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

A change in Egypt’s political weather filters through to China

Author: Wang Gungwu, NUS

There are so many levels of fascination in what is happening in the Arab world today. Expectations of revolution, fear of instability, the survival of secular governance over theocracy, the future of democracy, the power of Facebook and Twitter  — the list is long. Media reports have been excitable and it is too early to digest all the implications of the historic event.

One aspect of the reports deserves attention: These noted that China’s media kept its reporting of the events in Cairo low-key and that the word ‘Egypt’ was kept off the internet. Ever since the middle of last month, when the Tunisian president fell, the Western media has noted what the Chinese press has failed to report. Read more…

What drives Chinese current account surpluses?

Author: Peter Drysdale

China’s current account surpluses are the target of growing criticism in the international policy community. They are seen as a central element in the imbalance in the global economy.

They are seen as a source of vulnerability to a second round crisis in international financial markets. Read more…

China’s export-led growth model

Author: Yang Yao, Peking University

China’s export-led growth is rooted in a double transition of structural change and demographic transition. Accession to the WTO has allowed China to fully integrate into the world system and capture the gains of its comparative advantage in abundant labour supply.

The double transition will take 10 to 15 years to finish. Over this period, China is likely to continue its fast export-led growth. Read more…

Robust credit cultures key to developing deep and liquid corporate bond markets in Asia Pacific

Author: Tom Schiller, Standard & Poor’s

Despite good progress, Asia Pacific still has a long way to go before its local corporate bond markets realise their full potential. Fostering national credit cultures built on transparency, creditors’ rights, and independent and objective credit analysis is essential.

Nearly every Asia Pacific government has started building local corporate debt markets in order to benefit from the diversification that such markets provide. Read more…

Aid to Indonesian Islamic schools helps undermine terrorism

Author: Risti Permani, University of Adelaide

Few might think that the Australian state of Queensland’s recent natural disasters could have any link with the future of underprivileged students in Indonesian Islamic schools (madrasah).

But the Australian opposition Liberal Party’s proposal to cut aid for madrasah to avoid the Australian PM’s flood levy to pay for flood damage has raised concerns over the effect of diverting support for those schools on Australia’s counter-terrorism agenda. Read more…

Ichiro Ozawa goes quietly

Author: Michael Cucek, MIT

On 22 February, the Standing Officers Council of the Democratic Party of Japan voted to suspend the party rights of Ichiro Ozawa — less than six months after Ozawa was one of the two candidates for leadership of the party.

The decision marks a significant turning point for the current DPJ leadership as it attempts to mollify public displeasure over Ozawa’s continued membership and influence in the party. Read more…

Trans-Tasman summitry

Author: Gary Hawke, NZIER

The prime ministers of Australia and New Zealand met earlier this month. Former prime minister Rudd never quite completed a visit to New Zealand. Julia Gillard was a substitute on one occasion and another was disrupted by the party coup which coincided with his last attempt.

The main tangible deliverable outcome from the summit was no more than an increase in the limit for Australian investment in New Zealand and New Zealand investment in Australia, without satisfying extra requirements for overseas investment. This is hardly a major achievement. Read more…

Will China relocate factories to Africa, flying-geese style?

Authors: Terutomo Ozawa, CSU and Colombia University and Christian Bellak, WU Vienna

China has developed increasingly close economic relations with Africa in its quest for oil and minerals through investment and aid. The World Bank recently called upon China to transplant labour-intensive factories onto the continent. A question arises as to whether such an industrial relocation will be done in such a fashion to jump start local economic development — as previously seen across East Asia and as described in the flying-geese (FG) paradigm of FDI.

Many studies have examined China’s and other countries’ investments in Africa’s light industries (notably leather goods and textiles) and pointed out a host of difficulties they face because of poor local institutional conditions. Read more…

India’s twin deficits jeopardise national growth

Author: Pravakar Sahoo, IEG

The forthcoming budget for the Indian finance minister is going to be tough to balance. He is juggling a number of issues: inflation is the most important, but containing the fiscal deficit, current account deficit, slowdown of manufacturing output, declining FDI inflows and sustaining growth are also major challenges. Absence of a serious effort at reducing the fiscal deficit and current account deficit implies a growing risk of adverse change in market sentiment, which would lead to an increase in inflation, high interest rates and low private and public investment, thereby hurting growth.

Since 2007–08, the fiscal deficit has increased to around 6.5 to 7 per cent of India’s GDP, subsequently leading to a combined federal and state deficit of over 10 per cent of GDP in 2009–10. The actual numbers are higher, by at least 1 per cent, as some items were kept off the balance sheet. Read more…

China’s and India’s growing investment and trade with Africa

Author: Harry G. Broadman, Albright Stonebridge Group

The dramatic increase in recent years of trade and foreign direct investment (FDI) in sub-Saharan Africa by firms from Asia — notably China and India — has become an emotionally charged issue.

This is not surprising, since the resulting greater integration into international markets is exposing African firms and workers to greater competition, an inevitable by-product of development in today’s globalized economy. Read more…

Russia–Japan territorial disputes, divisive as ever

Author: Tsuneo Akaha, MIIS

The Russia–Japan territorial dispute over the southern Kurils/Northern Territories is heating up again. Although the Cold War has long ended, Russian President Dmitry Medvedev’s visit to Kunashiri Island on 1 November 2010 prompted Japanese Prime Minister Naoto Kan to call it ‘an unforgivable outrage.’

Japan claims that the islands of Habomai, Shikotan, Kunashiri (Kunashir in Russian), and Etorofu (Iturup) are not part of the territories it surrendered in the 1951 San Francisco Peace Treaty. Read more…

An agenda for US-Central Asia relations

Author: Evan A. Feigenbaum, CFR

Central Asia remains fragile and sometimes volatile. Nearly twenty years after the Soviet collapse, ethnic tensions, exacerbated by economic competition, simmer and threaten to destroy the fragile foundations of this multiethnic region.

Kazakhstan and Turkmenistan have achieved relative stability. But the explosion of Kyrgyz-Uzbek ethnic clashes around Osh and Jalalabad in June 2010 underscores deeper vulnerabilities and demonstrates just how rapidly violence can escalate in both scope and scale. Read more…

Chinese investment in Mongolia: A sequel

Author: Justin Li, ICE

Julian Dierkes’ thoughtful response to my essay on Chinese investment in Mongolia obliges clarification of some of my earlier points. I confess my ignorance of ‘Third Neighbour’ policy and, though one commentator suggests that it ante-dates large-scale Chinese investment in Mongolia and therefore cannot really be perceived as responding to that, it certainly helps to contextualise aspects of Mongolian foreign investment and trade policy.

It is important to take a closer look at the decision behind the controversial ‘east-west’ railway project approved by the Mongolian Parliament. Read more…

Is China a military threat to Australia? The Babbage fallacies

Authors: Geoffrey Barker and Paul Dibb, ANU

Ross Babbage has deep concerns about China’s growing military power and assertiveness. His concerns are magnified by his pessimism over the economic outlook for the United States throughout the next decade.

In Australia’s Strategic Edge in 2030 (Kokoda Paper No. 15, February 2011) Babbage asks what Australia should do to ‘offset and deter’ the rapidly expanding Chinese People’s Liberation Army (PLA) in the Western Pacific. Read more…

Fixing global economic imbalances

Author: Peter Drysdale, ANU

The G20 Finance Ministers’ meeting in Paris over the weekend clinched a deal on the indicators that will be used to evaluate and to tackle the economic imbalances, said to be at the heart of managing recovery from the global crisis.

Importantly, China signed on to the deal, the announcement of which reports that trade balance and investment flows will be monitored ‘taking due consideration of exchange rate, fiscal, monetary and other policies.’ Read more…