Author: Peter Drysdale

Over the horizon, a storm in US-China relations is gathering around the question of whether China is deliberately undervaluing its currency, the renminbi, against the US dollar, giving it an unfair competitive edge in US markets and causing high levels of American unemployment and current account surpluses. Most economists would accept that there was some measure of undervaluation of the Chinese currency (how much is a more difficult question on which to get agreement). But few would argue that appreciation of the Chinese currency would solve the American woes of which it is supposed to be the cause.

In the feature essay today on this question, Yiping Huang argues that appreciation of the renminbi is certainly on the Chinese economic policy agenda, but he warns, for a number of reasons, that sharp and sudden Chinese appreciation is likely to do more harm to America and the global economy than it would do good, and that it certainly would not alone solve the problems in America that it is supposed to be causing. Read the rest of this entry »

Author: Peter Drysdale

Could it be that domestic pressures in the DPRK — in consequence of a costly stumble backwards along the tortuous North Korea road to economic reform — and coordinated negotiating pressure from the other parties to the six-party talks are opening the opportunity for progress towards a settlement with North Korea? Some are now arguing that the time to move forward again may have come. And a number of analysts are now focused on the retreat on retrogressive economic policies and the prospect of a North Korean leadership visit to China as signs that a moment of decision may be bearing down on Pyongyang. It is difficult to know what all this means, as Scott Snyder suggests.

We have gathered the best of the latest analysis to try to get a handle on what’s been going on and what it might mean. Read the rest of this entry »

Author: Peter Drsydale

The flurry of leaders’ visits — by Indonesia’s President Susilo Bambang Yudhoyono to Canberra this week and American President Barack Obama to Canberra and Jakarta a little over a week later — signals an elevation in the triangular relationship between the United States, Indonesia and Australia, not merely the growing depth of their bilateral relations. Indonesia is one of the world’s newest democracies, a secular state with a predominantly Muslim population, of immense importance to Australia and America in securing Southeast Asian stability and openness. Indonesia and Australia are members of the new G20 group and have deep and common interests in working with America to entrench the G20 as the pre-eminent and enduring forum for global economic governance. Indonesia, with its pivotal role in ASEAN, and Australia, an anchor in trans-Pacific security, are close confidants on America’s re-engagement with Asia under the Obama administration.

American conceptions of security in Asia and the Pacific do not routinely comprehend Southeast Asia. Read the rest of this entry »

Author: Peter Drysdale

The global financial crisis has brought with it big changes in the international economic system. The response to the crisis has seen the emergence of the G20 as the main locus of international economic governance and a cession of authority from America and the old industrial powers (the G7 economies) to the emerging powers in Asia and elsewhere. The role of the US dollar as the world’s primary international currency is also under question, as the growth of US deficits that are necessary to sustain that role has begun to corrode confidence in the value of the dollar.

As the big new kid on the block, China plays into everyone’s thinking about what to do next. Read the rest of this entry »

Author: Peter Drysdale

Next month Mr Obama will visit Australia for the first time as President of the United States. His schedule is still shrouded in secrecy but he is scheduled to address both houses of the Australian parliament in Canberra, following the precedents set by his predecessor, George W Bush, and President Hu Jintao of China. By any yardstick, this is among the most important events in Australia’s diplomatic calendar. Though the going might be a little rough for him at home right now, Obama is bound to be welcomed very warmly in this country.

But what is at stake on the visit? This week Hugh White reviews Australia’s relationship with America over the past few Presidents and Australian prime ministers and nails what he believes is the central question that the President and Australian Prime Minister Rudd must deal with. Read the rest of this entry »

Author: Peter Drysdale

From what one can judge from commentary of serious Chinese analysts, there is a sense of genuine optimism about the state of the Sino-American relationship. In his essay for EAF Quarterly, Jin Canrong, Professor of International Studies at Renmin University in Beijing, sets out why there may indeed be ‘Reason for Optimism in Sino-American Relations’.

In his assessment, the Obama visit at the end of last year was a significant success. Its success reflects at least two things. Read the rest of this entry »

Author: Peter Drysdale

This week we publish the fourth issue of East Asia Forum Quarterly (EAFQ) (volume 2 Issue 1). EAFQ is published online and in hard copy by ANU E Press four times a year on a theme of major importance to the Asian region. You can support EAF by subscribing to EAFQ for A$30.00 annually.

As Richard Rigby says in the lead essay posted this week, the word ‘challenge . . . carries a heavy burden of nuance’. It can convey a sense of threat. But challenges can also be an inspiration, an offer of hope. Challenges always pose questions –often difficult ones, as Rigby also suggests. Read the rest of this entry »

Last week Japan Airlines went into receivership. JAL is the stately matron of Asian flag carriers so while its struggles with high costs and overheads were familiar news to the heavily business-class patrons of the old dear, it came as a shock to most of us who had loyally racked up JAL Mileage Bank points over the years – even if they did evaporate if you did not use them rather quickly!

JAL may be a leader of sorts – a prototypical example of what’s wrong with the major established international airlines today – but what’s wrong with JAL is not untypical with the challenges facing a bunch of the majors all over the world. British Airways is in trouble and other European majors have already succumbed. As Christopher Findlay explains in this week’s lead, the international system of air transport regulation might have tried to suppress the highly competitive forces that have been shaping huge adjustments in the business, but that was a loser’s game. Read the rest of this entry »

Author: Peter Drysdale

A few months back, distinguished Chinese economist Yu Yongding, of the Institute of World Economics and Politics at CASS in Beijing, delivered the annual Richard Snape Lecture to the Australian Productivity Commission.

This week’s essay is a digest of the lecture in which he provided a challenging critique of important elements of Chinese economic policy strategy in response to the global financial crisis. Yu’s argument is not only about how China should be handling the impact of the global financial crisis. It raises more fundamental questions about the structure of the Chinese growth model and whether it is doomed to fall over in a heap unless there are deep structural reforms in the economy. Yu’s lecture was engaging and, especially for an Australian audience whose economy is hitched so closely to China’s growth performance, a little disconcerting. It was illustrated by powerful images of eight lane highways going to nowhere absent of traffic, indulgent local government offices and other developments unrelated to unmet human need.
Read the rest of this entry »

Author: Peter Drysdale

The global financial crisis has seen China’s star shining ever more brightly in the international economic firmament. But with heightened concerns about inflation and moves to rein in the loose monetary policy which, together with a massive fiscal stimulus, had seen growth in China surge through 2009, will all that change?

As Yiping Huang cautioned last week, worries about the housing market and signs of an asset bubble were likely to encourage the Chinese monetary authorities to go into reverse, having recently removed preferential treatment for housing investment. India is the other emerging economy that has sailed fairly smoothly through the global financial crisis, with a 7.9 per cent growth rate in the third quarter of 2009. Read the rest of this entry »

Author: Peter Drysdale

The Chinese economy is leading the rest of the East Asian, if not the world, economy out of the global financial crisis. The strong performance of Australia and Korea through the crisis, and the recent signs of recovery from the sharpest drop in Japan’s GDP for over half a century, all owe something to how well China has come through the crisis.

In this week’s lead, Yiping Huang chances his arm on what the fortunes of the Chinese economy might be over the coming year. Like Huang, a number of analysts of the Chinese economy who have contributed to the commentary on this site over the past year and a half, foretold the rapid rebound. There were two main reasons for this. The first, which Huang cites, was the Chinese government’s ability to mobilise resources from a strong fiscal base and direct them to a massive stimulus program. Read the rest of this entry »

Author: Peter Drysdale

The Obama administration brought high expectations in Asia of a new era in America relations with Asia and for America’s global standing. Obama’s victory was a triumph of hope in America’s future and hope for America’s positive role in world affairs. Much has changed through 2009, with Secretary of State, Clinton’s historic inaugural visit to Asia (not to Europe) and Obama’s trip to Japan, APEC in Singapore, China and Korea in November. Clinton’s signing of the ASEAN Treaty of Amity and Cooperation set the stage for Obama’s dialogue with ASEAN leaders around the APEC Summit and a new direction in American engagement in the region. But through the year the reality had set in. The lukewarm press on Obama’s Asian trip back home was less a product of what the President had achieved on his travels and what markers he had laid down for the future of America’s Asian engagements than it was a measure of how the Obama administration was travelling at home.

This week Wendy Dobson, in her review of America’s Asian initiatives, reminds us what difficult a job the Obama administration still faces at home in managing the exit from the global financial crisis. Read the rest of this entry »

Author: Peter Drysdale

The big news this week was the chaos over the negotiations on climate change in Copenhagen. Will Steffen was there and files this realistic assessment on whether the deal that was eventually done will generate sufficient momentum to continue to build through 2010 towards a much more comprehensive and effective agreement. His conclusion is that the jury is still out.

And this week, we begin the end-of-year, beginning-of-year series by leading analysts from countries around the region on what the year looks like in retrospect and what challenges there are looking at the year ahead. Over the next few weeks, along with our normal posts, we reflect on what has been a year of enormous change in the world and ahead, at a period of immense fluidity in which Asia seems bound to play a peculiarly important role. Read the rest of this entry »

Author: Peter Drysdale

There are still many risks along the way to recovery from the global financial crisis. The American economy remains weak, with unemployment at 10 per cent, and Europe and Japan remain in the doldrums. China’s powerful recovery should be a bull element for the world economy. But could China’s recovery be more at the expense of recovery elsewhere than a driver of it? Will successful Chinese recovery, while most of the industrial world continues to stagnate, again widen imbalances in savings, investment and current account imbalances, and end in trans-Pacific economic and political conflict and recrimination? These are real risks of which some aspects of the history of relations between Japan and the other emerging powers and the industrial world in the Great Depression offer warning. Read the rest of this entry »

Author: Peter Drysdale

From Thursday through to Saturday last week almost 200 officials, academics and commentators from around the Asia Pacific region gathered at the invitation of the Australian Government to talk about Prime Minister Rudd’s idea of an Asia Pacific Community at the 2009 Asia-Pacific community Conference. This was the one-and-a-half track dialogue that Rudd had promised to convene at the Shangri-la meeting in Singapore in September.

Whether or not Mr Rudd won over their minds to his proposal, as one of the more sceptical guests observed, he certainly won over the hearts of each and every participant. He did this by paying careful attention to ASEAN sensibilities about the idea in his opening address and with his warm personal and individual hospitality at Kirribilli House.

What did the conference deliver on substance? Read the rest of this entry »