Think Asia Will Dominate the 21st Century? Think Again.
Michael R. Auslin, The End of the Asian Century: War, Stagnation, and the Risks to the World’s Most Dynamic Region (New Haven: Yale University Press, 2017), 304 pp., $30.00.
MICHAEL R. Auslin opens his book with a preface entitled “The Asia that Nobody Sees.” He might better have entitled it “Hiding in Plain Sight.” For far too long, but especially during the Obama years, policymakers chose to focus on Asia’s remarkable economic growth, coupled with an era of relative peace. Too often they overlooked economic, demographic, social, political and military tensions that did not lurk all that far below Asia’s shiny surface.
Barack Obama, who spent part of his formative years in Indonesia, was a leading cheerleader for the concept of the Asian century. He seemed to care little about Europe and preferred to avoid the troubles of the Middle East as much as possible. He embraced the notion of a rising Asia that soon would constitute America’s most vital interests. It was in that spirit, too, that Hillary Clinton announced the “pivot to Asia,” which was meant to refocus American military power and political and economic priorities away from Europe and the Middle East and instead underscore Asia’s importance to the United States.
Of course, much of the Middle East is in Asia; so too are five former Soviet republics; so too is Afghanistan. But when Obama and Hillary Clinton referred to Asia, they generally meant East Asia, though at times they expanded their definition to include South Asia, employing the term “Indo-Pacific.” But their focus was primarily on East and Southeast Asia, and particularly on China, Japan, Korea and five of the eight ASEAN states—Indonesia, Malaysia, Singapore, Vietnam and Thailand. It is these countries, plus India, that constitute Asia’s economic powerhouses (Brunei is an oil-rich country having more in common economically with the states of the Arabian Gulf than with its ASEAN partners). Laos, Cambodia and Myanmar lag far behind in political and economic development. Auslin likewise pays them far less attention than he does to their more advanced ASEAN partners, though the Obama administration, consistent with its policy of outreach to enemies and other subjects of long-time American sanctions, moved quickly to improve relations with Myanmar when the “Burmese Spring” blossomed in 2010.
Auslin asks what he terms “inconvenient questions,” such as: “How resilient are Asian countries to economic shocks? How adaptable are leading economic sectors and government policies?” Of course, the answers depend on the country in question. But Auslin rightly recognizes that these issues are not unique to any one state in the region and are common to virtually all of them. As he points out,
Asian countries, developed and developing alike, face significant challenges. . . . Demand from Western countries will possibly level off as those societies age and as incomes remain stagnant. . . . Corruption, malinvestment, and waste eat away at economic efficiency.
AS AUSLIN demonstrates, China is the prime exemplar of these developments. Chinese economic statistics, never fully reliable, continue to be adjusted downward. Wages have risen sharply over the past decade; indeed, for several years, the minimum wage was growing at double digits—as high as 18 percent. The Chinese banking system remains opaque, and bank balance sheets are unreliable, as they continue to overstate the value of their assets, notably state-owned enterprises (SOEs). Moreover, obtaining financing in China often requires connections in Beijing, further undermining the efficiency of the banking system. Finally, local and provincial regulations often impede business growth, while corruption, particularly at those levels, remains rampant, despite President Xi Jinping’s ongoing efforts to clean house. Lastly, Auslin rightly identifies yet another scourge that China—and other Asian economies—suffer from: Mafia-like intimidation, or worse, of foreign investors. Not surprisingly, companies that are contemplating investment in East Asia are looking more and more at Vietnam, Malaysia or Indonesia, or even the Philippines, rather than risk shrinking margins in China.
The SOEs are an albatross around China’s economic neck, yet even the increasingly powerful Xi, recently crowned China’s “core leader,” has been unable to shut most of them down. The management, ownership and finances of many private businesses also are opaque. Often, businesses that are nominally private are actually owned by the government through a complex chain of holding companies. This is particularly the case with respect to firms in the high-tech and aerospace sectors.
The era of untrammeled Chinese economic growth appears to be over—and that development naturally does not account for whatever actions a new Trump administration will take to even the playing field of Chinese-American trade. Should the administration initiate steps that would lead to a trade war with Beijing, it would seriously affect the American economy, but devastate China’s. U.S. economic fundamentals are strong, and may even be getting stronger, while China, as Auslin notes, has not yet achieved sustainable development. China’s economic vicissitudes are far from over.