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Virginia Review of Asian Studies
FROM THE EDITOR’S DESK
A compilation of articles and essays by Editor Daniel A. Métraux on issues pertaining to Asia and to Canada.
Dramatic Shift in Power in East Asia as China Replaces Japan as China Replaces Japan as the Region’s Preeminent Economic and Military Power
[Public lecture at Mary Baldwin College, November 2010]
A dramatic shift in world power occurred in late August 2010 as China replaced Japan as the world’s second largest economy. This development, which went largely unnoticed at the time, affects everything from the global balance of financial and military power to the production and worldwide sale of automobiles.
Although China is still far behind the United States in total economic output and overall military might, the gap is narrowing fast. It appears that China has finally regained the preeminence it lost in the late eighteenth century when China faded as Asia’s leading economic and military power.
China’s recent rapid growth can be traced back to 1979 when a series of economic reforms ended the government’s tight controls on the economy and permitted a high degree of independent activity by Chinese citizens and companies. Since then China has evolved into the world’s major low-cost factory, its major exporter, and producer of half its steel. Most of its revenue comes from cheap manufacturing, but gradually China is building up its technology industries and is producing more heavy industrial products as automobiles and air conditioners than it has in past years. China is also moving up in highly sophisticated areas as well having recently unveiled the world’s fastest supercomputer.
Over the past 2,000 years China boasted the world’s biggest economy with its work shops and textile mills producing roughly a third of total global production. The quality of its products was unsurpassed. But China’s arrogant sense of superiority and its xenophobic view of the outside world caused it to miss the scientific and industrial revolutions of the West. China declined ever further in the latter part of the nineteenth century when it refused to follow Japan’s embrace of Western technology and civilization. By the 1930s China’s share of total world factory output was miniscule at best.
China became a major manufacturing nation during the Maoist era (1949-1976), but the state-controlled economy never really took off and the people remained poor. After Mao’s death China’s new leader Deng Xiaoping ushered in a period of reform that welcomed ideas and investment from abroad and allowed most Chinese a large degree of economic freedom.
While China is second in total economic output, it holds first place in a number of categories. It is the world’s leading exporter, buyer of automobiles, and producer of steel. A healthy portion of General Motors’ recent profits came from its production and sales of motor vehicles in China. And while China is known primarily known for its production of low tech industrial products, it is rapidly challenging the West and Japan in the production of increasingly high tech products.
The fall of Communism and the rise of China’s modern capitalist economy has led to some glaring contradictions that would make former leaders like Mao and Zhou Enlai twist in their graves. While the founders of the People’s Republic preached the virtues of an egalitarian socialist society, there is an immense wealth gap between the elite groups in the eastern cities that have reaped the profits of China’s huge growth and the huge numbers of impoverished Chinese who struggle for survival in the country’s rural western areas and as migrant workers seeking a foothold in urban China. The Chinese have launched at least two manned space missions, have discussed exporting high-speed trains to both California and Europe and yet in remote regions in northern China many families live in caves on the sides of mountains.
Furthermore, while China’s total GNP is now only second to the United States, its per capita income is a great deal lower. Per capita income for Americans in 2009 was about $42,240 and $37,800 for Japanese. Chinese, on the other hand, earned a mere $3,600 which places it in the ranks of lower middle income countries such as several in Latin America and Africa. China’s overall rank was 124 while Japan was number 32 and the United States 17th But China’s GNP for 2009 was $4.98 trillion compared to $5.07 for Japan and it grew to $1.335 trillion for April-June 2010, on pace for $5.34 trillion for 2010.
China has also become a major importer of raw materials to fuel its industrial engine. Not long ago China was a net exporter of oil, but with the huge growth of its industrial engine Chinese are circling the globe asking top dollar for increased imports of oil. Australia with its mammoth mining industry has been a major beneficiary of China’s almost insatiable appetite for iron ore, coal and other commodities that has kept the Australian economy booming through the worst month of the current global economic crisis. China’s endless demand for oil, iron ore and other raw materials is pumping major amounts of revenue into developing countries as far-flung as Angola and Kazakhstan.
Japan’s Stark Decline
Few nations have seen as rapid or as severe a reversal of fortunes as Japan. During the 1970s and 1980s Japan produced a wide variety of highly innovative and high quality products from supercomputers to automobiles. Shares on the Tokyo stock exchange quadrupled in value and Japanese companies dominated global business. Twenty years ago some economists were predicting that Japan would overtake the United States as the world’s largest economy by 2010. Speculators in Tokyo borrowed to purchase real estate and corporations relentlessly expanded their production facilities in anticipation of future growth.
Sadly, Japan’s bubble burst in the early 1990s and Japan has since experienced a slow but relentless decline that neither huge stimulus spending, huge public works projects nor a flood of easy money has reversed. “For nearly a generation now the nation has been trapped in low growth and a downward spiral of prices, known as deflation, in the process shriveling from an economic Godzilla to little more than an afterthought in the global economy.”
Japan’s middle class has suffered from this relentless decline. The experiences of one businessman in Osaka is typical. Riding the crest of prosperity in the late 1980s, he bought a condo for about a half million dollars, drove a late-model Mercedes and vacationed with his family in Hawaii. Recently he sold his condo for a third of what he paid for it, traded in his Mercedes for an economy car, and no longer travels abroad. He is still stuck with a mortgage of $110,000.
Today Japan’s per capita debt is much higher than that of the United States. Japanese investors have lost trillions of dollars in the stock market, now just worth a quarter of its value in 1989. The future looks bleak, as Japan faces the world’s largest government debt (about 200 percent of gross domestic product), a shrinking population and rapidly rising rates of poverty and suicide. Japanese can only stand by and watch glumly as China’s economy and military prowess continue to boom.
Expansion of China’s Navy and Japan’s Reaction
Nationalist leaders in Japan have called for the expansion of their nation’s military capacity and a reduction on its reliance on the United States. Since the end of World War II Japan’s “Peace Constitution” has greatly restricted its military capacity and made it dependent on American military power to preserve its security. Japan does have an adequate military euphemistically called its “Self-Defense Force” with impressive air and naval components that would allow for “first-strike” defense against any marauding foe. Japan also spends a great deal of money to house American forces in Japan, most of who are in Okinawa.
Many conservative politicians in Japan want to eliminate Article Nine of the Japanese Constitution which disallows the use of its military for anything but defensive purposes. They claim that Japan has the right to maintain a “normal” military and enter into collective security relationships with other nations including the United States. Other Japanese politicians including Endo Otohiko, a leader of the New Komati (party) and former Senior Vice-Minister of Finance, feel that Japan simply does not have the financial wherewithal to build a significant military and that if it did, that act alone would send a chill through its neighbors who remember Japan’s excesses in World War II. Endo suggests that it would be very important for Japan to maintain its current security relationship with the United States.
China has traditionally been a land power that has regarded the ocean as a barrier rather than a roadway to the outside world. It has always been a continental nation with long contentious borders with Korea, Russia, India and many other states including Afghanistan. Except for a brief foray in boat construction and naval exploration in the mid-1400s, China has never shown much interest in the oceans around it. But all this is about to change.
Today China has the world’s second largest naval service after the United States. Rather than purchasing a broad range of modern ships from other nations, China has itself gone into the shipbuilding business on its own and has developed critical niche capacities in subsurface warfare and missile technology designed to hit moving targets at sea. Until now the United States has had unimpeded access to the waters off East Asia, but this may soon change. China’s already large fleet of 66 submarines is still expanding and soon will be on par with the United States in terms of quantity if not quality. China’s defense budget is growing nearly ten percent a year while future defense spending in the United States may even decline. Since ninety percent of commercial goods worldwide are still transported by ship, sea control is critical.
The heart of China’s naval interests is the South China Sea, a critical waterway through which passes a third of all commercial maritime traffic worldwide and half of the oil destined for Japan, Korea and northeastern China. That sea permits the Chinese access to the Indian Ocean through the Strait of Malacca near Singapore, one of the busiest areas of commercial shipping anywhere. While the United States considers the South China Sea to be an international waterway, China considers it to be an area of vital national interest – an interest that extends to the Straits of Malacca. China is also playing an instrumental role in building ports in Burma, Sri Lanka, Bangladesh, and Pakistan. These are not Chinese naval bases per se – that would cause anguish in India, another emerging naval power – but could be ports of call for Chinese naval task forces. Further, China’s increasingly close ties with Taiwan mean that the U.S. can no longer readily defend the island from a Chinese attack should one occur.
The rise of Chinese naval power poses another dilemma for both the United States and Japan. Both nations felt secure while American power was dominant in the area and until recently the Chinese were quite willing to allow the United States to maintain security in East Asian waters, but now that is changing. Japan cannot build a navy that can compete with China and must therefore continue to rely on the United States for its security, but whether the United States has both the capacity and iron will to counteract the Chinese is a very big question.
The major problem the Chinese face, is the huge environmental crisis at home including incredible air and water pollution. China must take steps to resolve these problems, but the cost will be huge and could certainly curtail the nation’s huge rate of growth.
Conclusion
China’s rise as a major power has been long coming. Japan’s precipitous fall, which began with the collapse of its economy in 1989-1990, is also well established. While China can in no way match the overall military might of the United States, the U.S. can ill afford to ignore China’s economic and military expansion. The United States has vital interests in East Asia which include the defense of Japan. It also has a historic commitment to protect Japan both militarily and economically.
The United States also has a vital relationship with China. Its embassy in China is the biggest anywhere and the volume of trade between the two countries increases daily. China needs the United States to buy its industrial goods and the U.S. needs to borrow money from China to fund its growing debt. Both nations are also competing against each other for foreign sources of energy and there are frequent spats over such matters as fair trade and currency valuation. While neither China nor the United States will become close allies anytime soon, it is vital that they maintain a close working relationship as friendly rivals.
The Russians Were Coming! The Russians Were Coming! Their Fascinating Failure at Fort Ross, California
[Published in Travelmag.co.uk in November 2010]
What is now the continental United States was home to many European colonial settlements. The Spanish, French, Dutch, British and even Swedes attempted to extend their realms across North America, but there is one group that we rarely if ever hear about – the Russians who bravely attempted to develop a colony on the rocky coast of California just north of Bodega Bay above San Francisco. Fort Ross became a lively base for almost three decades, but was ultimately unable to sustain itself. However, the intrepid traveler today will find a lot of fascinating history and some magnificent ocean views if he or she visits Fort Ross Historical Park today.