Authors: Peter Drysdale and Shiro Armstrong, ANU

Yang Yao, Deputy Dean of the National School of Development and the Director of the China Center for Economic Research at Peking University, argues in the upcoming issue of Foreign Affairs that a radical shift in gear on China’s political reform is now necessary to maintaining growth with social harmony.

‘Beijing’s ongoing efforts to promote GDP growth’, he argues, ‘will inevitably result in infringements on people’s economic and political rights. For example, arbitrary land acquisitions are still prevalent in some cities, the government closely monitors the Internet, labour unions are suppressed, and workers have to endure long hours and unsafe conditions. Chinese citizens will not remain silent in the face of these infringements, and their discontent will inevitably lead to periodic resistance. Before long, some form of explicit political transition that allows ordinary citizens to take part in the political process will be necessary.’

Read the rest of this entry »

Author: Shiro Armstrong, ANU

The Democratic Party of Japan’s (DPJ) secretary general and power broker Ozawa Ichiro recently took 645 DPJ members and other leaders to China in an unprecedented move for both countries. This is a big step in following up on the DJP’s promise to mend relations with China. There is talk now of making progress on the difficult history issue and of moving beyond it. Other rumours have Prime Minister Hatoyama visiting Nanjing this year — the site of Japanese imperial war atrocities — in exchange for a visit by President Hu to Hiroshima.

The Sino-Japanese relationship has come a long way since a decade ago. Read the rest of this entry »

Author: Shiro Armstrong

When Kevin Rudd was elected Prime Minister in November 2007, many in Japan (and Australia) worried about the prospect of Australia shifting its diplomatic focus from Japan to China.

Rudd’s fluency in Mandarin and his long-time links to China brought out the insecurity in those who thought Australia’s increasing political engagement with China would come at the expense of its relationship with Japan, as if this were a zero sum game. Many of those critics see Japan’s relationships with the United States and Australia as a counter-balance to China.

This of course got worse when Rudd did not visit Japan on his first official tour abroad as the newly minted Prime Minister, whereas China featured prominently on his itinerary. The fury was bordering on panic and the oversight was widely reported as a diplomatic snub. Was this panic justified? Right after the election, key cabinet ministers such as Trade Minister Simon Crean and Foreign Minister Stephen Smith visited Japan in January 2008. Since then Kevin Rudd has made a couple of trips, including an important and significant trip to Hiroshima.

In addition to Rudd’s trips, 9 ministers in the Rudd government have visited Japan, for a total of 13 trips.

Read the rest of this entry »

Author: Shiro Armstrong

Taro Aso is in China today and tomorrow for his second visit since he became Prime Minister of Japan. His first was for the Asia Europe meeting (ASEM) last October where the bilateral relationship was obviously not the main event.

The trip is important as the main topics up for discussion are North Korea and North East Asia’s response to the global financial crisis.

It comes just a little over a week after Aso stirred controversy by sending an offering to Yasukuni shrine. The shrine is a symbol of Japanese militarism and expansion and visits by leaders invites an angry response from China and Korea (see more here). Aso didn’t go as far as visiting the shrine himself which would have been taken as a significant insult to Japan’s neighbours so everyone can breathe easy for now.

Read the rest of this entry »

Author: Shiro Armstrong

There has been a lot happening in North East Asia recently. December 13th last year saw the first ever Japan-China-ROK Trilateral Summit Meeting. The meeting was in planning for a long time and long overdue, but given a sense of urgency due to the global financial crisis.

Now attention again has shifted back to the two giants, Japan and China, who have hit a rough patch right before the 9th Strategic Dialogue to be held today in Tokyo. The meeting is timely as last week saw the return of the dispute over the islands in the East China Sea which have potential oil and gas reserves. This issue has been the subject of past Strategic Dialogue meetings but goes back much further. It appeared to have been finally resolved in June last year in an historic agreement where joint exploration of the potential reserves was agreed to. Now private Chinese firms are said to be exploring the reserves on the Chinese side of the agreed border but the issue is whether they could be extracting reserves from the seabed on the Japanese side. Tokyo has lodged a series of official complaints.

Read the rest of this entry »

Author: Shiro Armstrong

There is a lot of discussion about whether Obama is a protectionist or not based on his campaign rhetoric (see VoxEU) and there seems to be some serious concern about this among foreign leaders, especially in in Asia.

Obama’s campaigning involved promises to protect mature industries, not infant industries. There is a small band of economists who support this, most recently Ha-Joon Chang writing in the FT blog.  Chang’s justification:

However, well-designed and time-bound protection of mature industries can facilitate, rather than hindered, trade adjustment and industrial upgrading. Japan and some European countries in the aftermath of the 1970s Oil Shocks come to mind.

Mr Obama should use protectionism in a similarly forward-looking way.

Chang says protection has to be forward-looking, with conditions on investment and training. Going down that road runs the risk of entrenching special interests by protecting them from international competition and making the adjustment later that much more painful. It seems to me likely to add to the costs of adjustment by delaying or even worse, just disguising protection.

But will Obama actually protect these industries from trade? Read the rest of this entry »

Author: Shiro Armstrong

A lot of people have spoken out strongly against the recommendations of the Garnaut review, citing the 10 percent emission reduction target number as too soft. The focus on the 10 percent number is unhelpful and misses the point for three reasons. First, the 10 per cent reduction from 2000 levels by 2020 is a conditional and intial target consistent with Australia’s part in a global agreement of 550 ppm. The initial step of reaching an agreement and setting any target is a priority, after which the targets can be tightened in subsequent agreements.

Second, as the final report makes clear, the 2020 targets need to be assessed from 2012, not 1990 or 2000 as the base year. We have had 8 years since 2000 with emissions growth higher than was projected, making targets based on 2000 levels a bigger task than it may seem. Besides, Australia already has a target to take us to 2012 (established under the Kyoto Protocol)! The key is what should post 2012 targets look like? On that basis the proposed emission reduction targets for Australia (conditional upon international agreement of a global GHG atmospheric concentrations of 550 ppm) are both tough to achieve and comparable with those for other countries – they are not soft.

Read the rest of this entry »

Author: Shiro Armstrong

On the G20, Sam Roggeveen says

we may have George W Bush to thank for the decisive move that  makes China an active participant in the global order rather than a resentful and unsatisfied outsider.

This is a conclusion he comes to from reading Graeme Dobell. Dobell actually said

Part of China’s technique for dealing with George W Bush was the slow development of the protocols for a Beijing-Washington hotline.

Was it actually George W Bush that was responsible for bringing China in to the club? Sam’s inference is that Bush may have been able to do this with the G20 because of his stance on China, a la Nixon back in the day. As Dominic Meagher says, the Bush Administration’s approach towards China changed fundamentally after 9/11. Might as well credit Osama bin Laden as architect of US-China rapprochement as George W Bush. The Nixon effect was all but irrelevant. Bush’s approach to China was forged by his need to face strategic reality in 2001 not by strategic intent or purpose in shaping a new world order into which China was welcomed as an active and major power.

Read the rest of this entry »

Author: Shiro Armstrong

The current global economic crisis presents an opportunity for reaching a global agreement on climate change next year in Copenhagen, according to Nicholas Stern, author of the Stern Report.  The global financial crisis has highlighted the risks of ignoring problems in the financial system over the past two decades. The longer you ignore the risks the greater the problems. If we ignore the risks of climate change for three or four decades we face consequences from which there will be no recovery.

Stern and Ross Garnaut joined Cai Fang (China Academy of Social Sciences) and Qin Dahe (Chinese Academy of Sciences) at a major forum on the Economic Consequences of Climate Change and Its Policy Implications organised by the ANU’s China Economy and Business Program, with CASS in Beijing on Friday.

Read the rest of this entry »

Author: Shiro Armstrong

Taro Aso is scheduled to visit Beijing on October 24 and 25 for the the Asia-Europe Meeting (ASEM) but the focus of the trip will be in his planned meeting with President Hu Jintao and Premier Wen Jiabao.

Aso was foreign minister from October 2005 until August 2007 but did not visit China once. It would have been difficult for him to do so during Koizumi’s time (which doesn’t mean that he shouldn’t have) but it is surprising he didn’t during Abe’s leadership which started in October 2006.

While Abe was breaking the ice, Wen Jiabao was melting the ice, Hu Jintao was playing ping pong and Fukuda was warming ties, Aso was making random noises in the background and staying away from China. Read the rest of this entry »

Author: Shiro Armstrong

A landslide victory for new Japanese Prime Minister Aso in the LDP presidential elections meant that he got to choose his own Cabinet and it’s a giggle a minute – if it weren’t so serious.

Hatoyama (Hato means dove in Japanese), known as the angel of death, is just the start of contradictions...

Hatoyama Kunio (the kanji Hato in his name means dove in Japanese, hence the costume in the photo) is the new Minister of Internal Affairs and Communications. He is known as a ‘shinigami’ which means ‘angel of death’ or ‘god of death’ after his record number of executions as Justice Minister… an unfortunate nickname for a portfolio which puts him in charge of the nation’s food supply. Read the rest of this entry »

Author: Shiro Armstrong

Taro Aso starts his prime ministership in Japan this week.

A few years ago you couldn’t imagine headlines such as ‘Aso vows to build friendly relationship with S. Korea, China’ or ‘Japan PM Hopeful Aso Seeks Friendship With China, S Korea’.

There is an underlying dynamic in the Japan-China relationship that is too strong for a hawk even of Aso’s stature to try fight – he has to go with it. The turning point in the Sino-Japanese relationship in recent times was the 2005 anti-Japan protests in China.

Aso as foreign minister moving (un?)willingly with the tide, AP Photo by Everett Kennedy Brown

The revision of Chinese history textbooks in Chinese high schools is one significant yet little known outcome of the turning point in the relationship.
Read the rest of this entry »

Author: Shiro Armstrong

The Japan-China relationship is improving.

That’s the result of a survey conducted by the China Daily and Tokyo-based non-profit group Genron-NPO, which polled 1,557 Chinese urban residents in five major cities including Beijing, Shanghai, Xi’an, Chengdu and Shenyang, and 1,037 students in five Chinese universities. 1,000 urban residents and 400 ‘intellectuals’ were surveyed in Japan in June and July.

While each group surveyed responded more positively than the year before, the differences among the groups within the countries is stark. But more interesting is the disconnect in perceptions between the two countries.

Read the rest of this entry »

Author: Shiro Armstrong

Professor Larry Summers at the conference on Financing Higher Education and Economic Development in East Asia: [See the video of the whole speech (20 mins)]

Human capital plays a key role in the development of all economies. A decade ago, discussions of education and development tended to be categorised by focussing on the importance of primary and secondary services. Certainly primary and secondary education are both important elements of the sector – not least because they feed directly into the quality of higher levels of education. But the lessons of recent economic history also highlight both the importance of strong higher educational outcomes obtained through universities and of the need for delivering substantial economic support.

The current world economy is going to be increasingly dominated by knowledge based industries over the coming decades. Agricultural, industrial and technical revolution will all give way to increases in knowledge. Manufactures will continue to be displaced by services and salary differences between knowledge based and non-knowledge based industries will continue to rise. The widening of these economic differentials highlights the importance of investing in knowledge and getting the fundamentals of each country’s higher education sector right.

Author: Shiro Armstrong

The incidence of suicide in Japan appears high. Are there insurance incentives to suicide? Indeed, Chen, Choi and Sawada in a recent paper titled Suicide and Life Insurance find a positive relationship between the suicide rate and the availability of life insurance with a death benefit associated with suicide. They claim that suicide is a rational decision after taking into account the exemption period (the period that the death benefit is not available after the insurance is purchased – to minimise adverse selection).

It is apparently not uncommon to have life insurers provide a payout for suicide. Most OECD countries have the option of a death benefit in life insurance payable in the event of suicide with exemption periods ranging from 1 to 3 years.

What is the social rationale for having such insurance options? Should a regulatory authority or supervisory body in the insurance industry allow insurance that, in some circumstances, provides incentive for suicide? You can imagine the adverse selection problems that arise. Read the rest of this entry »