Bill Emmott - International Author & Adviser

Article

Asia´s century and its implications
Exame - December 2007

When the idea first came up, in the 1970s and 1980s, it was labelled as "the Pacific century", as it was assumed that the 21st century would be dominated by the countries around the Pacific Ocean, especially Japan, the United States and in a smaller way South Korea. Now, everyone thinks of it as "the Asian century". With the dollar declining, America slipping into recession and China about to dominate headlines in 2008 with its fast growth and the Beijing Olympics, it looks as if the Asian century has really begun. But the question is, what does the phrase really mean?

When the founder of Time and Life magazines, Henry Luce, used an editorial in Life to call for "the American century", he was urging his countrymen to enter the second world war and to take a position of global leadership that corresponded to the economic and technological preeminence that America had already attained.

Clearly, Asia is now attaining a great economic importance. In Japan and China, it has the world’s second and fourth largest economies, with India also climbing the ranks at number thirteen. It includes four of the world’s dozen biggest exporters, and contains far and away the largest foreign-exchange reserves in the world, with China holding $1.4 trillion and Japan $916 billion. Taken as a whole, Asia in 2006-07 accounted for more than a fifth of world gross domestic product, almost 30% of world exports and a third of its cross-border capital flows.

Economic power, then, is shifting to Asia. Well, until the dollar began to decline two years ago, and to slide rapidly this year, that wasn’t quite true. If you look at the percentages of world GDP accounted for by America, the European Union and Asia in 1990 and 2006 the surprising thing is that the numbers haven’t changed very much: Asia’s share rose from 20.6% to 22.3%, while America’s also rose, from 22.5% in 1990 to 27.5% in 2006. Taking the EU as the 15 members it had in 1990, the EU’s share has slipped, but only from 30.1% to 28.2%.

The idea that economic power has shifted to Asia is thus not born out by the facts. Those figures, though, are distorted by three things: by the long decline in energy and commodity prices during the 1990s, which depressed the global GDP shares of resources producers; by the stagnation in Japan during the 1990s, which meant that Asia’s global share was being redistributed from Japan to China and other fast-growing economies; and by the strength of the dollar.

Those distortions have begun to unwind: high energy and commodity prices are transferring wealth away from the old developed world; Japan’s economy is growing again, adding to Asia’s overall share; and the dollar is declining. The currencies it has not declined against very much so far, however, have been Asian ones, especially the Chinese renminbi and the Japanese yen. But that is likely to happen during the next year or so. At the end of that period, the value in dollar terms of the Chinese and Japanese economies is likely to have risen, quite sharply.

Yet Asia is divided, not united

The economic weight of the world truly is being rebalanced, with Asia accounting during the next decade for a share likely to much closer to its share of world population (about 50%). So the notion of the Asia century looks like coming true. Yet that still leaves the question of what it really means. For "Asia" is different from Henry Luce’s "America" in a crucial way.

It seems obvious once you say it: America is one country, while Asia is many countries. So Asia is not going to be able to exercise global power in the same way as America did, unless by Asia you do mean one country, in other words China. But there is a further meaning to the obvious fact that Asia is a continent rather than a single country. It is that Asia is in fact a hotbed of rivalry.

Among the world’s oldest enemies are China and Japan. Despite sharing many common cultural traits, these two countries have been fighting each other for a thousand years, most recently in 1931-45 when Japan invaded China. For the five years of Japan’s most notable recent prime ministership, that of Junichiro Koizumi in 2001-06, no top-level summits were held between Chinese and Japanese leaders after October 2001, such was the rancour between them, mainly over historical issues.

Many will say this doesn’t matter: China is the future while Japan is the past. That is not, in my view, a wise way to look at the world’s second biggest economy, but let us put Japan’s potential revival to one side and look at the rest of Asia. China’s neighbour across the Himalayas is India, an economy that is at least a decade behind China in terms of industrialisation and living standards but that is now growing by 9-10% a year. Might China and India work together to exert global power?

It is extremely unlikely. The pair fought a border war in 1962, they still have unresolved disputes over huge tracts of land, and India provides a refuge for one of China’s greatest enemies, namely Tibet’s spiritual leader, the Dalai Lama. There is a good reason why President George Bush signed a civil nuclear deal and a defence pact with India in 2005: it is that he knows India wants help in order to be able to stand up to China, and so America can use India as a counterweight inside Asia to growing Chinese power.

So the Asian century, if that is indeed what emerges, needs to be thought of in a very different way from Henry Luce’s American century. It is a period in which Asia is certainly going to become more and more important: as an economic region, as a source of global warming, as a source of capital, as a valuable market. But also, it is going to be a period during which the divisions within Asia promise to become ever more important.

Asia is not an embryonic European Union: bitter memories and political differences are keeping the major powers apart. It is a region full of danger zones—Korea, Taiwan, Pakistan and Tibet, to name but four. For the first time ever, the region now has three big powerful countries, in China, India and Japan, all at the same time. Power is not shifting to Asia as a whole. But the future peace and prosperity of the world will increasingly be shaped by events in Asia, by whether the rivalry between these three powers turns out to be constructive or destructive. In that sense, this is the Asian century.


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