Author: Stuart Harris, ANU
On 29th June, representatives of Taiwan and China signed an Economic Cooperation Framework Agreement (ECFA). President Ma Ying-jeou declared it a further substantial contribution to stabilising cross strait relations and it was welcomed by the US State Department.
Although not a preferential (‘free’) trade agreement, it is moving in that direction subject to further negotiation and is clearly a major development in China-Taiwan relations. In Taiwan, however, the ECFA is highly controversial. Although an economic agreement, it has obvious, arguably significant, political implications. The two aspects can be looked at separately only with difficulty. Read more…
Author: Ruediger Frank, University of Vienna
The North Korean leadership has, for reasons that we do not yet fully understand, made a crucial mistake around the beginning of the 21st century. After the severe shock of the famine from 1995-1997, the regime had the economy back under control. The country could have returned to the pre-crisis economic model, which was essentially a de-monetised economy where the state distributed almost all goods directly to most of its citizens. However, the new leader Kim Jong-il decided otherwise. Rather than eliminating or limiting the market elements that had gained strength during the famine, he embraced the market in public statements. Economists followed suit and in 2002 declared, in the country’s only economic journal Kyŏngje Yŏn’gu, that markets had always been part of a socialist system.
North Korea was set to become the next China – an authoritarian regime that has moved beyond totalitarianism, has an autocratic yet collective leadership, and an efficiency-oriented, market-style economy. Read more…
Author: G.E. Anderson, UCLA
China is well-known for state direction of the economy, and China itself does not really try to hide the fact that its most important industries are dominated by state-owned enterprises. Among these industries are airlines, telecoms, banking, finance, steel, mining, shipping, petroleum and, yes, automobiles.
A good mix of Chinese and foreign auto companies sell ‘energy-saving’ cars that are eligible for consumer subsidies of 3,000 yuan per car (see my earlier post). Curiously though, the best selling small sedan in China, BYD’s F3, doesn’t appear on the list. Read more…
Author: Christopher Findlay, Adelaide University
The new Gillard government has responded to a vigorous industry campaign to revise Australia’s proposed taxation arrangements for minerals and energy projects. This followed the earlier plan under Prime Minister Rudd to introduce a tax (called the Resource Super Profits Tax) on resource rents in addition to the company income tax. In the revised plan (called the Minerals Resource Rent Tax) only coal and iron ore will be covered along with gas and oil.
In these new arrangements:
- - The headline tax rate is reduced from 40 per cent to 30 per cent and there is a 25 per cent ‘extraction allowance’ so the effective tax rate is 75 per cent of 30 per cent which is 22.5 per cent. Read more…
Author: Aidan Foster-Carter, Leeds University
June 2010 saw two major anniversaries on the Korean peninsula. On June 25 sixty years ago the Korean People’s Army (KPA) invaded the South launching a bitter three-year war. North Korea still denies culpability, claiming it was repelling a Southern invasion; despite overwhelming evidence, now backed by Soviet archives, that it was the aggressor. No less mendaciously Pyongyang nonetheless celebrates the July 27, 1953 Armistice which ended open hostilities as a ‘brilliant victory in the Fatherland Liberation War’ — even though this left the North bombed and napalmed to ruination.
China still formally backs the North’s version, but this year some brave soul decided to take seriously the late Deng Xiaoping’s instruction to ‘Seek truth from facts.’ The International Herald Leader, an affiliate of Xinhua news agency let the cat out of the bag. It featured interviews with Chinese historians telling the true story, and a timeline stating that ‘The North Korean military crossed the parallel on June 25 1950 and Seoul was taken in four days.’ Naturally, the article rapidly vanished from the web. But many Chinese now are openly critical of the DPRK, and embarrassed that Beijing continues to toe Pyongyang’s line. Read more…
Author: Kevin P. Gallagher, Tsinghua and Boston University
Under the radar screen at the US-China Strategic and Economic Dialogue (SE&D) last month, the US and China continued to discuss a bilateral investment treaty (BIT). If the final negotiated text looks like the majority of US BITs it could threaten financial stability and economic growth in China.
The US and China began negotiations toward a BIT in 2008 under the Bush Administration. After taking office, US President Barack Obama gave his seal of approval to the negotiations at the November 2009 SE&D when the two nations agreed to ‘expedite’ them. Read more…
Author: Lynette Ong, University of Toronto
Could China become the next Greece? ‘Digging out of Local Government Debt’ was the headline of a recent article in Caixin, one of China’s most respected financial magazines. Over the last 18 months, we have been reminded of the dangerously high level of local government debt in China, which could potentially derail the country’s impressive growth path. Pundits abound. A frequently cited pessimistic estimate by Victor Shih at Northwestern University, puts the total close to 100 per cent of GDP.
Local government debt in China may be ballooning, but the concern that it is posing an imminent fiscal risk is wrongheaded. Read more…
Author: Peter Drysdale
Hardly had the dust settled after the G20 Summit in Toronto last week, when concerns mounted once again about a double dip in the global economy. The pace of recovery certainly appears to be slowing in America, though it’s too soon to suggest that the economy is heading south again. What is clear is that it will be quite a while before robust activity becomes entrenched once more, and fiscal health is restored in the world’s major industrial economies.
In this week’s feature essay, Wendy Dobson argues that Toronto has made clear that much work is needed to avoid slipping back into crisis. Read more…
Author: Andrew Sheng, University of Malaya and Tsinghua University
At the 10th Anniversary of the Euro’s launch in 2009, there were some suggestions that one-day the Euro might even take over the role of the US dollar as the dominant reserve currency. After all, the US dollar had been depreciating due to the subprime crisis against the Euro. Less than a year later, the Euro is sliding as a result of the Greek debt crisis.
Doubters are now pointing to a political and structural crisis of the Euro, and focusing on the need for stronger fiscal discipline. The Maastricht Treaty, that led to the creation of the euro area, was unable to bind the euro area members to fiscal discipline. Read more…
Author: Wendy Dobson, University of Toronto
The Toronto meeting of G20 leaders on June 26-27 was a stop on the road to Seoul. Leaders took a few significant steps forward but not enough has yet been accomplished to avoid another crisis and there is danger of renewed complacency. Much, therefore, is riding on the work that leads to decisions in Seoul.
Among its accomplishments, the Toronto meeting was a deadline that elicited progress on the key objective of restoring strong, sustainable, and balanced world growth. Read more…
Author: Rikki Kersten, ANU
At first glance, the advent of Naoto Kan to the Prime Ministership in Japan seems to promise a change in process and style rather than a fundamental shift in Japan’s foreign policy.
Kan’s shifts in process will be many, and likely effective. Kan will run a tighter ship by coordinating policy development within government, and muzzling rogue media statements by colleagues who do not have carriage of relevant policy. In the run-up to the mid-term elections, he will have the luxury of not having to stick to the immovable policy positions of coalition partners such as the Socialist Party. Read more…
Author: Tobias Harris
Prime Minister Kan Naoto had his debut on the world stage at the G20 meeting in Toronto this week. While in Toronto he had his first meeting with US President Barack Obama.
As Reuters notes, Kan met with Obama for a half-hour, considerably more time than Hatoyama got when he visited Washington in April (when Hatoyama was infamously described as ‘loopy’). The two leaders apparently discussed their shared love of matcha ice cream, and the Japanese media looked for signs that the two were becoming pals, looking for evidence that the relationship between the US and Japan was back on track after the Hatoyama government ‘strained’ the bilateral relationship. Read more…
Author: Joe Karackattu, Jawaharlal Nehru University
The rise of India and China as ‘pillars’ of the emerging economic landscape of the 21st century is often a favourite subject of discussion. With the recent global recession, there is a sense of optimism that both will have an important role to play as key drivers of the recovery. Individually, both countries have distinct capabilities: one is referred to as the ‘world’s factory’ and the other as the ‘world’s office’, reflecting their comparative strengths in manufacturing and services, respectively.
However, aside from the China versus India commentaries, there is a larger malaise in Sino-Indian ties, which has led to the absence of a healthy economic and political relationship between the countries. Read more…
Author: Durgesh K. Rai, ICRIER
The unprecedented economic growth in Asia during the last couple of decades has shifted the world economy’s centre of gravity from the West to the East. As the Asian economies have grown larger and become more complex they have also become more integrated with each other and with rest of the world. Nevertheless, despite sound macro-economic fundamentals and being far from the epicenter of the recent financial and economic crisis, the impact of the crisis on the region has been swifter and deeper than for other regions.
The expansion in intra-regional economic integration has not seen an increase in regional economic co-operation, particularly at broader or pan-Asian level, which has been lagging behind. Read more…
