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The global implications of the rise of Asia

A note by the Director (Ditchley 2010/09)

18-20 November 2010

 
The economic rise of Asia, transforming the global scene over the past few years, has been accelerated by the rapid emergence of most Asian economies from the 2008 financial crisis.  The aim of this conference, organised with help from Asia House, was to look at how Asia was continuing to change, examine potential risks to this economic success story, and consider how the rest of the world should be reacting.  The assembled group of experts and practitioners included representatives of ten Asian countries, though major actors such as Indonesia were still not represented around the table.  Debate was lively and consensus not easy to reach, despite firm and expert chairmanship.

We started by looking at the nature of the phenomenon, which Asian participants argued should be seen rather as the rejuvenation or return of Asia, after a 200 year blip.  There was general agreement that the extraordinary rates of growth in recent years looked likely to continue in many if not all of the successful countries, despite the challenges, and that the process had been relatively well managed so far.  It was also firmly pointed out that talking about Asia should not just be reduced to a focus on India and China, huge though they were.  Other major players, already emerged like Japan or South Korea, or emerging like Indonesia and the Philippines, also deserved their place in the sun – on any other continent they would be giants.  Some queried whether it made sense to talk of Asia as an entity at all, given its size and huge diversity, and also pointed to Asian failures such as Afghanistan and North Korea, making generalisations about Asia difficult.  Asian participants, while recognising the diversity, suggested that there was nevertheless an increasing sense of “Asian-ness” around the continent. Asians were quietly learning from each other.

There was much discussion over whether there was an “Asian model”.  Most thought not – India’s and China’s systems were very different from one another, and political arrangements in Asia in general ranged from very open democracies to highly authoritarian regimes.  The so-called Beijing consensus was a phoney construct. So were there specifically “Asian values”?  On the one hand, Asian economic success had been built largely on typical western values of a work ethic, open markets, technological advance and improving education. It flowed more from liberalisation than authoritarianism. It had also benefitted hugely from the overall security umbrella provided by the US.  On the other, many Asian countries did appear to favour similar international approaches based around strong national sovereignty, territorial integrity, consensus-seeking, respect for others, and
non-intervention, while strong family ties and favouring of collective interests and rights over individual ones were a common feature.  Individual human rights in particular did not feature heavily among the priorities of many Asian countries, which risked weakening international norms.

In any case there was agreement that Asia, while a rising political as well as economic force in the world, was not yet acting collectively in any organised or meaningful way, and looked unlikely to do so for the foreseeable future.  Regional organisations, with the partial exception of ASEAN, remained weak and inchoate, with few real moves towards European-style integration. Bilateralism was the name of the game for the most part, as shown by the rash of bilateral free trade agreements within Asia and between Asian countries and others. But when Asian country views did coincide, as those of India and China had over climate change, they were very powerful.

At the global level, the increasing importance of Asian countries was being gradually reflected in international institutions – for example changes to voting weights and quota arrangements in the IMF and World Bank, and the creation of the G20.  The heads of the ICJ and IAEA were now Asian.  This needed to go much further to reflect the rapidly changing weight of Asia.  There was a particular urgency about reforming the Security Council.  There was an obvious risk otherwise of Asian countries seeking alternative institutions and arrangements. But in practice there was little sign of this for the moment: western concepts and western-designed institutions still prevailed on the international scene.  There was little sign of Asian soft power. In this sense countries like India and China could be seen as “pre-mature” powers – not yet ready for the demands of global leadership, not clearly articulating visions of global common goods, and understandably still preoccupied with their own development, given the huge populations in both countries still living at below the level of $1-2 income per day. It was hard to say at this stage whether Asian powers would in the end want to buy in more to the existing system, or change it fundamentally. There were still therefore open questions about how Asia’s economic power was to be translated into political power, and whether we yet had the institutions of international governance we needed to achieve this amicably. Their absence was a source of major risk.

The conference looked at political, economic and social challenges to Asia’s rise.  The biggest single issue was seen as resources – where would the natural resources come from to feed the voracious Chinese, Indian and other industrial and consumer appetites, and could current rapid growth be sustainable in environmental terms?  On the first point, it was felt that energy and other raw material requirements could probably be met, aided by plentiful supplies of domestic coal in China and India and the development of new technological solutions.  The big exception was water, where supply was already tight, and too many of the sources for comfort located on the Tibetan plateau.  This could easily lead to future conflicts about control of river flows.  There were much greater worries about the second point.  Environmental pollution in China and elsewhere was already huge.  The poor populations of China, India and other Asian countries had justifiable aspirations to western-style consumption patterns – varied meat-rich diets, cars and consumer goods for all.  But given the predicted effects of climate change and the rise of the global population to 9 billion plus by 2050, how could this be sustainable?  Agricultural technology (GMOs etc) could help on the food side, but against that arable land was finite as well as water.  China was already addressing some of its environmental problems more successfully than the outside world gave it credit for, but for example a new coal-fired power station in China every week inevitably posed massive problems.

There were economic risks too:

-          over-dependence on western, particularly US, consumer markets;

-          pervasive corruption in many Asian countries;

-          rising wage levels making eg Chinese production of basic goods less competitive, while moves up the value chain were slow;

-          too much government interference in key markets;

-          rising protectionism or even currency  wars if current tensions and imbalances were not well handled.

As a general point, moving countries from middle to high income status had proved historically very challenging.

On the political and social side too, plenty of challenges could be identified:

-          managing expectations and pressures in a context of glaring inequalities of income and prosperity between different groups and geographical areas;

-          the end of the “demographic dividend” in some countries, notably China, while India and others would continue to produce dynamically growing young populations who would need jobs;

-          competing nationalisms, with obvious worries about how for example China and India and China and Japan would relate to each other in the future, but also about Chinese territorial assertiveness around her maritime borders;

-          reduced US willingness/capability to provide the current security umbrella;

-          weaknesses in Asian education systems in producing a creative, innovative and highly qualified workforce in the right numbers;

-          problems in managing religious diversity and multiculturalism – while Islam could be seen as a force for moderation in much of Asia, there were exceptions, notably Pakistan;

-           the absence so far of effective security structures, particularly in East Asia, perhaps the biggest gap still to fill.

The good news was that these challenges had so far been well managed, in particular by the Chinese leadership.  But how sure could we be that this would continue?  For example suspicions were growing in a worrying way between China and India. Overall Asian participants seemed more optimistic by nature about the continent’s ability to manage the challenges than outsiders. Economists also tended to see Asia’s rise in win-win terms while political and security analysts took a more zero-sum game approach. Whatever the degree of optimism, Asia would undoubtedly be in transition for years to come, and transitions were uncomfortable, with problems and shocks bound to arise.  Moreover the world had never before seen countries the size of China and India achieving success and playing global roles.  It would inevitably be a tricky experience all round.  At the same time eastern triumphalism should not replace western triumphalism. The overall gap in living standards between the west and most Asian countries was still huge, and would take many years to make up.  China might have overtaken Japan as the world’s second biggest economy but on average a Japanese person was still ten times as rich as a Chinese person.  Japan continued to have huge reserves of wealth, technological skill and innovation capacity, as did most western countries.  So talk of western or Japanese ‘decline’ should be treated with great caution, even if relative positions were changing.

How should the rest of the world be responding to Asia’s rise?  Asian participants argued that, despite its scale and speed, it should not be seen as threatening by others, unless the west thought it was entitled to endless domination. It was after all based on economic success, not military power. Asia was not trying to impose any model on the rest of the world, and Asian country aspirations could be accommodated in existing international structures if these were flexible enough.  A rules-based economic system had suited Asia well so far and there was no reason why that should change. Asian nationalism was only to be expected from ‘adolescent’ countries and should moderate in time. China and India should be able to go on rising simultaneously and peacefully. Democracy could spread further in Asia as prosperity rose.

Meanwhile Asia was not trying to exclude the US – on the contrary, most Asian countries wanted the US to play an even more active role, particularly on the security side, and to maintain the long-standing Pax Americana. The
US-China relationship would be the single biggest factor, and keeping that constructive the single biggest challenge, particularly given current domestic pressures in the US, and the tendency for China to be used as a scapegoat in some quarters. The US should not rely on India to counterbalance China, since India would not want to become entangled in this way, despite her own wish for a strong relationship with the US. At the same time any kind of US/China G2 approach would be regarded with great suspicion by others.

The EU meanwhile had an important role to play, not only as a major trading partner and political actor, but also as the only model for a “post-Westphalian” world where national sovereignty and nationalism could be less dominant, and disputes could be resolved more peacefully.  Russia’s role and influence should also be factored in, not least since Russia was in part an Asian power.

There was agreement that the international institutions needed to be adapted further to Asia’s rejuvenation, particularly the IMF, World Bank and UN Security Council.  The G20, while already including several Asian countries, had not yet found its feet overall, but would have a crucial role to play in moderating tensions and promoting agreements once it did.  Meanwhile conclusion of the Doha round would go a long way to reduce growing trade tensions.  While there could be some merit in promoting bilateral Free Trade Agreements, great care was needed if the multilateral process was not to be undermined in the process.

We did not discuss in great detail Asian-African relations but China’s approach in Africa, based on securing access to natural resources without much apparent thought for the consequences, continued to cause concern.  Greater transparency here would be helpful.

One important cross-cutting issue was the importance of education for future engagement, particularly higher education.  While many Asian students came to the West, the flow in the other direction was very limited.  Study of Asia and Asian languages was not receiving the priority it clearly needed in some western countries.  Within Asia too, there was little exchange of students. Mutual comprehension was likely to be weaker as a result, and over the time the risk of misunderstanding and even conflict correspondingly greater.

Overall the conference took the view that the rest of the world had to accept the rise of Asia as a fact, respect it, and get on with adapting to it constructively. It could only be a good thing if economic success in China, India and other Asian countries was lifting hundreds of millions of people out of grinding poverty. The only way forward was therefore deeper mutual engagement at all levels.  East v. west made no sense and was highly dangerous. We had to embrace change, not fight it. That would require an effort of political will and maturity on all sides which would not be easy to achieve in a fragile global economic context where populism was rising in many countries and domestic public opinion might push in directions other than positive engagement. Asian countries for their part needed to recognise the suspicions aroused elsewhere by rapid change and new developments, for example by recent apparent Chinese military assertiveness, and act more clearly to dispel them. They needed to assure others that they recognised their responsibilities, and were willing to play by the international political rules as well as the economic rules, even if they had a right to a greater say in writing them in the future.

Within Asia, China and India needed to talk to each other much more, as did China and Japan. Growing economic links might not be enough to avert rising tensions. South Korea might be able to play a useful third party mediating role in the latter context. Asia should not repeat Europe’s balance of power errors, which had had such catastrophic results in the 19th and 20th centuries, and should be very careful about encouraging nationalist sentiment.

Some American warning voices pointed to the perception in the US in particular that Asian countries were ‘gaming the system’ or acting as free riders under the US security umbrella. The US wanted to stay heavily engaged in Asia but could no longer lead globally as she had done for so long. The problem was that no-one else was picking up the slack. Rebalancing sounded reasonable but no-one knew how to do it safely. The risks of populism taking us in the wrong direction were therefore high, which could lead in turn to Asian perceptions that the west was trying to limit her rise, and ‘competing conspiracy theories’. These warnings were a salutary reminder of the dangers and the need for strong, positive leadership to avert them and find win-win approaches

On the economic side, the conference agreed that talk of currency wars was highly dangerous, and the reality if it happened would be doubly so. In practice interdependence was a reality, and gave both sides leverage. Rapid Asian growth was leading to ‘more coupling’, not decoupling, even if Asia could now largely finance itself. Mutual access to markets had to remain open, including access to the new opportunities arising from growing consumer demands in India and China. It would be dangerous for the west to try to block Asian companies from making acquisitions in the west, and would certainly look like double standards, a perpetual Asian complaint about western behaviour. Attempts to restrict technology transfer would be destabilising. At the same time there needed to be recognition that purchases by major state-controlled corporations were bound to raise particular fears. And the issue of intellectual property rights also still needed to be addressed. That could become easier as Indian and Chinese companies increasingly had IPRs of their own to worry about.

Conference participants recognised that we were discussing the future as if current trends would simply continue, which they almost never did.  While we had reasonably taken the view that rapid Asian economic growth would continue and indeed still had a long way to go, we should recognise that bubbles always had a tendency to burst.  Some recalled the debate and concern over “Japan No 1” not so many years ago, which looked rather absurd now.  There was a general recognition that “black swans” could throw all current assumptions out of the window.  These were by definition hard to predict, but serious tension between China and India or China and Japan; open conflict in South Asia or the Korean peninsula; chaos in the global bond markets leading to problems for Asian liquidity; political issues in Thailand or other South East Asian tigers leading to economic slowdowns there; further nuclear proliferation; an unexpected spread of Islamic extremism in Asia; and a significant US withdrawal from its traditional role in Asia were all seen as potential major dangers. And there were bound to be new issues we had not thought of.

The last word goes to our conference rapporteur’s haiku: ‘Asia soaring high. Gravity shifting eastwards. Can we realign?’

This Note reflects the Director’s personal impressions of the conference.  No participant is in any way committed to its content or expression.

 

PARTICIPANTS

Chairman  :  Professor Kishore Mahbubani
Dean and Professor in the Practice of Public Policy, Lee Kuan Yew School of Public Policy, National University of Singapore;  Board or Council Member:  International Institute for Strategic Studies;  International Council, Asia Society;  Yale President’s Council on International Activities, Singapore-China Foundation – Scholarship Committee.  Formerly:  Singapore Diplomatic Service (1971-2004);  Ambassador, Permanent Representative of the Republic of Singapore to the UN, New York (1998-2004).

AFGHANISTAN
Miss Shaharzad Akbar
Weidenfeld-Hoffmann Scholar and MPhil candidate in Development Studies, University of Oxford;  Partner and Senior Consultant, QARA Consulting Inc.

AUSTRALIA
Dr Malcolm Cook
Program Director East Asia, Lowy Institute for International Policy;  Dean, School of International Studies, Flinders University (Jan 2011- ).

Dr Bobo Lo
Independent Scholar.  Formerly:  Senior Research Fellow and Director, Russia and China programmes, Center for European Reform (2008-10);  Head (2005-08),  Associate Fellow (2002-05), Russia and Eurasia Programme, Chatham House;  Visiting fellow, Carnegie Moscow Center (2001-05).

BANGLADESH
Ambassador Iftekhar Chowdhury
Senior Research Fellow, Institute of South Asian Studies, National University of Singapore (2009-).  Formerly:  Foreign Minister of Bangladesh (2007- 09);  Ambassador and Permanent Representative to the United Nations (UN), New York (2001- 07). 

CANADA
Mr Donald Campbell
Senior Strategy Advisor, Davis LLP, Distinguished Fellow, Asia Pacific Foundation.  Formerly:  Executive
Vice-President, CAE Inc, Montreal (2000-07;  Deputy Foreign Minister of Canada and Personal Representative of the Prime Minister for G8 Summits (1997-2000)).  A Member of the Program Advisory Committee, The Canadian Ditchley Foundation.
 
Professor Wendy Dobson
Professor and Co-Director, Institute for International Business, Rotman School of Management, University of Toronto (1993- );  Chair, Pacific Trade and Development Network;  Director, several Canadian corporations;  Advisory Board Member of several institutions.  Author.  A Member of the Board of Directors, The Canadian Ditchley Foundation.

Mr V Peter Harder
Senior Policy Adviser, Fraser Milner Casgrain LLP, Ottawa;  Chairman, Canada China Business Council (2008- ).  Formerly:  Deputy Minister, Government of Canada.  A Member of the Program Advisory Committee, The Canadian Ditchley Foundation.

Mr Joseph Rotman OC
Chairman, Roy-L Capital Corporation, Toronto;  Chair, Canada Council for the Arts (2008- );  Member, Board of Directors, Canada Gairdner International Awards (2005- ).  A Member of the Board of Directors, The Canadian Ditchley Foundation.

Mr Yuen Pau Woo
President and Chief Executive Officer, Asia Pacific Foundation of Canada, Vancouver;  Chair, Pacific Economic Cooperation Council’s State of the Region Report;   Advisor, Shanghai WTO Affairs Consultation Centre;  Member, Global Council, Asia Society, New York.  A Member of the Program Advisory Committee, The Canadian Ditchley Foundation.

CHINA
Mr Rong Ying
Vice President and Director, South Asian Studies Center, China Institute of International Studies (CIIS), Beijing (2007- ).

CHINA HONG KONG
Dr Xiang Bing
Founding Dean, Cheung Kong Graduate School of Business (2002- );  Consultant on management issues;  Media Commentator, Chinese and non-Chinese media;  Independent Board Member, several US, Hong Kong and Chinese companies.

COMMONWEALTH SECRETARIAT/INDIA
Mr Kamalesh Sharma
Commonwealth Secretary-General (2008- ).  Formerly:  High Commissioner of India to the UK (2005-08);  Special Representative of the UN Secretary-General to East Timor (2003 04);  Permanent Representative to the UN, New York (1997-2007).  A Governor, The Ditchley Foundation.

EUROPEAN COMMISSION/UNITED KINGDOM
Mr James Moran
The European Commission (1983-);  Director Asia, Directorate General for External Relations (2006-).  Formerly:  Head of Unit, China;  Head of Unit, Southeast Asia.

FRANCE
Ambassador François Descoueyte
French Diplomatic Service (1975-);  Director, Foreign Press Centre of Paris (on secondment) (2010-).  Formerly:  Director, Asia-Oceania, Ministry of Foreign Affairs, Paris (2008-09);  Ambassador to Australia (2005-08), to Korea (2001-05).

GERMANY
Ambassador Andreas von Stechow
Economic Advisory Division, Ministry of Foreign Affairs (MFA), Berlin;  Member, Max Planck Society for
Plasma-Fusion.  Author.  Formerly:  German Diplomatic Service. 

INDIA
Mr Sunil Chopra
Vice President and Global Head of Sales, Banking and Financial Services, Tata Consultancy Services, London.  Formerly:  Regional Head, Corporate and Institutional, Standard Chartered Bank, India.

Ms Manjeet Kripalani
Founder and Executive Director, Gateway House:  The Indian Council on Global Relations, Mumbai;  Board Member, International Centre for Journalists, Overseas Press Club, USA, and Indian Liberal Group, Mumbai.

Mr Hemant Luthra
President (Systech Sector) and Member, Group Executive Board, Mahindra and Mahindra Ltd, Mumbai.  Formerly:  Executive Vice President, Corporate Strategy, Mahindra and Mahindra Ltd;  Founder and CEO, a Private Equity Fund for the ING Group.

Ambassador Kanwal Sibal
Member, National Security Advisory Board, New Delhi;  Columnist, New Delhi.  Formerly:  Indian Foreign Service;  Foreign Secretary;  Ambassador to Russia;  to France;  to Egypt;  to Turkey;  Deputy Chief of Mission, Washington DC.

IRAN/UNITED KINGDOM 
Mr Behrouz Afagh
BBC World Service (1983-);  Head of Asia and Pacific Region (2006).  Formerly:  Head, Eurasia Region.

JAPAN
Professor Takehiko Kariya
Professor in the Sociology of Japanese Society, Nissan Institute of Japanese Studies and Department of Sociology, University of Oxford.  Formerly:  Professor of Sociology of Education, Graduate School of Education, University of Tokyo.

Professor Takashi Terada
Professor of International Relations, Institute of Asian Studies, Waseda University, Tokyo;  Adviser to Ministry of Foreign Affairs and Ministry of Economy, Trade and Industry on Asian issues.

Minister Shingo Yamagami
Japanese Diplomatic Service (1984-);  Minister, Political Section, Embassy of Japan, London (2009-).  Formerly:  seconded to National Police Agency as Director, Police Administration, Ibaraki Prefecture (2007-09);  Director, Treaties Division, Ministry of Foreign Affairs (2004-07).

MALAYSIA
Professor Yuen Foong Khong
Professor of International Relations and Fellow, Nuffield College, University of Oxford.  Formerly:  Director, Institute of Defence and Strategic Studies, Nanyang Technological University, Singapore.

 
RUSSIA
Professor Dmitry Streltsov
Head, Afro-Asian Studies Department and Professor, Moscow State Institute of International Relations, Moscow;  Research Fellow, Center of Japanese Studies, Institute of Oriental Studies, Russian Academy of Sciences.

UNITED KINGDOM
Sir John Boyd KCMG
Chairman, Asia House (2009-).  Formerly:  Master, Churchill College, Cambridge (1996-2006);  Chairman, Trustees of the British Museum;  Governor, Royal Shakespeare Company (1996-2005);  HM Diplomatic Service (1962-96).

Dr Fu Xiaolan
Director, Programme for Technology and Management for Development and University Lecturer in Development Studies, University of Oxford (2006-);  President, Chinese Economic Association (Europe) and CEA (UK).

Mr Roddy Gow
Chief Executive, Asia House;  Founding Chairman, Gow and Partners.  Formerly:  Chairman, British American Business Council.

Ms Elizabeth Padmore
Board Member, Facilitator and Mentor;  Director, National Australia Group Europe and Clydesdale Bank plc;  Chairman, Basingstoke and North Hampshire NHS Foundation Trust.  A Governor and Member of the Council of Management and the Finance and General Purposes Committee, The Ditchley Foundation.

UNITED STATES OF AMERICA
The Honorable Douglas Bereuter
President and CEO, Asia Foundation (2004-).  Formerly:  Member, US House of Representatives (1974-2004);  Vice Chairman, House International Relations Committee;  Chairman, Asia Pacific Subcommittee.

Dr Paul Heer
National Intelligence Officer for East Asia, Office of the Director of National Intelligence (2007-);  Member, Council on Foreign Relations (2001-)

Dr Huang Jing
Visiting Professor, Lee Kuang Yew School of Public Policy.  Formerly:  Senior Fellow. John L Thornton China Centre, Foreign Policy Studies, The Brookings Institute (2004-08).

Dr James Lindsay
Senior Vice President, Director of Studies and Maurice R Greenberg Chair, The Council on Foreign Relations, New York.  Formerly:  Director, Robert S Strauss Center for International Security and Law and Tom Slick Chair for International Affairs, The University of Texas at Austin (2006 09).

Dr Jamie Metzl
Executive Vice President, Asia Society, New York.  Formerly:  Deputy Staff Director and Senior Counselor, US Senate Foreign Relations Committee;  Senior Advisor to the Under-Secretary for Public Diplomacy and Public Affairs, US Department of State.

Mr Scott Moore
Global Governance 2020 Fellow (2009-);  DPhil Candidate in Politics and International Relations, University of Oxford (2010-);  Rhodes Scholar.  Formerly:  Fulbright Fellow, College of Environmental Science and Engineering, Peking University (2008-09).
 
Ambassador Stapleton Roy
Director, Kissinger Institute on China and the United States, The Woodrow Wilson International Center for Scholars, Washington DC.  Formerly:  US Diplomatic Service;  Assistant Secretary of State for Intelligence and Research.

Dr Ashley J Tellis
Senior Associate, Carnegie Endowment for International Peace.  Formerly:  Senior Adviser to the Under Secretary of State for Political Affairs, US Department of State.  A Member of The Advisory Council, The American Ditchley Foundation.

Mr Casimir Yost
Director, Long Range Analysis Unit, National Intelligence Council (2009-).

WORLD BANK
Dr Ivailo Izvorski
Lead Economist, East Asia and Pacific Region, World Bank;  Principal Author, World Bank’s East Asia and Pacific Economic Update (2008-).