Geopolitical realities in East Asia

Geopolitical realities in East Asia
This photo shows a China Coast Guard ship (right) using a water cannon on a Vietnamese ship in disputed waters in the South China Sea.

It is clear that East Asia is fundamental to United States' prosperity, and vice versa. An economically vibrant US is vital to our prosperity as well.

The World Bank has estimated that this year, East Asia will contribute to 40 per cent of global growth. By about 2030, East Asia will surpass Europe and North America in terms of gross domestic product, population and even technological innovation.

In this context, US engagement in East Asia and the Trans-Pacific Partnership (TPP) will be game changers. The TPP alone will create nearly 700,000 new jobs in the US by 2025, according to the US Chamber of Commerce.

It is therefore a no-brainer that it is in the US' core interests to tap into East Asian growth and be part of the unfolding East Asian story.

If the US does not have the TPP, it will be a big loss to the US. Meanwhile, other trading arrangements are coming into play, like the Regional Comprehensive Economic Partnership (RCEP) and the Asia-Pacific-wide FTA (FTAAP).

East Asia

Just as all roads once led to Rome, all discussions on Asia now inevitably lead to, and start with, a discussion on China. As the world's second largest economy, China is an economic competitor as well as a strategic competitor for influence in East Asia.

Fairly soon, China will overtake the US as the largest economy, in absolute terms. The various statements that we see about China's economy being unsustainable and that it will implode and so on are, in my view, based more on wishful thinking on the part of commentators rather than reality. Nevertheless, China does face enormous challenges.

The key question is how a rising China and the presently dominant US will structure their relationship.

It is really a growing power versus resident power analysis, and scholars who have studied this have said that it inevitably led to war. But that is not the scenario which most sensible people consider as the most likely in the US-China context.

The general assumption is that neither wants war and both will seek to avoid open conflict. China has benefited from the current international order, but it will seek to re-shape the norms and rules, at least in the region. This is because China believes that the norms and rules were created by Western powers, at a time when China was weak.

How China seeks to change these norms, and the extent to which it is prepared to accept them as they are will determine the shape of relationships in the region.

China's internal dynamics

It is useful to think a little about the internal dynamics within China as well because that will impact on how China interacts with the rest of the world. At the Third Plenum held in November 2013, the Chinese leadership recognised the need for serious structural reforms.

The Chinese leadership under President Xi Jinping is determined to do this. That will require, amongst many other things, more market-based policies, dealing with very powerful state-owned enterprises, and managing powerful vested interests. It will not be easy, because it means reforming the very structures which are all essential parts of the system.

Between 1980 and 2010, they lifted with their own bootstraps 300 million people out of poverty.

No country has ever achieved that. That was done in the context of absolute central power and ability to execute that power.

They are seeking to do another revolution now, in the next 20 years, but in a very different context where people are on the Internet, where power is not so absolute any more and where every decision is subject to challenge internally. It will be difficult for President Xi and his administration to exercise absolute centralised control.

China faces other significant challenges. There is a large wealth gap, with a significant urban-rural divide, and coastal-interior divide. China has to carry out these reforms without a framework of the Rule of Law as we understand it. It will not be easy, but looking at the competence of the leadership and determination, I am cautiously optimistic that China will overcome the enormous challenges and will be transformed.

Given China's priorities, one can imagine that China really does not desire external conflict. China will also seek stable relations with the US, as it is aware that the only power that could check China's growth, or alter China's trajectory, remains the US.

China will seek to advance its interests externally in every way - but Beijing is not actively looking for trouble with the US. China continues to need investments, trade, technology and management expertise from the US. It has been noted often that China holds large amounts of US Treasury bonds.

Likewise, Washington sees stable relations with an economically dynamic China as in its interests, and necessary to the continued health of the US economy. A new US-China relationship will be the foundation of any new East Asian architecture. All other relationships quite frankly will be secondary.

China has said that the Asia-Pacific is big enough for both the US and China and has spoken about "a new model of great power relations". The US has echoed this, but while Washington and Beijing may use similar terms and words, it is not clear that they mean the same thing.

Tensions and claims

Tension and spats in the East and South China seas are an illustration of how these dynamics work. China's claims cover 90 per cent of the South China Sea, although the precise, legal basis for these claims is unclear.

A senior Chinese scholar recently wrote that the basis of the claims will not be clarified.

Time does not permit to go into his explanation in detail, but suffice to say that this shows: first, a tacit acknowledgement that China has not spelt out the legal basis for its claims; and second, that the validity and moral strength of China's claims do not depend on legal technicalities, at least on the part of this scholar who, by the way, happens to be the president of the National Institute for South China Sea Studies.

A Chinese leader today cannot be seen to be giving up on China's claims. He will be seen as weak and Chinese public opinion will be most unforgiving.

Likewise, other countries who feel that their claims intersect with China's claims, cannot be seen to be passive either. This is a dynamic that increases risks and tensions. Furthermore, this dynamic arises regardless of the legal merits of the respective claims.

I note that the US is trying to urge all claimants not to resort to aggression and has called for a reduction of tensions. To some extent, this reflects the new reality. The US now needs the cooperation of others and asks for it, as opposed to the post-World War II situation, when the US could impose its will.

China frequently accuses the US of meddling in its affairs. From China's perspective, East Asia should be within China's sphere of influence. This has shades of the 19th Century Monroe Doctrine. I say "shades" because you can point to obvious differences between the two situations, but the reality is that Big Powers behave in this way.

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