East Asia Forum http://www.eastasiaforum.org Economics, Politics and Public Policy in East Asia and the Pacific Mon, 20 Oct 2014 11:15:07 +0000 en-US hourly 1 Reconciling Japan’s security policy with Northeast Asian stability http://www.eastasiaforum.org/2014/10/20/reconciling-japans-security-policy-with-northeast-asian-stability/ http://www.eastasiaforum.org/2014/10/20/reconciling-japans-security-policy-with-northeast-asian-stability/#comments Mon, 20 Oct 2014 11:00:04 +0000 http://www.eastasiaforum.org/?p=43909 Author: Ben Ascione, ANU

On 1 July 2014, the Abe government made a cabinet decision to reinterpret the Article 9 peace clause of Japan’s constitution to recognise the exercise of collective self-defence under limited circumstances. While the scope of the proposed changes are an evolution rather than a revolution in Japanese security policy, especially due to the tough negotiations with Abe’s coalition partner New Komeito, furore and misconception have surrounded the move.

The cabinet decision addresses four areas. First is the remit for the Self-Defense Forces (SDF) to respond to grey-area infringements short of an armed attack against Japan. Second is narrowing the definition of activities which are banned because they constitute an integral part in the use of force. This would enable the SDF to provide more rear-area logistical support from non-combat zones to ‘armed forces of foreign countries engaging in activities for the security of Japan or for the peace and stability of the international community’.

The third area is the loosening of restrictions so that SDF personnel participating in UN peacekeeping operations will be able to use weapons in line with UN rules of engagement. The final area is allowing the SDF to come to the aid of a ‘foreign country in a close relationship with Japan’ if three conditions are satisfied: the attack threatens the Japanese people’s constitutional right to ‘life, liberty and pursuit of happiness’; there are no other means to repel the attack; and the use of force is limited ‘to the minimum extent necessary’.

So why the backlash, given the limited scope of these changes? The UN Charter declares that collective self-defence is a prerogative of all sovereign states, and the cabinet decision merely seeks to move Japan from a total self-ban to partial recognition of this internationally recognised right. Moreover, the Japanese Diet needs to amend a number of existing laws before the new interpretation can be implemented.

Abe has long called for formal revision of the constitution to abolish Article 9, but the military allergy — or anti-militarism — in Japan remains strong nearly 70 years after World War II. Defenders of Article 9 promote it as a model for Japan to hold up to the world, challenging the idea that the ability to go to war defines ‘normal’ state behaviour and confers prestige. They fear that Abe’s changes will provoke and entangle Japan in conflict rather than bolster the country’s security.

Japanese protesters also distrust Abe’s intentions and the ideology he represents. Ignoring popular sentiment, he recently forced through a state secrecy law and relaxed Japan’s weapons export ban. Abe also leads or participates in numerous parliamentary study groups with extreme revisionist convictions related to topics including history, patriotic education, the Yasukuni Shrine and the ‘comfort women’ issue. Abe does not have a broad mandate for change on any of these issues. The majority of the public would prefer him to focus on revitalising the economy.

There are pockets of support in Japan for Abe’s moves on security policy. Right-wing nationalists believe that Article 9 besmirches the honour of Japan’s imperial past and is a shackle to its just place as a fully sovereign state. But many moderate Japanese defence specialists have welcomed the cabinet decision on the grounds that the country’s security policy needs to respond to security challenges in the post-Cold War era.

Some have expressed frustration that the new move is a symbolic rather than a substantial recognition of the right to exercise collective self-defence. By their reckoning more should be done, including expanding the scope of permissible peacetime activities that the SDF can conduct with other nations to allow for enhanced contingency planning and joint military exercises. Legal inconsistencies due to the peculiarities of Japan’s positive list system of what functions the SDF may perform also need addressing.

But riding Abe’s wave to generate momentum and break through the military allergy and change Japan’s security policy has come with unwanted side effects. Japan’s relations with China and South Korea have hit unprecedented post-war lows, and the task of upgrading Japan’s security policy has been unnecessarily complicated by Abe’s stance on revisiting Japan’s history issues.

China and South Korea stress that Abe’s historical revisionism means he must not be trusted on collective self-defence. Such pronouncements, including during President Xi Jinping and President Park Geun-hye’s joint summit in Seoul in early July, offer an easy opportunity for cheap political point scoring at home. But Abe handed them the issue on a silver platter when he visited Yasukuni Shrine in December 2013, where 14 class-A war criminals are enshrined, and by his government’s ‘re-examination’ of the Kono Statement on the treatment of wartime ‘comfort’ women.

The US, having long called for Japan to take on greater security roles commensurate with its economic capacity, has welcomed the cabinet decision as a positive step to strengthen US–Japan alliance cooperation and increase Japan’s contributions to regional peace and stability. America’s support should also be understood in the context of President Obama’s emphasis on multilateral cooperation and the US ‘rebalancing’ to Asia.

With this approach to security it is hoped that Japan’s exercise of collective self-defence can contribute to alleviating some of the US defence budget pressures after the billions spent on Afghanistan and Iraq, the global financial crisis and the US government shutdown in October 2013. A sense of urgency is involved, as the US and Japan have declared their intent to upgrade their defence cooperation guidelines by the end of the year.

But for Japan to be able to say yes to collective self-defence in a more meaningful way, where it will truly be able to make ‘proactive contributions to peace’, it has to convince more than its own defence specialists and the United States. China, South Korea and the broader Japanese public also need to be brought on board. The domestic political dynamics in China and South Korea make this a complicated task. But there are a number of measures Japan can take to lay the groundwork.

First, the Japanese government must not undermine but strengthen official positions, such as the Kono Statement and the Murayama Statement, which acknowledge wartime transgressions. This should include a moratorium on Yasukuni Shrine visits by Japanese prime ministers.

Second, Abe’s assertion that the door for dialogue is always open must go beyond political rhetoric, and greater efforts must be taken to realise bilateral leaders’ summits with China and South Korea. A bilateral meeting with President Xi Jinping while Abe is in Beijing for the APEC Leaders’ Meeting in November presents an excellent opportunity to start.

Third, Japanese, Chinese and South Korean leaders must publically acknowledge the mutual importance of the Japan–China and Japan–ROK bilateral relationships. The frame through which the public in each country perceives the bilateral relationship must be broadened to emphasise areas of cooperation rather than the relentless focus on the territorial disputes and history issues that dominate mainstream media. The Senkaku/Diaoyu Islands issue presents a particularly dangerous scenario and greater efforts from both countries are needed to reduce tensions and avoid an accident that could spark conflict. Establishing a military-military hotline to deal with emergencies would be a good first step.

Fourth, Japan’s cooperation with China and South Korea should be boosted in areas of mutual importance, such as the environment and energy efficiency.

Finally, military-level confidence-building among the three Northeast Asian states should be bolstered. The recent announcement of joint military exercises in Australia with China and the US under Exercise Kowari in October shows that such cooperation is possible. Such exercises could be expanded in the future to include Japan and South Korea.

China and South Korea have often interpreted Japan’s adherence to Article 9 as a message that the country is a non-actor in security affairs, with the underlying implication being that Japan might still be a dangerous country were it not for the strict legal barriers and the US cork in the militarist bottle. Japan must emphasise its post-war record as a peaceful nation and demonstrate that it can play a positive and active role in security affairs that can be reconciled with the interests of all regional actors.

Ben Ascione is a PhD candidate in international relations at the Crawford School of Public Policy, The Australian National University, an associate researcher at the Japan Center for International Exchange, and an associate editor at the EAF Japan and North Korea desks.

This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘A Japan that can say ‘yes’‘.

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The puzzle of Chinese political power http://www.eastasiaforum.org/2014/10/20/the-puzzle-of-chinese-political-power/ http://www.eastasiaforum.org/2014/10/20/the-puzzle-of-chinese-political-power/#comments Mon, 20 Oct 2014 01:00:37 +0000 http://www.eastasiaforum.org/?p=43899 Authors: Peter Drysdale, EAF, and Ryan Manuel, ANU

When Xi Jinping ascended to the Chinese presidency, he, Premier Li Keqiang and their streamlined seven-person Politburo Standing Committee faced serious economic challenges at home as well as increasingly complex issues to manage abroad.

Domestically, the Bo Xilai affair hovered over the leadership transition ominously, underlining the need to deal with disquiet among the Chinese public over corruption and the relationship between the state and economic power.

Chinese President Xi Jinping gives a toast during the National Day reception in a banquet hall at the Great Hall of the People in Beijing, China, 30 September 2014. (Photo: AAP).

If Xi wanted to secure the popular support, he needed to deal with state monopolies; but in dealing with the monopolies he ran the risk of undermining his power base if he wasn’t prepared to see off threats from some very powerful interest groups that were becoming a more and more important feature of the economic and political landscape.

Internationally, there was the issue of how China’s rising power played into the relationship with the United States, economically and strategically. In the distance, the looming territorial issues with America’s allies and partners in the neighbourhood had the potential to get out of control.

Seeing off these threats required considerable focus of power.

Some say that, as China’s President and Party Secretary, Xi is now the most powerful leader of China since Mao. This power comes partly from Xi’s personal character, lineage and image, and partly from the overt centralisation of power that has been put in place around his leadership. While holding the reins of power may make Xi’s job easier today, down the track it may make it more complicated, and urge on him more caution.

In the week’s lead, Shen Dingli of Fudan University suggests that the concentration of power around the presidency does not compromise the virtues of ‘democratic centralism’ that was put in place precisely to check Maoist-type excesses, but rather strengthens its accountability and guards against abuse by the likes of Zhou Yongkang. Bringing the monopolies, the military and the Party into line to assert the coherence and integrity of the state is one massive task, bound to elicit an image of authoritarian aggrandisement. But, Shen warns, to conflate centralisation with a return to authoritarianism is premature.

Xi’s ability to centralise power comes partly from his ability to project his image as a ‘man of the people’ — taking minibuses rather than motorcades, ordering tripe at Beijing restaurants without ceremony, riding on bicycles with his daughter — and his gifts in dealing with the public that previous leaders like Jiang Zemin and Hu Jintao can only envy. Praise of Xi’s’ genial personality is broadcast far and wide.

Xi’s popular image has helped to put him in charge. Two decisions in particular are of importance.

The first is his re-entrenchment of idea of a ‘mass line’ — officially, a reminder to Party officials to ‘better understand, represent, and prioritise the wishes of the people'; unofficially, an efficiency and anti-corruption drive using Party offices rather than government ministries to make it work. The campaign ‘saved 586,000 meetings, removed 160,000 phantom staff, returned 115,000 vehicles to government use from private accounts and stopped 2580 unnecessary official buildings from being built’. It has also brought over 200,000 Party members (mostly government officials) to Party tribunals and disciplinary actions. This so-called ‘tigers and flies’ campaign appears very popular — and it’s caught some very big tigers, most notably Mr Zhou, but also many senior officials, generals, popular commentators and other important people.

While the ‘tigers and flies’ anti-corruption campaign is populist gold, it scares the rest of the fauna silly. The assault on Zhou broke what many considered an unspoken rule to not go after Party heavyweights or their families after they have retired from office. It’s reported that Jiang Zemin and Hu Jintao urged Xi to rein in the anti-corruption campaign for this reason. If, as the analysis right now suggests, the campaign is winding back on the hunt for tigers, reading about the capture of flies is likely to be less engaging.

But Xi’s other push towards centralisation may have effects that are more long-lasting. Unlike previous Chinese leaders, Xi has put himself in charge of a number of ‘leading small groups’ (like task forces) designed to push major reforms and tackle serious issues. So Xi is now leading the Economics Small Leading Group, and calling for ‘a revolution in the way the country produces and consumes energy’. Whether it’s foreign affairs, Taiwan, maritime security, internet governance, economics and finance, or ‘comprehensive deepening of reform’, the Presidency is in the middle of the action.

It appears that Xi has become the so-called Chairman of Everything, centralising authority for almost all policy to committees at the centre of the state. This has huge advantages in coordination of the affairs of the state and dealing with big issues that were threatening to get out of hand. On the other hand, it might yet prove what Sir Humphrey in Yes Minister would describe as a ‘courageous’ decision. The danger is one of the centralisation of failures in dealing with any among a myriad of these issues, in a system where the accountabilities are not exactly clear. That centralisation of failure could come at a big and personal political cost.

The puzzle is whether the personalisation of policy heft can translate into governance grunt. In the short term, moves like lifting the control of local courts up a level to remove them from local interference is likely to deliver better outcomes to Chinese citizens and taking the privileged down a peg or two likely to reassure them, but the climate of fear that constrains worthy activists as well as venal officials creates an environment in which a major policy misstep could unleash a tsunami of criticism from either side the political spectrum.

Let’s hope for success, as success could hopefully bring a major advance in Chinese political accountability.

The irony and the reality is, of course, that it is exactly the absence of Xi’s (and the leadership’s) broad representative legitimacy, in some form or another, that creates both the risks to its continuing authority as well as the hazards to its collective democratic exercise of authority.

Peter Drysdale is Editor of the East Asia Forum.

Ryan Manuel is Research Fellow in China in the World at The Australian National University.

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With Xi’s new power is collective leadership over? http://www.eastasiaforum.org/2014/10/19/with-xis-new-power-is-collective-leadership-over/ http://www.eastasiaforum.org/2014/10/19/with-xis-new-power-is-collective-leadership-over/#comments Sun, 19 Oct 2014 11:00:28 +0000 http://www.eastasiaforum.org/?p=43891 Author: Shen Dingli, Fudan University

There is currently much talk about whether China’s President Xi Jinping is shifting away from collective leadership. Western observers tend to conclude that, given his command of all powers since becoming Chinese communist party chief and state president, Xi is centralising power around himself. But that is a premature conclusion that bears more careful scrutiny.

Chinese president Xi Jinping leads the parade of present and past leaders, as they gather for the National Day reception at the Great Hall of the People in Beijing on 30 September 2014. (Photo: AAP).

China’s communist party has always claimed to adopt ‘democratic centralism’. And, at different times, the party has emphasised either the ‘democratic’ or ‘centralist’ aspect. The key has been to strike a balance. On the one hand, an overly democratic system may act with low efficiency. The recent inability of the US Congress to make a compromise on budgetary sequestration is a key example of this. On the other, an overly centralist system tends to push the paramount leader’s own agenda while ignoring the ideas of others. For example, George W. Bush’s pre-emptive war against Iraq in 2003 — without adequate intelligence or consensus in the United Nations Security Council — has, mistakenly and unnecessarily, led both America and Iraq in the wrong direction.

China’s overall system, by design, is more centralised than many in the west, so it has also been burdened by a number of frustrations in the past — such as the launch of the Cultural Revolution. China has adopted a series of political reforms to prevent such problems from arising again. For instance, China now employs a fixed five-year term system — instead of the lifelong system under Mao — to set its political cycles. More emphasis is also put on collective leadership by allowing for effective and more regular policy consultations and deliberations.

The division of jobs within China’s Politburo level seems to be an institutional means to attain collective leadership, but it hasn’t always been successful. Though policymaking behind the wall of the Forbidden City tends to be opaque, it is still possible to feel that members of the Politburo Standing Committee — such as Zhou Yongkang, who took charge of legal and judicial matters between 2007 and2012 — could abuse collective leadership for personal ambition. While Zhou never paralysed the system, his actions have adversely affected the efficacy of collective leadership.

With this in mind, China has to improve its leadership system to make it truly collective, and prevent any individual from monopolising power under the guise of collective leadership. Xi’s return to a more centralised system seems to be part of his efforts to manage effectively these power relations so as to prevent a situation like Zhou’s power trip from re-emerging. Looking from the outside, Xi has so far successfully managed this process.

The current domestic and international circumstances required that Xi move to centralise. In addition to the weak collective leadership of Standing Committees in the past, China’s rapid growth has rendered the present government organisation less effective in responding to the demands of economic and social reform. Meanwhile, the international response to China’s rapid ascendance also warrants cordial — yet decisive — Chinese leadership. During China’s own fast transformation and a period of regional, as well as global, power transition, China needs a determined leader who can command collective leadership domestically.

Obviously, in the course of strengthening the effectiveness of collective leadership the chance of shifting away from its original intent may actually increase. But as long as Xi allows policy consultation and deliberation before decisions are made, his revamped system may actually enhance China’s ‘democratic centralist institution’.

Given his expected ten-year tenure, Xi seems to be poised to make the democratic centralist system a stronger and more efficient institution. At the same time, to avoid the pitfalls of shifting away from collective leadership, he must — after two years of consolidating his power base — be aware of the importance of both leading his team and sharing his power.

Shen Dingli is Professor and Associate Dean at the Institute of International Studies at Fudan University.

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Modi’s UN speech shows his foreign policy will walk a well-worn path http://www.eastasiaforum.org/2014/10/18/modis-un-speech-shows-his-foreign-policy-will-walk-a-well-worn-path-2/ http://www.eastasiaforum.org/2014/10/18/modis-un-speech-shows-his-foreign-policy-will-walk-a-well-worn-path-2/#comments Sat, 18 Oct 2014 11:00:52 +0000 http://www.eastasiaforum.org/?p=43883 Author: Krishnendra Meena, Jawaharlal Nehru University

Many have hailed Prime Minister Narendra Modi’s maiden speech to the United Nations General Assembly as a historic shift away from the speeches of past Indian heads of government. But in reality, Modi’s speech is more a continuation of the Indian government’s stance on many international issues, albeit with more flourish and charisma, which comes naturally to Modi when he speaks in Hindi.

Indian Prime Minister Narendra Modi addresses the 69th United Nations General Assembly at UN headquarters, 27 Sept, 2014. (Photo: AAP)

Modi’s speech covered international issues like terrorism, UN Security Council reform, global development, climate change, the Pakistan question in India’s foreign policy and India’s neighbourhood. Modi’s remarks on most of the issues bore a close resemblance to the previous government’s views. First, Modi began with the concept of Vasudhaiva Kutumbakam, or ‘the world is one family’, which has often been used by Indian leaders in the United Nations since  the 1960s and 1970s. More recently, in 2005,  his predecessor, Prime Minister Manmohan Singh opened his UN speech with the same phrase from Hitopdesha and Panchatantra, Sanskrit fables with morals relevant to statecraft. The phrase is appropriate to express globalist ideas. Many such instances are visible in Modi’s speech to the UN.

The call for reform of the UN Security Council has been a constant feature of India’s UN policy since the end of the Cold War. For the last ten years former Prime Minister Manmohan Singh consistently spoke about reform at international fora. The previous United Progressive Alliance government was thus able to garner support from the international community with President Obama declaring US support for reform during his visit to India in November 2010.

In his speech, Modi called for UN Security Council reforms in the coming years, particularly in light of the post-2015 development agenda. Modi’s call for a world without the various ‘G’ groups — like G7, G4 and G77 — and emphasis on ‘G-All’ resonates well in the UN. But the Bharatiya Janata Party (BJP), the political party to which Modi belongs and the largest party of the Modi-led National Democratic Alliance, don’t agree. The BJP believe states should maximise their own relative power through such groupings. India actively takes part and has been at the forefront of groups like the BRICS and IBSA (India, Brazil and South Africa).

Modi’s implicit argument that terrorism is exported to India, a snide reference to Pakistan, has been part and parcel of India’s policy on the issue for decades. But the call for ratification and adoption of the Comprehensive Convention on International Terrorism is a novel one — no previous Indian prime minister has expressed it in such clear terms. The issue plaguing the Convention — which has been under discussion since 1996 — is the definition of ‘terrorism’ itself. The acceptance of the definition depends on clarifying whether terrorism can be committed by states as well as non-state actors. Many believe that in many parts of the world terrorism is sponsored by state actors and many state activities are not covered under the current definition.

The Pakistan question was also mentioned in the UN General Assembly address. But the reference was more benign than previous remarks made by Modi in alluding to the recent floods and the continuity of India’s policy of bilateral negotiations between the two countries on crucial issues.

The novelty in Modi’s speech was on two counts: the emphasis on the importance of India’s immediate neighbourhood in South Asia and the importance of yoga as a lifestyle. On the former, Modi declared that ‘a nation’s destiny is linked to its neighbourhood. That is why my government has placed the highest priority on advancing friendship and cooperation with her neighbours’. Nothing could be more relevant in the present context, especially if India intends to project out of the region, and as China’s expanding economic reach is felt in South Asia. This and promoting yoga is in perfect harmony with the BJP’s ideas of cultural nationalism. A peaceful neighbourhood may be the first phase for India’s grand ambitions.

Modi’s first address to the UN dispelled hopes that he could deliver what India has been waiting for since independence. There were glimpses of pragmatism and change in Modi’s speech but it mostly represented a continuation of India’s foreign policy under previous governments.

Krishnendra Meena is an Assistant Professor in Political Geography at the School of International Studies, Jawaharlal Nehru University, New Delhi.

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Vietnam’s education system: still under construction http://www.eastasiaforum.org/2014/10/18/vietnams-education-system-still-under-construction/ http://www.eastasiaforum.org/2014/10/18/vietnams-education-system-still-under-construction/#comments Fri, 17 Oct 2014 23:00:37 +0000 http://www.eastasiaforum.org/?p=43870 Author: David Brown, California

For Vietnamese youth, a university degree is the entry ticket to the middle class and a promise (often unfulfilled) of an urban professional job. Enrolment in higher education has grown from 162,000 in 1992 to over two million last year, some 25 per cent of the nation’s college-age population. Business, finance and foreign trade degrees are prized, a consequence of the Vietnamese economy’s globalisation.

To meet demand for diplomas, universities have sprouted like weeds. Study after study reports that curricula are outdated; teachers overmatched and underpaid; and graduates lacking in job-ready skills. ‘We have an excess of low quality universities and a dearth of high quality ones’, Minister of Education Pham Vu Luan told the nation’s National Assembly late in 2011

Nationwide examinations qualify 20 per cent of high school graduates for places in Vietnam’s elite and relatively inexpensive national universities. Most of the rest find berths in provincial universities, vocational colleges or private universities — a sorting mechanism that depends partly on exam scores and partly on family finances. And, with good grades or bad, the children of Vietnam’s political and business elite typically head to Australia, the United States, United Kingdom or China for higher education.

After debating four drafts, the Assembly passed Vietnam’s first Law on Higher Education in June 2012. The law aims to give university administrators autonomy while relegating the Education Ministry to quality control. In a bid to bring some schools up to world standards, a select handful of national universities will get more, and more predictable, support from the state budget. Private universities, provided that they don’t aim to make a profit, are now eligible for local government support in the form of land grants or subsidised loans. If a substantial number of Vietnam’s 419 (by last count) institutions of higher learning go out of business, the new law implies, so be it.

Though no one seems satisfied with the operation of the new law, it is probably too soon to look for big changes. Administrators have yet to use their new autonomy to offer teaching staff a living wage or better working conditions. As a result, professors continue to put much of their energy into activities that lucratively leverage their prestigious titles (for example, private tutoring, setting up private research institutes or moonlighting as advisors to NGOs or private firms) instead of into teaching.

Science and engineering was once the most popular course of study, supplying staff for state enterprises. A few good schools survive from the era of the five year plan, in particular Bach Khoa Polytechnic in Hanoi. Even so, there’s a disconnect: Vietnamese college graduates simply don’t have the basic skills sought by multinationals that have committed billions of dollars to manufacturing in Vietnam.

The US chipmaker Intel has responded by promoting initiatives to produce more and better engineers — staff who are incidentally proficient in English, of course. Among its objectives, Intel says, is to ‘train the deans and rectors of the colleges and universities to… be more strategic and forward looking’.

That’s not enough, say Vietnamese graduate students at several Melbourne universities, whose open-ended debate on their nation’s education future has just spawned a perceptive and prescriptive book, Higher Education in Vietnam: Flexibility, Mobility and Practicality in the Global Knowledge Economy. Western ideas are a fine starting point for reform, they say, but higher education must also be faithful to Vietnam’s core values and educational tradition, so that ‘the best of the past continues into the future’.

In Vietnam, it’s assumed that the elite state universities will retain their place at the top of the academic pecking order if only because their students are uniformly bright and ambitious. Public debate focuses on alternative models, in particular on new universities that describe themselves as ‘not for profit’, schools like Ton Duc Thang (TDTU) and Hoa Sen universities. With substantial support from the Ho Chi Minh City government, these two schools have grown from modest vocational schools to institutions with a reputation for turning out graduates who have no trouble finding good jobs. Both, however, are caught up in controversy.

Aiming to build its reputation for research, Ton Duc Thang University paid a distinguished overseas Vietnamese professor handsomely to launch an academic journal. When copies of the first number arrived from the Springer publishing house, however, they bore no marks of a TDTU connection. The university has sued the professor, providing plenty of titillating copy for Saigon newspapers.

Meanwhile, a stockholder revolt has convulsed ‘non-public’ Hoa Sen University. As required by the 2012 higher education law, Hoa Sen reorganised as a private corporation and distributed shares of stock to its employees. Little did it (or, presumably, the drafters of the new law) imagine that many of the recipients would sell their shares to outsiders. By July, these investors had accumulated enough shares to oust the school’s much-admired founder-rector, with the apparent intention of substituting staff willing to turn a profit for shareholders.

The plan for ‘Fulbright University Vietnam’ (FUV) has also gained public attention.

For a decade now, there have been for-profit branches of foreign universities in Vietnam. RMIT Vietnam, affiliated with the Royal Melbourne Institute of Technology, is the best known. For hefty fees, it teaches a solid business curriculum mainly in English.

Now a group linked to Harvard University aims to take the foreign-affiliated model considerably further. It is raising funds in Vietnam and abroad to endow a full-featured institution on the foundation laid by two decades of teaching economics to civil servants in Saigon. The plan seems to have won strong central government backing, including tacit agreement that FUV can design its curriculum independent of Ministry of Education oversight. The first students will be enrolled in 2016.

The educational system that can support the institutions of a modern Vietnam is still under construction. Critical to the success of that venture will be the energy of the tens of thousands of students returning from study abroad — provided that the system can slot them into positions that fully engage their talents and reward them accordingly.

David Brown, a retired US diplomat, writes often on contemporary Southeast Asia. He is indebted to several young Vietnamese scholars, in particular Thao Vu, for assistance with this article.

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The future of the Shanghai Cooperation Organisation http://www.eastasiaforum.org/2014/10/17/the-future-of-the-shanghai-cooperation-organisation/ http://www.eastasiaforum.org/2014/10/17/the-future-of-the-shanghai-cooperation-organisation/#comments Fri, 17 Oct 2014 11:15:14 +0000 http://www.eastasiaforum.org/?p=43859 Author: Swagata Saha, Observer Research Foundation

China recently reaffirmed that it backs India and Pakistan becoming members of the Shanghai Cooperation Organisation (SCO). At the 14th meeting of the Council of Heads of States of SCO on 12 September, Chinese President Xi Jinping called for full membership for SCO observers, including India and Pakistan.

Russian Prime Minister Dmitry Medvedev speaks with Chinese Prime Minister Li Keqiang after visiting an exhibition of innovative technologies at the Open Innovations Forum in Moscow, Russia, 14 October 2014. (Photo: AAP).

The SCO is a regional security and economic grouping of Russia, China, Uzbekistan, Kazakhstan, Tajikistan and Kyrgyzstan, operative since 2004. In 2005 India became an observer, joining Iran, Pakistan and Afghanistan. Sri Lanka, Belarus and Turkey are dialogue partners. From its earlydays at the SCO, India has shown willingness for a more substantial role at the organisation.  In June 2011, the SCO approved a ‘memorandum of obligation’ which enabled non-member countries to apply for SCO membership.

China has been attempting to shape a non-Western security grouping to counterbalance NATO and allow China more room for military action in Asia. The SCO, often dubbed the Asian NATO, has been dominated by Russia and China. Since Xi became president, Russia and China have been strengthening ties with joint naval exercises, economic roundtables and a US$400 billion gas deal, all taking place in first quarter of 2014. Expanding the SCO is imperative to securing the Central Asian gas pipelines, many of which run through Chinese territory and are threatened by insurgencies that compromise their construction.

The transfer of security responsibility from NATO and the US to the Afghan National Army in 2014 has spurred enormous possibilities and responsibilities for the SCO. Stability in Afghanistan is crucial to China’s primary motive of reaping profits from their investments in the country. Also, insurgencies in the Afghanistan-Pakistan region have spilt over into China’s backyard. The revolutionary zeal of groups based in the region has fuelled the East Turkestan Islamic Movement in China’s Xinjiang Province. Xinjiang Province has been hit by many insurgent attacks this year. The Karachi airport blast in June has brought to forefront the expanding network of extremism in Central Asia.

Popular resentment with irresponsive regimes has been raking the Middle East and West Asia. The members of the SCO are often referred to as the ‘club of authoritarians’. The SCO’s plan to extend membership to India, the largest and one of the soundest democracies in the neighbourhood, aims to undercut these claims while keeping Western efforts to promote democracy at bay.

For its part, India has been making conscious moves towards full membership. In 2012, India initiated the India–Central Asian Dialogue. In 2014, India participated in the meeting of National Coordinators of SCO Member States, where observers were invited for the first time, shortly after the visit of SCO Secretary General Dmitry Fedorovich to India.

SCO membership is pivotal to India’s Connect Central Asia Policy and energy diplomacy goals. The feeble Indian footprint in energy-rich Central Asia may be detrimental to Indian Prime Minister Narendra Modi’s ‘Make in India’ plan. Expanding the SCO membership will also benefit efforts to curtail terrorism, drug trafficking and extremism.

The plan to upgrade SCO observers to full membership parallels China’s ‘One Belt and One Road Initiative’ launched in 2013. The New Silk Road Economic Belt and the 21st Century Maritime Silk Road are designed to heighten the attractiveness of trade with China and strengthen its presence in Asia.

Extending SCO membership to Pakistan will help facilitate China’s plan to revive its role as a regional trade hub. This will also aid China’s Great Western Development Strategy, which was launched in 2000. By developing an intricate oil, gas, railway, road, economic and cultural network with other Asian states, China will place itself at a stronger footing to lead in the Asian century.

The issue of expanding SCO membership has been raised at a time when East–West contestation is at a new post-Cold War high. US–Russia relations have deteriorated considerably over the Ukraine crisis. After sealing the China–Russia gas deal, Russian President Vladimir Putin declared that the unipolar world order is over. Members of the US House of Representatives have also criticised India for giving ‘Russia’s aggression in Crimea implicit approval.’ Chuck Hagel’s visit to India in August and Modi’s visit to the United States, after almost a decade long visa ban, may signal an improvement in East–West relations. But cyber espionage, military reconnaissance and US air strikes in Syria remain key sources of tension between China, Russia and the United States.

SCO members need to take a two-track approach to make it a successful regional grouping. At the macro level, it must forge a common vision and mutual trust with similar groupings such as the Collective Security Treaty Organization. At a micro level, bilateral and regional issues between member states need to be addressed. For instance, tensions between India and Pakistan (who are both being offered full membership at the SCO) over the Kashmir issue needs to be resolved. Similarly, China and India should resolve to settle their border disputes. There are also tensions between China and Turkey, an SCO dialogue partner, over the East Turkestan Islamic Movement. If the SCO is to contribute to a stable and prosperous Asia, it must resolve these bilateral disputes.

Swagata Saha is a Research Assistant at Observer Research Foundation and a team member of China Weekly monitor.

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A Bank of Japan that can say ‘yes’ http://www.eastasiaforum.org/2014/10/17/a-bank-of-japan-that-can-say-yes/ http://www.eastasiaforum.org/2014/10/17/a-bank-of-japan-that-can-say-yes/#comments Thu, 16 Oct 2014 23:00:25 +0000 http://www.eastasiaforum.org/?p=43844 Author: Paul Sheard, Standard & Poor’s

Under the leadership of Governor Haruhiko Kuroda, the Bank of Japan (BOJ) in March-April 2013 did a 180-degree turnaround: it declared that it had the monetary policy wherewithal to end Japan’s chronic, mild deflation and secure a rate of inflation of around 2 per cent and announced bold monetary action to that end. For BOJ-watchers this was revolutionary stuff — and it was coming from establishment Japan.

Bank of Japan Governor Haruhiko Kuroda: his bold experiment to end deflation will be a valuable lesson for central bank governors whether it succeeds or fails. (Photo: EPA/AAP)

Depending on the price index used, Japan’s economy has been in deflation for 15–20 years. Under the previous BOJ governor, Masaaki Shirakawa, the official line was that the bank could not end deflation using monetary policy. The BOJ argued then that the root cause of deflation in Japan was the steady decline in real potential growth, which was driven largely by demographic factors and so was not directly amenable to monetary policy cures. When it came to ending deflation, the BOJ’s position essentially was one of ‘no, we can’t, therefore we won’t’. Instead, the primary responsibility was held to lie with the government.

This was a remarkable position for a central bank to take. While it was correct to argue that monetary policy could not make much of a dent in real variables like potential growth, it flew in the face of standard economic analysis to argue that monetary policy could not control a monetary or nominal phenomenon, namely the path of the aggregate price level.

Moreover, the BOJ’s position was self-defeating. The central idea in modern monetary theory and practice is that the central bank needs to, and is able to, ‘anchor’ the public’s inflation expectations around its inflation target: central banks control inflation to a significant extent by convincing the public that they can and will meet their inflation target. If the starting point is one of deflation, supported by the public expecting deflation to continue in the future, and the central bank itself tells the public that it does not believe it has the tools to end deflation, then that just serves to entrench deflation even further.

In a remarkable turn of events, Prime Minister Shinzo Abe made holding the BOJ accountable for ending deflation the centrepiece of his economic policy program. To do so he used the once-in-five-years opportunity to appoint a new governor and two deputy governors. With Governor Kuroda at the helm, the BOJ has completely changed its tune and its behaviour. When it comes to ending deflation, the message now is ‘yes, we can; yes, we will’.

It is often observed, somewhat stereotypically, that while change can be a long time coming in Japan, when it does occur, it can come very suddenly and dramatically. That begs two questions. First, why, for so long, did the BOJ resist — and why did its political masters allow it to resist — adopting a conventional central bank stance on the deflation issue? And second, why did the Japanese polity suddenly grab the BOJ by the scruff of the neck when it did?

One can only speculate about both questions. The BOJ ’s resistance, having been dealt a bad hand on deflation by the government’s banking and fiscal policy failures of the 1990s, may have been a case of bureaucratic logic and inertia meeting cognitive dissonance. Lacking the boldness and decisiveness to take the kind of policy action necessary, it may have settled for the more expedient course of redefining the problem and the solution, and as an institution started to believe its own alibi.

But that kind of intransigence had consequences — not least in chronic deflation contributing to Japan’s fiscal woes, to dampened ‘animal spirits’ and to a downbeat national psyche. A confluence of factors likely conspired to wake the Japanese polity from sleep-walking into graceful ageing and declining global relevance, and then to produce a coherent policy mix headlined by a resolve to reflate.

Those factors likely were: a post-global financial crisis fall in real GDP twice the magnitude of that in the US; the fiscal wake-up call from the Eurozone sovereign debt crisis; the game-changing nature of the 3/11 disaster, particularly for business investment prospects in Japan; the continuing rise of China, seemingly impervious to the worst global financial and economic shocks since the Great Depression; yet another round of deflationary yen strength; and a growing sense of ‘enough is enough’ when it comes to political musical chairs and mediocre leadership.

While the Kuroda-led BOJ may be saying yes to ending deflation, will it succeed? Despite encouraging early progress, the jury is still out. Economic theory suggests that, once deflation is “soft-wired” into the fabric of an economy (via self-fulfilling expectations and behaviour), it is not easy to expunge.

On the other hand, theory also suggests that there is some set of monetary policies which, if sustained, would succeed in ending deflation. By a reductio ad absurdum argument, the BOJ could surely trigger high inflation if it proceeded to buy up all of the available financial assets in the world — and financed this by ‘printing’ central bank money (reserves). So there must be some less dramatic set of policy actions that would end deflation and produce just the right amount of inflation — it is just a matter of calibrating policy to find out where that point lies.

But, given generally uncooperative fiscal policy, that deflation-expunging tipping point may require surprisingly aggressive policy, far beyond what the BOJ is currently doing, and Mr Kuroda may be hamstrung by other policy board members, some of whom disagree with his assumptions and framework. If so, the BOJ may come up short. That would be unfortunate and not only Japan. After all, Mr Kuroda is attempting to be to deflation (too-low inflation) what US Federal Reserve chairman Paul Volcker was to too-high inflation in the 1980s. If Mr Kuroda’s ‘can do’ approach succeeds, he will be creating a valuable precedent for all future central bankers. Much is at stake.

Paul Sheard is Chief Global Economist and Head of Global Economics and Research at Standard & Poor’s. He is based in New York.

This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘A Japan that can say ‘yes’‘.

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Will Vietnam’s FDI-led economy get stuck in a middle income trap? http://www.eastasiaforum.org/2014/10/16/will-vietnams-fdi-led-economy-get-stuck-in-a-middle-income-trap/ http://www.eastasiaforum.org/2014/10/16/will-vietnams-fdi-led-economy-get-stuck-in-a-middle-income-trap/#comments Thu, 16 Oct 2014 10:00:00 +0000 http://www.eastasiaforum.org/?p=43851 Author: Tran Van Tho, Waseda University

The Vietnamese economy has experienced a downturn in growth since 2008. In the past five years, the growth averaged about 5.5 per cent a year and is not expected to be much higher in the coming years. For a country of per capita income of about US$2000, that rate of growth is low. Increasing the rate of growth to somewhere in the vicinity of 8 per cent a year is imperative if Vietnam is to avoid the so-called middle income trap.

Another feature of the Vietnamese economy is that growth has increasingly been driven by foreign direct investment (FDI). FDI firms in recent years accounted for nearly half of industrial output and more than 65 per cent of exports. The contribution of FDI has been even stronger in various types of machinery, such as telephones, computers, motorbikes and home electric appliances. In addition, due to high income-elastic characteristics, machinery is now the mainstream of industrialisation and trade in the growing East Asian region.

Because of the large flows of FDI, Vietnam has been increasingly intertwined in the machinery supply chains developed by multinational corporations in East Asia. Machinery is becoming increasingly important in Vietnam’s trade structure: it accounted for more than 30 per cent of Vietnam’s exports in 2013, compared to only 10 per cent in 2000. Given the expansion of FDI in this field in recent years, this share can be expected to rise further.

But Vietnam’s current lukewarm rate of growth, driven largely by FDI, may result in structural problems in the long run, where FDI-intense sectors grow quickly and other sectors do not. One reason for this worry is that most FDI firms in Vietnam are wholly foreign-owned. The number of joint ventures between foreign and local firms is quite small. At the end of 2013, approximately 80 per cent of FDI projects were wholly foreign-owned. Vertical linkages between FDI and local firms are also very weak. FDI firms in machinery assembly heavily rely on imports of parts, components and other intermediate goods. They do partially procure intermediate goods in domestic resources but mainly from the supply of other foreign firms rather than local firms. This problem stems from the presence of state-owned enterprises (SOEs).

SOEs do not engage in the production of either manufactured goods for export or intermediate goods for machinery assembly industries. SOEs themselves are not only inefficient but also affect the direction of economic policies and distort the allocation of resources. Therefore local firms in the private sector are also not efficient suppliers of intermediate industry goods since they are placed at a disadvantage in terms of access to capital and land for investment.

So long as SOEs are not comprehensively reformed, the dual structure of the Vietnamese economy will continue.

Since the range of what is considered ‘middle income’ is wide, from US$1000 to about US$10,000 per capita, the problems of the lower middle income countries — those with per capita incomes up to about US$4000 — must be different from the higher middle. High middle income countries, such as Malaysia or Thailand, are reaching the so-called Lewisian turning point, where excess labour in subsistence agriculture can no longer be soaked up by industrial sectors without increasing wages.

In order to avoid the middle income trap, these countries should strengthen their research and development capability, emphasise the quality and appropriateness of human resources, and improve the institutional system for nourishing a dynamic private sector which pushes the structure of comparative advantage toward higher-skill, more innovation-intensive production.

For lower middle income countries like Vietnam, still characterised by a surplus of labour, the efficient allocation of the factors of production is important. Reforms to overcome distortions in factor markets, in order to increase the capital and land productivity, are essential.

Strong FDI performance can help Vietnam maintain a course of moderate growth in the future, but unless substantial institutional reforms are carried out, the economy will continue to underperform in sectors that are not exposed to foreign investment. In the future, when wages begin to rise, foreign investors will stay only if labour productivity increases. And if it doesn’t, the Vietnam could find itself trapped in the ranks of the lower middle-income countries.

Tran Van Tho is Professor of Economics in the School of Social Sciences, Waseda University.

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Surge of sedition charges in Malaysia arrests Najib’s reform agenda http://www.eastasiaforum.org/2014/10/16/surge-of-sedition-charges-in-malaysia-arrests-najibs-reform-agenda/ http://www.eastasiaforum.org/2014/10/16/surge-of-sedition-charges-in-malaysia-arrests-najibs-reform-agenda/#comments Wed, 15 Oct 2014 23:00:00 +0000 http://www.eastasiaforum.org/?p=43835 Author: Nigel Cory, CSIS Washington DC

Malaysian opposition leader Anwar Ibrahim was charged with sedition on 24 September for statements he made at a political rally three years earlier. Shortly before, on 19 September, a Malaysian court sentenced a student activist to a year in jail for comments he made after the 2013 general election. These cases are the latest in a surge of sedition charges that is terrorising opposition politicians, social activists, journalists and academics in Malaysia.

The spate of cases represents an attack on free speech and indicates an ongoing trend of political repression since the ruling National Front barely clung to power in the 2013 election. It could also prove to be a setback to the recent improvement in relations between the United States and Malaysia. As cases continue to stack up and domestic opposition starts to build, policymakers in Washington, and other capitals, will be watching to see if the situation warrants high-level attention and potentially public criticism.

A concerted effort appears to be underway within the Malaysian police and judiciary to enforce the country’s colonial-era sedition law. So far in 2014, 14 people have been charged, including 12 since August. Time is no barrier given that some charges have been retrospectively filed for alleged offenses made years ago. Most worrying is the fact that the law has mainly been used against the government’s opponents, including seven opposition politicians (including Anwar’s lawyer), an academic, a social activist and a journalist with , which is often critical of the government.

The Sedition Act of 1948 is a relic of British authorities’ efforts to quell opposition to colonial rule and root out communism. As recent cases demonstrate, its broad definition sets a low bar for its potential use. An offender is someone who ‘does or attempts to do … any act which would, if done, have a seditious tendency’, or ‘utters any seditious words’. A seditious tendency is one meant to ‘excite disaffection against any Ruler or against any government’ or ‘promote feelings of ill will and hostility between different races or classes’.

The timing, number of cases and selective application of the law raises serious concerns as it indicates high-level political coordination and interference. It also runs counter to Prime Minister Najib Razak’s 2012 commitment to repeal the Sedition Act as well as his broader reform agenda. The arrests are more suited to Malaysia’s authoritarian past under former prime minister Mahathir Mohamad. Najib recently said he still intends to repeal the law, but refused to take up the legislative reforms recommended by the National Unity Consultative Council, a body set up to conduct public consultations on reforming the Sedition Act.

Najib seems content to fence-sit for the time being. On 13 September, he said that discussions should continue with those, especially in the majority Malay community, who are concerned about the repeal effort. Najib and his party, the United Malaysia National Organisation (UMNO), are especially sensitive to this sentiment because of its increasing reliance on the Malay vote after Chinese voters almost completely abandoned the ruling coalition in the 2013 election. Najib says that the freedom of all Malaysians ‘should also be in balance with laws that protected long-held principles’. Those principles presumably include the legally privileged status of ethnic Malays. Insecurity about that status appears to be driving the conservative wing of UMNO to stymie efforts to repeal or reform the Sedition Act. If Najib continues to acquiesce to their demands and tactics, it will seriously undermine his reformist credentials.

Malaysia watchers in the United States and elsewhere have reason to be concerned. The use of sedition charges against political opponents risks reversing Malaysia’s progress towards becoming a modern and mature democracy. If the arrests continue it will heighten criticism by human rights groups and policymakers abroad. In the United States, where anxieties are already growing ahead of the final appeal against Anwar’s sodomy conviction in late October, such severe backsliding could put a damper on what should be a burgeoning relationship.

Nigel Cory is a researcher with the Sumitro Chair for Southeast Asia Studies at CSIS. He previously served as an Australian diplomat in Malaysia and the Philippines.

A version of this article first appeared here on cogitASIA.

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Where are all the women in China’s political system? http://www.eastasiaforum.org/2014/10/15/where-are-all-the-women-in-chinas-political-system/ http://www.eastasiaforum.org/2014/10/15/where-are-all-the-women-in-chinas-political-system/#comments Wed, 15 Oct 2014 11:00:59 +0000 http://www.eastasiaforum.org/?p=43828 Author: Jude Howell, LSE

In September 2014 the Inter-Parliamentary Union released its latest figures on the number of women in national parliaments. Rwanda topped the league with women accounting for 63.8 per cent of parliamentarians in the lower house (or its equivalent). China, however, ranked 62nd out of 189 countries, with women accounting for 23.4 per cent of representatives to the National People’s Congress (NPC) — China’s nearest equivalent to a parliament. Given that the Chinese Communist Party (CCP) has long espoused the idea of equality between men and women and has a well-established, dedicated institution for protecting women’s rights and interests — the All-China Women’s Federation (ACWF) — it is curious that the figures are so unimpressive.

These figures reflect a more general pattern of underrepresentation of women at all levels of the political system. Only two women sit in the current 25-member Politburo and no woman has ever sat in the powerful Politburo Standing Committee. Currently there is only one female provincial governor (Li Bin, governor of Anhui) and only one party secretary of a province or city (Sun Chunlan, currently party secretary of Tianjin city, and previously of Fujian province). In fact, Sun is one of only two women who have ever served as the party secretary of a province. Only 21 per cent of all party members are female and only 23 per cent of all national-level civil servants are women. Further down the system, little more than 1 per cent of village committee chairs are women.

How can this be? Especially given the CCP’s apparent long-standing commitment to gender equality, its large organisational machine for promoting women’s rights and interests, its practical efforts to tackle sexist attitudes and promote equality and, not least, Chinese women’s high economic participation — which hovers around 70 per cent for women between 18–64 years. Unravelling this puzzle reveals a complex array of interweaving causal factors, some of which prevail in other countries and some of which are particular to China’s political system and culture.

First and most fundamental are processes of gender socialisation. Despite ideological campaigns during the Maoist decades to change people’s thinking around gender roles, entrenched gendered attitudes remain amongst both men and women. Women are often described as ‘lacking self-confidence’ or ‘lacking quality’ (suzhi di), or seeing their role traditionally as ‘inside the home’ rather than ‘outside the home’. Such views are also often internalised by cadres in the ACWF and mirrored in the numerous campaigns to enhance women’s self-esteem and ‘improve their quality’. But this focus on the individual woman’s ‘quality’ is problematic — not just because it casts the spotlight on the individual woman as the problem and the solution but more importantly because it masks other issues such as institutional and political factors that shape the way men and women enter formal politics.

China’s political culture is male-dominated. Not only is there male bias in the nomination and selection processes for leading positions in the party/state at all levels, but the career trajectories of men and women are often quite different. Both domestic responsibilities as well as a lower retirement age for women hinder the opportunities of promotion for women. Though the NPC in March 2007 stated that women should account for no less than 22 per cent of all NPC members, such targets have turned out to have a limiting effect, creating an artificial barrier to participation after the 22 per cent target has been reached. Surviving in a male-dominated political system also means playing the cultural games that are laid down by men, such as smoking and drinking heavily. Women are thus caught in a dilemma — if they drink along with men, their reputation might be sullied; but if they do not drink along with the men, then it appears that they are not part of the group, and may forfeit influence and connections.

Apart from these political cultural factors, ‘state-derived feminism’ — which is the theory, ideology, strategy and practice of the ACWF — is also limited in what it can achieve. The analysis of female oppression remains stuck in an unrevised Marxist-Engelsian-Maoist analysis that is no longer able to grasp the gendered effects of an increasingly globalised and marketised economy and society. In addition, the ACWF forms part of the CCP’s institutional machine. Constraints on its autonomy translate into constraints on its room to manoeuvre and its ability to take a more challenging approach to gender inequalities. Though more independent women’s groups have proliferated across China since the Fourth World Summit of Women was held in Beijing in 1995, a restrictive regulatory framework for civil society still limits their effectiveness.

But it is not all doom and gloom. At least China has an institutional infrastructure of expanded laws and regulations advancing gender equality and a dedicated national machinery in the form of the ACWF. This cannot be dismissed too lightly. There is also a new wave of activism amongst China’s young generation of women, which is taking radical action around practical issues like the shortage of female toilets and the discriminatory practices in university entrance processes. All is not lost; but more could be done.

Jude Howell is a Professor at the Department of International Development, London School of Economics.

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