[FT.com]A Ringside View of History in the Making

A pretty insightful view of China’s society/economy of present and of the near future.

A ringside view of history in the making
By Guy de Jonquieres
Published: March 29 2007

This is my last Asia column before I have to retire from the Financial Times, after 39 years. It is an opportunity to draw together some lessons and impressions gathered while covering the region and to explode the odd myth. I shall also hazard a few predictions.

First, not all east Asia is an economic miracle: today, it is overwhelmingly a China story. China has generated more than half the growth in developing Asia, including India, this century. A surprisingly large number of other countries have performed disappointingly. Japan, the region’s largest economy, is still re-emerging from its lost decade. South Korea, the third largest, is floundering. Taiwan and Thailand are performing below their potential.

Second, China has no grand master plan. Its one constant is the Communist party’s ruthless dedication to keeping its monopoly on power. In practice, the leadership’s claim to political legitimacy hinges on its ability to keep living standards rising for as many people as possible. The pursuit of that goal is pragmatic and based on trial and error. That is a prudent choice when, as is so often the case in China, there are so many unknowns, even to those in power. The biggest is where economics will drive the country politically.

Two other factors make governing China a tightrope act. One is the centre’s never-ending struggle to control headstrong local officials, who have taken literally the injunction to enrich their regions – and themselves. The other is the growing influence of vested interests that have asserted themselves more strongly under a less radically reforming leadership. Lobby politics is now at least as important in shaping policy in Beijing as in Washington, which is why it is often hard to read.

Third, economics rules Asian diplomacy. In a region riven by mistrust and age-old hostilities, the interdependence created by trade and investment is the most powerful underpinning of stability. However great their political differences, Asian countries have not let these threaten their common pursuit of export-led growth. One can only hope that economic logic continues to prevail and that Asia does not suffer the same fate as Norman Angell’s prediction in 1913 that European countries had become economically too intertwined ever again to wage war against each other.

Fourth, it will be a long time, if ever, before Asia forms a closely integrated economic bloc. In addition to mutual suspicions between nations, rivalry for regional influence between China and Japan – and probably, in time, India – will make meaningful agreements hard to achieve. Furthermore, the institutional co-operation that deeper integration would require is frustrated by Asian governments’ jealous defence of sovereignty and the weakness of many of their domestic institutions.

Fifth, the importance of Chinese “soft power” is overrated. Most of Beijing’s diplomatic overtures around the world are driven first and foremost by economic need, above all its quest for secure supplies of energy and raw materials. That it has stolen a march on the US is due more to Washington’s neglect than to Beijing’s undoubted political marketing skills.

Effective soft power is based on the projection of appealing national ideals, principles and values. However wantonly the Bush administration has squandered those assets, I suspect most Asians would still opt for the – tarnished – American dream over the harsh constraints, relentless materialism and spiritual poverty of contemporary China.

Sixth, Europe is irrelevant in Asia, except as a market and a producer of luxury goods. Those in Europe who envisage Asia basing its future development on the European “model” delude themselves. The only European models that Asia would like to embrace are to be found on catwalks.

Seventh, the west should moan less about manufacturing going east. Manufacturing is what you do if your only alternative is eking a living from the soil, or what lies beneath it. Automation is making it less of a job creator, competition is brutal and the big money lies elsewhere, in product design, marketing and branding. That is why, from China to India, companies yearn to graduate beyond metal-bashing.

Eighth, denying free expression is wrong economically, as well as politically. Most Asian governments dream of creating “knowledge” societies capable of fundamental innovation. However, severe setbacks such as Korea’s faked human cloning scandal show how far they have to go. It is telling that almost all Asian-born Nobel scientific laureates have been honoured for work done in the west.

Genuine innovations are often serendipitous and challenge the established order. But even in countries where repressive regimes do not punish such behaviour, hierarchical attitudes and deference often breed intellectual conformism. Changing that will take more than big research budgets.

In the past 28 months, this column has given me the ultimate journalistic privilege, a ringside view of history in the making. It has been stimulating, often surprising, sometimes amusing and always fun. I have frequently benefited, too, from the wisdom of readers. Some have become friends. I wish them all, and Asia, well.

Copyright The Financial Times Limited 2007