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Sunday, April 29, 2012

Mapping out Asia's future


China or Japan: Which Will Lead Asia?, by Claude Meyer. Columbia University Press, 2011, 195 pp., $35.00 (hardcover)

The title poses a question with an obvious answer; a rising China is increasingly eclipsing Japan and seems destined to become the hegemonic power in Asia. So why read this book about old news? One reason is that the author succinctly assesses the rise of both nations, elucidates the respective strengths and weaknesses of the two economies that account for more than 75 percent of Asian GDP and presents scenarios for how regional rivalry will evolve over coming decades. Busy readers who want to quickly get up to speed on East Asia will learn much from this slim volume, one brimming with a veteran observer's insights and knowledge.

Meyer questions the popular view that "Asia's future is already mapped out, between the ineluctable decline of Japan on the one hand and the irresistible rise of China and India on the other." China has overtaken Japan as the world's second largest economy, but Meyer reminds us that tales of Japan's decline are overstated and it retains economic and financial domination of Asia.

While noting that "China and Japan are kept at odds not only by a burdensome past but also, and above all, by their conflicting ambitions", Meyer does not see these tensions spiraling into war, placing faith in pragmatism and the dynamics of increasing economic interdependence.

While everyone is writing off Japan and ogling the latest GDP growth figures for China, Meyer restores some perspective. By 2030 analysts believe that China will be the world's largest economy, but even so its per capita GDP will lag Japan by some 65 percent.

Moreover, "China will have to cope with a polarized society, an environmental crisis and heavy financial burdens." China's demographic time bomb is also looming, its comparative advantage in low-cost production is eroding, and it is dependent on global markets for resources and markets. The interplay of these factors could derail the prevailing onward, upward scenario, but on balance Meyer thinks China will manage to cope with its varied challenges.

The current division of labor between Asia's economic behemoths features upstream factories in Japan exporting high value-added components to China that relies on downstream manufacturing or assembly of low value added products. Meyer argues that Japan currently enjoys "supremacy in Asia because it is based on technological leadership and exceptional control over methods of production." He also notes Japan's "overwhelming financial power in Asia"; the Tokyo bond market is triple the size of all other Asian bond markets combined while its stock market capitalization is twice that of China and Hong Kong. In his view, "China is probably more reliant on Japan than vice versa." Japan's technological supremacy is being challenged, but China has a long way to go.

China's regional ambitions involve imposing, "an avatar of a tribute system tinged with neomercantilism." Such a scenario is anathema to Japan. The two countries remain divided over their shared history and in Meyer's view this is fanning nationalism in both nations that undermines the basis for trust and cooperation. He argues that Japan's "difficulty in coming to terms with the suffering it both inflicted on others, and had to bear itself, delays the time when that past, finally acknowledged, can make way for the demands of the present."

Meyer presents, and dismisses, three scenarios for Asia's future: Japan's acceptance of Chinese hegemony, armed conflict or cooperation. Moreover, China is determined to "impose itself as the undisputed leader of Asia" and shared leadership is unlikely because the two nation's aims are incompatible. The best bet for Japan, according to Meyer, is in promoting a regional community based on the East Asian Summit process because the inclusion of India offers a useful counterweight.

If that doesn't happen, Meyer suggests Japan might become the Switzerland of Asia. The greatest threat to Japan, he writes, "lies in its own inability to imagine a future for itself." Perhaps, but the McKinsey-sponsored "Reimagining Japan" (2011) features a number of Japanese who try.

Jeff Kingston is the director of Asian Studies at Temple University Japan.


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