elements of
the US presence in Asia cannot hide a global trend
toward regionalization. There are already two economic
blocs in the world and two currencies that overshadow
all other minor local currencies. The first bloc is in
the Americas, with the North American Free Trade
Agreement (NAFTA) comprising the United States, Canada
and Mexico but also with the larger trading and economic
cooperation between North and South America. The second
bloc is in Europe, around the ever-expanding European
Union. The first bloc is dominated by the US dollar, the
second by the euro. In Asia, which has proved the most
economically dynamic area of the world in the past
several years, there is no trading bloc and no common
currency.
The Japanese yen, which in the past
dominated local transactions along with the US dollar,
does not appear to be as strong as before. The Japanese
economy has been suffering for more than a decade, and
its extreme volatility since the 1997 financial crisis
does not make it a solid anchor of stability for the
regional economy.
The Chinese yuan has some
advantages and some disadvantages. The key disadvantage
is that it is not fully convertible, and possibly will
not be for some time. However, it is becoming more of a
common currency in Southeast Asia, where it is de facto
freely traded at a fixed exchange rate with the US
dollar. In fact, the solidity of the yuan has become a
great asset since 1997, when it resisted all the
pressures for devaluation, and thus checked the vicious
circle of competitive devaluation that could have
totally ruined Asia and perhaps the world.
The
circulation of a larger pool of yuan outside of China
and the stronger presence of the US dollar and the euro
make China look with favor at the possibility of a
basket of Asian currencies. This could strengthen weaker
regional currencies, such as the Indonesian rupiah, and
also ease the transition toward the full convertibility
of the yuan. A basket of Asian currencies in which to
float the yuan could be a safety net for the Chinese
currency, protecting it from aggressive moves that could
bring down the whole Chinese economy. On this front, the
flow of foreign direct investment in China provides some
protection, as those who have invested in China would
not be keen on seeing their assets drastically devalued.
However, it is impossible not to think of opening the
capital markets, either directly in Shanghai and
Shenzhen or indirectly in Hong Kong. In both cases the
Chinese economy would be subject to greater volatility,
which an Asian basket could help moderate.
For
this reason China follows with great interest the Thai
initiative for the Asian Cooperation Dialogue and its
launch of an Asian bond, dollar-denominated, just as the
yuan is pegged on the dollar. This could also be a first
step toward an Asian monetary fund, which Japan and
China tried too timidly to launch in 1997. This fund
could be even more important as more voices now join the
chorus criticizing the nature of the International
Monetary Fund's intervention in Asia after the crisis.
As China suspected then, it now looks clearer that the
IMF actually deepened the crisis, and made it spin out
of control. This was because the IMF had little
knowledge of the local conditions and applied solutions
unfit for the situation of, say, Indonesia. Conversely,
Thailand seems to have managed to go into a positive
spin when it pushed its new economic recipe, shrugging
off mounting Western criticism against it.
In
sum, after 1997 and the present recovery of the Asian
economies in the face of a global economic downturn, it
appears clear that Asia needs its own way of running
things. For this reason China has been pushing for a
free-trade agreement among the ASEAN (Association of
Southeast Asian Nations) plus three (China, Japan and
South Korea). As a concrete token of its good faith, it
has proposed the common development of the Spratly
Islands, disputed in all or in part by China (and
Taiwan), Vietnam, the Philippines, Malaysia and Brunei.
They represent the single most serious issue of
contention between ASEAN countries and China, often
quoted as a proof of China's threatening intentions (see
The Spratlys pact: Beijing's olive
branch, November 6, 2002).
"This
important advancement of China-ASEAN relations marks a
higher level of political trust between the two sides
and will contribute to regional peace and stability,"
then-Chinese prime minister Zhu Rongji said in a speech
in Phnom Penh. The agreement stipulates that claimants
would practice self-restraint in any activity that could
spark disputes, such as inhabiting the islands. They
also agreed to exchange views between defense officials
and give advance warning of military exercises.
This is an important development, as China had
in the past been concerned about being cornered in
multilateral defense agreements. The situation has
changed since the launch of the Shanghai Five agreement,
with Russia and four former Soviet republics, and the
beginning of a dialogue with the North Atlantic Treaty
Organization (see Lonely Beijing looks to NATO,
November 19, 2002). Furthermore, the experience of the
past year seems to prove that the vitality of the Asian
economy, of which China is a fundamental component, also
helped the global economic situation.
Without Asia
the global crisis would have been deeper. This seems to
teach us a few lessons. A greater degree of Asian
economic integration is positive not only for Asia but
also for the rest of the world. A greater level of
integration of Southeast Asian countries among
themselves - something about which Beijing had been
concerned at times, since it was proposed as an
instrument to contain China - is positive in view of a
greater scope of economic integration in a region
spanning from Pakistan to Japan. This in turn would
contribute to the stabilization of the world economy,
along with the euro and the dollar.
(Copyright
Heartland. This version has been edited by Asia Times
Online.)
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