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

The future of the international currency system and China’s RMB

Author: Yiping Huang, Peking University and ANU

The global financial crisis could mark the beginning of the end for the US dollar’s dominance over the global economy.

But the US dollar will not leave the global stage in the foreseeable future. It will remain one of the world’s most important currencies for many years to come. But the difficulties in maintaining the US dollar’s role as a global reserve currency are large, and are best characterised by the ‘Triffin Dilemma’. Read more…

Reform or retrenchment in North Korea?

Author: Bradley O. Babson, NCNK

Politics and economics are deeply entwined in North Korea. Thus, interpretation of the intentions and implications of North Korean actions must be assessed through both lenses. As it tries to address economic development and security challenges, North Korea has to find a way to make internal changes that will yield results while maintaining political control and regime legitimacy.

At the same time, Pyongyang has to improve its external relations in ways that enhance its economy and security, but this will require more openness and commitment to compliance with international norms. Read more…

India’s deepening relations with Japan

Author: Nabeel Mancheri, Jawaharlal Nehru University

The Annual Bilateral Summit in New Delhi on 29 December 2009 marked a stepping stone in the relationship between India and Japan. During the summit, Dr. Yukio Hatoyama and Dr. Manmohan Singh, Prime Ministers of Japan and India respectively, held discussions on bilateral, regional and global issues and reaffirmed that Japan and India share common values and strategic interests. They pledged to further develop their Strategic and Global Partnership in an effort to strengthen their bilateral relations and ensure peace and prosperity throughout the region and the world.

Until the 1990s, the relationship between India and Japan had been highly asymmetrical. Read more…

Japan: Keeping the DPJ’s backbench in check

Author: Tobias Harris, MIT

On Wednesday, Ubukata Yukio, the deputy secretary-general, Tanaka Makiko, Koizumi Junichiro’s controversial foreign minister who joined the DPJ last year, and other DPJ Diet members proposed to Prime Minister Hatoyama Yukio and DPJ secretary-general Ozawa Ichiro that the party establish a new policy research arm to replace the policy research council that closed shop when the DPJ took power in September.

Once again showing that whatever the DPJ-led government’s shortcomings, it is entirely serious about centralising policy-making in the cabinet and neutering the ruling party, both Hatoyama and Ozawa were quick to reject the proposal. Read more…

US protectionism’s other names

Authors: Jagdish Bhagwati and Arvind Panagariya, Columbia University

Lagging employment recovery and continuing high levels of unemployment have marked the macroeconomic scenario in the United States. So it is natural that the United States, which chaired the G20 meeting in Pittsburgh, would use its privileged position as the host to invite the US secretary of labour, a well-known union activist, to convene a meeting of the employment and labour ministers on the jobs situation prior to the next G20 heads of state meeting in Canada.

The macroeconomic aspects of the labour situation are indeed a proper focus of such a meeting. Read more…

Japan: Is the DPJ taking a leaf out of the LDP’s book?

Author: Aurelia George Mulgan, UNSW@ADFA

One of the signature policies of the DPJ government has been to reallocate budget funding from public works to people’s livelihoods under its key slogans: ‘from concrete to people’ and ‘putting people’s lives first’. There was much fanfare attached to the suspension of a number of key public works projects as part of the budget review process last year, with the Yamba Dam being the biggest prize. Although halting construction of the dam was a DPJ election pledge in its 2009 manifesto, Minister Maehara, of the Ministry of Land, Infrastructure, Transport and Tourism (MLIT), was able to claim much of the political credit for the way the suspension was handled.

But the DPJ’s commitment to spending reform has not prevented it from politicising the current process of public works (PW) allocation in the best tradition of the LDP. Read more…

Taiwan: Is Beijing testing Obama’s mettle?

Author: Ron Huisken, ANU

China’s fierce reaction to Washington’s recent confirmation of a US$6.4 billion arms deal with Taiwan was pre-meditated, not spontaneous. The deal itself has been around since 2001, and it was an open secret that the recent announcement was a matter of when and not if. This issue played out alongside a subsequent confirmation that President Obama would meet the Dalai Lama in his capacity as Tibet’s spiritual leader, a development that Beijing warned would threaten trust and cooperation with the US.

China and Taiwan have notched up some significant gains in the direction of normal dialogue and freer economic interaction since President Ma took over in Taipei in May 2008. Many commentators assessed that the ‘Taiwan question’ seemed to be more securely quarantined than ever. Read more…

US-China economic imbalance: Alternatives to appreciating the Chinese yuan

Author: Xiao Geng, Brookings Institution

Recent debate has focused on how to increase US exports and savings and increase Chinese imports and consumption in order to correct the trade imbalance between the US and China. In America in particular, focus has been placed on Chinese exchange rate policy. American leaders would like the RMB to appreciate significantly and quickly. They hope that this would lead to an increase in US exports and employment.

Yet Chinese leaders regard pressures to appreciate and protectionist measures from the US as unfair, and as detrimental to China’s development. They place emphasis upon structural and institutional reform in order to increase Chinese consumption and to bring about more efficient domestic investment. Read more…

The scale of China’s economic impact

Author: Ligang Song, ANU

China has succeeded in moving up the ladder of development through rapid growth in just three decades. The pace of China’s growth is not what is unique — Korea, Singapore and other economies in East Asia grew as fast in the 1970s and 1980s. What is unprecedented historically is its scale. The size of China’s population, market and geography, and the dynamism that flowed from economic reform and transformation are what define its impact on the rest of the world. Despite a still relatively low per capita income, the sheer size of the Chinese economy has made China a significant player in world production, consumption, trade and increasingly international finance and the environment.

The dynamics unleashed by Deng’s reform, the opening up policies and institutional changes have propelled continuous capital accumulation, productivity gains, trade and income growth on a scale the world has never seen before. Read more…

Japan and Australia: stalled in domestic politics

Author: Christopher Pokarier, Waseda University

Whales do not usually surface by the exclusive north shore of Sydney harbour. Yet when Japanese Foreign Minister Katsuya Okada sat down for a meeting with Kevin Rudd at the Australian Prime Minister’s official Sydney residence, Kirribilli House, on Saturday afternoon, the topic was very much on the menu of their conversation. Prime Minister Rudd declared just the previous day that, as pledged while in Opposition, if a diplomatic agreement to end Japan’s Antarctic whaling program by November was not achieved then ‘…let me tell you, we’ll be going to the International Court of Justice.’

That the whaling issue could assume such public prominence might bemuse pioneers of the bilateral relationship who overcame the legacy of war and cultural distance to forge a prosperous and profoundly important partnership between the two nations. Read more…

President Obama comes to Canberra – Weekly editorial

Author: Peter Drysdale

Next month Mr Obama will visit Australia for the first time as President of the United States. His schedule is still shrouded in secrecy but he is scheduled to address both houses of the Australian parliament in Canberra, following the precedents set by his predecessor, George W Bush, and President Hu Jintao of China. By any yardstick, this is among the most important events in Australia’s diplomatic calendar. Though the going might be a little rough for him at home right now, Obama is bound to be welcomed very warmly in this country.

But what is at stake on the visit? This week Hugh White reviews Australia’s relationship with America over the past few Presidents and Australian prime ministers and nails what he believes is the central question that the President and Australian Prime Minister Rudd must deal with. Read more…

Obama visits Australia

Author: Hugh White, ANU

President Obama’s visit to Australia is a bit of a puzzle. The superficial politics are obvious enough, at least for Rudd. The deeper dynamics are not. That is because we do not yet know what Kevin Rudd thinks of the US alliance. Of course he supports it; every Australian leader does. But he has not so far defined what he wants to do with it.

In this he differs from his predecessors. Bob Hawke and John Howard, in very different ways, each re-conceived the alliance, to suit their own policy aims and political purposes. Read more…

Lessons from South Korea: Indian industry and government must unite

Author: Rajiv Kumar, ICRIER

Last week I went back to Seoul after 26 years. The city is transformed and so is the economy. In 1984, when I visited the export processing zones, Masan and Iri contributed at least 60 per cent of total exports from South Korea. Posco had been established as a public sector company to take on established global giants and out-competed all of them despite having to import 100 per cent of its raw materials by relying on latest technology, economies of scale and above all, sheer hard work and dedication. And, at the same time, Korea was reaching full employment levels by furiously expanding labour intensive exports.

The question arose in my mind that if Korea could successfully combine the latest technology with large-scale employment generation, could India do it as well? Read more…

Accelerating growth, reducing poverty and using regional cooperation in Bangladesh

Author: Sadiq Ahmed, PRI

Despite solid development performance since independence, Bangladesh’s per capita income remains low by global standards. Nevertheless, there have been encouraging signs; poverty has come down from over 70 per cent in the early 1970s to around 40 per cent in 2005.

However, a look at the spatial distribution of development progress shows significant disparity between leading and lagging regions of Bangladesh. Read more…

The ASEAN-China FTA: driving competitiveness in Malaysia

Author: Shankaran Nambiar, MIER

China has come to occupy a prominent position on Malaysia’s trade agenda over the past few years and is now Malaysia’s fourth largest trading partner. China currently accounts for about 11 per cent of Malaysia’s global trade, lagging behind the likes of the US, Japan and Singapore.

This was not always the case. Between 1995 and 1999, only about three per cent of Malaysia’s exports moved towards China. Today, about ten per cent of Malaysia’s exports are destined for China. Only about two per cent of imports came from China in 1995, but more recently they have shot up to close to 13 per cent. Read more…