Publication in Economics, Politics and Public Policy in East Asia and the Pacific

Japan Airlines ‘up in the air’ (with apologies to George Clooney)

Author: Christopher Findlay, Adelaide University

Readers who are members of the JAL Mileage Bank (JMB) are probably wondering now what will happen with their bank of points. The reconstruction of JAL certainly raises this question but also highlights some even bigger challenges in air transport today.

The international system of the regulation of air transport has tried to suppress a set of highly competitive processes. Market access rights are negotiated bilaterally, and routes limited mostly to carriers identified with the countries involved. Read more…

China’s migrant problem: the need for hukou reform

Author: Sherry Tao Kong, ANU

In December 2009 China’s Central Economic Work Conference announced policy initiatives of hukou (household registration) reform and the absorption of migrant workers into small-medium cities. Although the renewed national strategy can certainly be seen as a welcome sign to address this fundamental issue, the majority of migrants are clustered in metropolises such as Beijing, Shanghai and Guangzhou. The local governments in these cities will need to devise their own coping strategies to deal with the pressure and tension over limited infrastructure and resources.

Beginning last year, Shanghai and a number of other cities have started a ‘point system’ to grant ‘well-qualified’ migrant workers permanent residency. Read more…

Why water matters

Author: Quentin Grafton, Crawford School, ANU

Despite its importance, water rarely receives the attention it deserves, at least in rich countries, except when there is too much (floods) or too little (droughts) available. Indeed, many people do not even know how much they pay for water which, by weight, is by far the most important natural resource they consume. In high income countries, such as Australia, the average household consumption per capita is 285 L per day or 104 KL or Cu.M per year. Even on a global scale, water withdrawal by humans is substantial and represents about 30 per cent of total accessible runoff and is increasing as global water consumption rose over sixfold in the 20th century.

The lack of attention to water, at least in rich countries, is because many people pay very little for it — it accounts for less than 1 percent of household budgets in wealthy nations — and it is readily available 24 hours per day, 365 days a year. Read more…

Taiwan’s criminal defence system moves towards China’s

Author: Jerome A. Cohen and Yu-Jie Chen, NYU

The Chinese government’s continuing attacks on human rights lawyers rarely make foreign headlines these days. Monitoring, intimidating, disbarring and prosecuting activist lawyers have become routine in China. Even the tragic ‘disappearance’, while in police custody, of defence lawyer/political reformer Gao Zhishen, now feared to be dead, has hardly attracted attention. It is also unremarkable for even non-political Chinese defence lawyers to suffer sanctions. The recent conviction of Beijing lawyer Li Zhuang for allegedly counselling his client to lie and bribe witnesses would not have been noted abroad if the case had not involved Chongqing’s extraordinary campaign to suppress organised crime.

By contrast, the Taiwan government’s new interest in curbing vigorous defence lawyers does constitute ‘news’. Read more…

Obama on horns of a dilemma in the Muslim world

Author: Amin Saikal, ANU

The battleground for President Barack Obama to fight al-Qaeda and its supporters in the Muslim world is wider than that his predecessor faced. Afghanistan, Pakistan and Iraq are no longer the only main fronts. Added to them are Somalia and Yemen, where al-Qaeda has gained unprecedented strength. The President says he will use all elements of American power to deal with the situation, but what are the implications of this for his desire to improve relations with the Muslim world?

The Afghanistan conflict has now become Obama’s war. Read more…

New thinking about foreign policy strategy in Japan

Author: Ryo Sahashi, University of Tokyo

In the first hundred days under the new administration of the Democratic Party of Japan (DPJ) and its coalition partners, Social Democratic Party (SDP) and People’s New Party (PNP), criticism of Prime Minister Yukio Hatoyama’s foreign policy stance by domestic and American political commentators has continued to mount. The Hatoyama government’s approval rating among Japanese voters has also dropped significantly, though past administrations have also commonly experienced severe declines in popularity within their first three months.

The criticism seems to have reinforced a public impression of Hatoyama’s lack of leadership and strategic vision. Read more…

Will ASEAN benefit from the ASEAN-China FTA?

Author: Shandre Thangavelu, NUS

The ACFTA (ASEAN China Free Trade Area) is one the world’s largest free trade agreements. As of January 2010, it encompassed 1.9 billion people, had a combined GDP of US$6.6 trillion and total trade amounted to US$4.3 trillion. Its Framework Agreement was signed in November 2002 and the Trade in Goods Agreement entered into force July 2005, followed by the Trade in Services Agreement in July 2007. In 2010, the full implementation of zero tariffs for most goods in the FTA is expected for China and the ASEAN6 (Brunei, Indonesia, Malaysia, Philippines, Singapore, and Thailand), while the CLMV (Cambodia, Laos, Myanmar and Vietnam) will do the same later in 2015.

The key motivations of ASEAN for ACFTA is to access the growing Chinese market in services and manufacturing and to create one of the world’s largest trading areas. Read more…

Ambivalence in Japanese sentiment over China

Author: Joel Rathus, Adelaide University and Meiji University

This month’s issue of Voice, conducted a public poll looking, among other things, at Japan’s China policy. Polling on three questions in particular are interesting for what they say about the bipolar character of Japanese feelings about dealings with China. The polls reveal that Japanese want a friendly relationship with China. They also accord a prominent place in the national psyche for the Yasukuni Shrine without a hint of contradiction.

In response to the question, ‘Do you agree with the new Administration’s China policy; East Asian community, and East Sea Joint Development etc.’, half of the respondents said they agreed while 35 per cent disagreed. Read more…

China’s new media charm offensive

Author: Peter Yuan Cai, ANU

Early last year, the Hong Kong based South China Morning Post reported that Beijing is allegedly amassing a war chest of 45 billion yuan to fight a battle over China’s image in the international arena. This has not yet been confirmed by any official sources in China, but the signals from Beijing are lending credence to this report.

Major state-owned media giants such as China Central Television (CCTV), the People’s Daily and Xinhua News Agency are all expanding their services and international presence. The People’s Dailyowned Global Times launched its English edition in December last year. Read more…

President Obama, the TPP and U.S. leadership in Asia

Author: Claude Barfield and Philip I. Levy, AEI

After prolonged ambivalence about trade, President Obama finally found an agreement he could embrace – the Trans-Pacific Partnership (TPP). But what is the object of the President’s new found passion? Why has the South Pacific caught his fancy when pending agreements in Latin America and Northeast Asia could not? And will this amount to anything more than the Administration’s rather empty promises to wrap up the Doha Round of WTO global trade talks?

In fact, the TPP is potentially a significant addition to U.S. trade policy. It could be a model for trade liberalisation and a means to address long-standing U.S. interests in Asia. Read more…

Malaysia’s mercurial Dr. Mahathir

Author: Hal Hill, ANU

Few countries have matched Malaysia’s stellar record of development over the last several decades: Annual GDP growth has averaged around 6.5 per cent since independence in 1957, and the nation of 27 million people now boasts the world’s 31st largest economy. But no discussion of this Southeast Asian nation’s economy would be complete without due attention to Mahathir bin Mohamad, who held the reins for 22 years from 1981 to 2003.

Dr. Mahathir’s personal story, as recounted in Barry Wain’s ‘Malaysian Maverick,’ tracks the country’s broader post-war history. Read more…

Japan’s security options limited by economic realities

Author: Brad Glosserman, CSIS, and Robert Madsen, MIT

Since the inauguration of the Hatoyama administration in Tokyo last September, US-Japan relations have resembled a slow-motion train wreck. The Hatoyama government’s desire to ‘rebalance’ Japan’s foreign policy and to forge ‘a more equal relationship’ with its ally have triggered alarms and raised fears of a rupture, rather than the recalibration that everyone professes to want. But those fears are misplaced. Japan in fact has no viable alternative to its alliance with the United States. The real danger is that the current troubles might do lasting damage to what Secretary of State Hillary Clinton recently described as a ‘truly indispensible’ partnership.

There are many, generally well-known, reasons why the alliance will almost certainly survive this difficult period. Read more…

Japan’s political watershed and its economic challenges

Author: Akira Kojima

Last year was a politically exciting but economically depressing year for Japan. It was the first time in 16 years that the government had been led by a party other than the Liberal Democratic Party (LDP), but also a year in which Japan suffered its largest decline in GDP in half a century. The year 2010 is to be another difficult and challenging year, with economic deflation necessitating the adoption of a new growth strategy and a July upper-house election which could create a historical watershed of Japan’s politics.

While Japan was not at the epicenter of the global financial crisis, with Japanese banks having better balance sheets and much less exposure to toxic financial commodities, the ensuing collapse in export demand and financial spillovers have plunged Japan’s economy into its severest recession in many decades. Read more…

The question of Chinese over-investment and over-capacity – Weekly editorial

Author: Peter Drysdale

A few months back, distinguished Chinese economist Yu Yongding, of the Institute of World Economics and Politics at CASS in Beijing, delivered the annual Richard Snape Lecture to the Australian Productivity Commission.

This week’s essay is a digest of the lecture in which he provided a challenging critique of important elements of Chinese economic policy strategy in response to the global financial crisis. Yu’s argument is not only about how China should be handling the impact of the global financial crisis. It raises more fundamental questions about the structure of the Chinese growth model and whether it is doomed to fall over in a heap unless there are deep structural reforms in the economy. Yu’s lecture was engaging and, especially for an Australian audience whose economy is hitched so closely to China’s growth performance, a little disconcerting. It was illustrated by powerful images of eight lane highways going to nowhere absent of traffic, indulgent local government offices and other developments unrelated to unmet human need.
Read more…

China’s response to the global financial crisis

Author: Yu Yongding, CASS, Beijing

Undoubtedly the most important impact of the global financial crisis (GFC) on the Chinese economy came from the fall in global demand, reflecting China’s extremely high export dependency.

China’s export to GDP ratio in 2007 was 35 per cent. Compared with a growth rate of 25 per cent in September, exports shrank by 2.2 per cent in November. This fall in exports may have cut GDP growth by 3 per cent. If its indirect impact is included, it may have shaved more than 5 per cent off China’s 2008 growth rate.

China’s high export dependency is a result of its export promotion policy. But from a macroeconomic perspective, China’s high export dependency is partly attributable to overcapacity caused by over-investment. In 2007, the combined contribution of fixed asset investment (FAI) and net exports to GDP growth was more than 60 per cent. FAI and exports are the engine-room of Chinese growth. Read more…