Op-Ed Contributors
East Asia needs breakthroughs in cooperation
By Zhou Muzhi (China Daily)
Updated: 2009-12-28 07:43
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The marketing and information technology revolutions that have mushroomed over the past 20 years have sped up the flow of worldwide manpower and wealth as well as the globalization of economic activities. The accelerated integration, development and reforms that countries have undergone have boosted the world's total gross domestic product (GDP) from $20 trillion in 1989 to last year's $60 trillion.
Following the historic fall of the Berlin Wall was the reunification of East and West Germany in Europe. The series of events that ensued, from the establishment of the European Union in 1993, to the creation of the euro, a unified regional currency in 1999, and the bloc's eastward expansion in 2004, signaled that a new type of political and economic entity has taken shape.
In the US, lax regulation of its capital market and the adoption of a strong dollar policy have resulted in a ceaseless inflow of speculative capital from abroad, which, together with a flood of financial products and high-flying speculative crazes, have turned Wall Street into a sheer haven of gamblers. The omnipresent games with capital have also contributed to the explosive development of the IT industry in the US. Blossoming IT technology, new concepts and new commercial models were used as an important tool to snatch more wealth. However, the world had to pay the bill for speculation in Silicon Valley as the IT bubble burst in the US in 2000. The increasingly fierce speculation in Wall Street finally triggered the outbreak of the worst global financial crisis in decades.
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The US abandoning its Japan policy from containment to support during the Cold War period resulted in decades-long high-paced economic development in Japan and its No 1 economic status in Asia. However, Tokyo's failure to follow the trend of globalization and make innovative reforms in a timely manner after the end of the Cold War has hampered the country's further development. In the past two decades, Japan's GDP has only maintained a 1.4 percent growth rate, much lower than the world's average of 5.8 percent. Its GDP share in the world's total has also drastically declined from 15 percent in 1989 to 8 percent in 2007. Frequent spats in Japan's political arena and frequent leadership transitions have also resulted in its failure to work out a national plan to adapt to globalization.
Public eagerness for bolder reforms amid the global crisis contributed to the election of the first black president in the US and the first power transition in a real sense in Japan. However, Wall Street, the epicenter of the global financial crisis, has failed to push forward some fundamental reforms following the outbreak of the crisis, as reflected by some Wall Street financial bodies receiving government subsidies on the one hand and distributing bonuses to management on the other. The US government's failure to reform the rules of the game and put in place effective financial supervisory mechanisms make possible a new round of financial storms.
Under the double impact of a shrinking US market and the appreciation of the yen, the staggering Japanese economy has been in a difficult predicament, as reflected by salary cuts and the bankruptcy of a growing number of enterprises.
At the Beijing-Tokyo Forum held in Dalian, China in early November, Japanese financial elites still believed that the US dollar would be the world's currency of payment in the future, although they thought new financial storms will occur and the dollar would continue to devalue. Such a belief has hampered their pursuit of a regional financial system in East Asia.
At the forum, participants from both countries had heated debates about the concept of the East Asia community, an idea advocated by Japanese Prime Minister Yukio Hatoyama not long ago. However, Hatoyama neither made substantive clarifications about the community nor put forward a concrete timetable for its construction.
According to International Monetary Fund estimates, the GDP of East Asia, including ASEAN, China, Japan and the ROK, is expected to exceed that of the euro-zone countries next year and match that of the US in 2014. Thus, the establishment of a cohesive community in the region will serve the interests of all regional members. To this end, East Asia should first set up a free trade agreement within the region and try to dismantle barriers that hamper the free movement of talent and wealth between members. Viable measures should be taken to strengthen coordination among members on economic and monetary policies for the final construction of an EU-like bloc.
The author is a professor with Tokyo Keizai University.
(China Daily 12/28/2009 page4)
