The global centre of gravity shifting to Asia

“Danny Quah of the London School of Economics has calculated the world’s economic centre of gravity and reckons that, thanks to Asia’s rise, over the 70 years from 1980 to 2050 it will move eastwards from the mid-Atlantic all the way to somewhere between India and China. By 2015, the halfway point on this great journey, it will have reached the city of Bandar-e Mahshahr, in Iran, on the north-eastern tip of the Persian Gulf .”

 Danny Quah’s calculation of the world’s economic centre of gravity has been included in The Economist’s eye-catching statistical landmarks of 2015

Many see the rush to join the Asian Infrastructure Investment Bank as the beginning of a new international financial order and the decline of US dollar hegemony.

BRITAIN’S recent decision to join the Asian Infrastructure Investment Bank (AIIB) as a founder member has led to a kind of stampede by other allies of the United States in Europe such as Germany, France and Italy to follow suit.

So did two other important Asia-Pacific allies, Australia and South Korea. The only other major US ally in Asia which did not was Japan.

What is striking is that these allies went against the express wishes of the US which apparently saw the AIIB as a potential challenge to the domination of the international financial architecture by the US-controlled World Bank and the International Monetary Fund.

Particularly stunning is the British decision. According to senior fellow at the Department of Politics and International Studies at Britain’s Cambridge University Martin Jacques, in this year’s Boao Forum, this is the first time since Breton Woods in the 1940s, except for one occasion when Britain refused a US request to send troops to Vietnam, that Britain had ever said no to the US so publicly!

Jacques exaggerates somewhat as he should have begun with 1956 as the year when Britain abandoned an independent foreign policy, as a result of its misbegotten adventure in Suez, and became a faithful junior partner to the US.

Still, it is no less remarkable, even beginning with 1956, for it took about six decades before a clear British nay to the US came about.

Many saw the rush to join the AIIB as signifying the beginning of a new international financial order and the decline of US dollar hegemony, with China deemed to be the new or most influential nation.

Some, however, saw Chinese weakness rather than strength in this spectacle.

London’s Financial Times argued that resorting to a multi-lateral institution to exercise influence suggests weakness as China will be less able to get its own way, not to mention possible badgering from non-governmental organisations in future deliberations of the AIIB, than if it could do so by bilateral means.

It remains to be seen if a new financial order will eventuate. I will however make a few points about this development.

One is that it has shown in a dramatic way the global reach of Chinese economic strength, especially in the financial arena.

While it is true that China is already an economic force in other parts of the globe such as in the continents of Africa and South America, not to mention Asia and Australia, this is probably the first time that a major European nation has made an economic decision with obvious political implications favourable to the Chinese.

Someone defined a superpower as a nation or state that can project dominating power and influence in the globe, sometimes in one region or more, and that has the potential to attain global hegemony.

In this respect we can consider China an economic superpower.

Of relevance to our understanding of Chinese strength is the reason behind the British decision.

Britain in the past year or two has evinced a more positive attitude towards China.

According to an analysis in the Internet magazine, Counterpunch, the recent British economic recovery has been mainly based on financial flows to property and infrastructural projects in London and the south of England, and the prosperity of the City of London.

And the city of London is what keeps Britain from becoming a third-tier economy.

This is so important that David Cameron and the Conservatives could conceive of Britain leaving the European Union if the EU were to mess with the running of the City by imposing regulations.

A lot of the money recently has come from China and Britain is very keen to be involved in the offshore trading of the Chinese renminbi. Thus, there is every prospect of Britain getting more action from a China, with foreign reserves of around US$4tril (RM14.68tril), looking for more ways to use the renminbi.

Joining the AIIB in such a fashion, not only brings with it the prospect of possibly getting a leg up in future AIIB projects, but also gains Chinese goodwill. But it is important not to exaggerate Chinese strength. It is a superpower only in the economic arena, and not in other spheres such as the military and political.

Militarily, the US far exceeds China in the amount of money spent and in technological sophistication. Politically, what China can at present offer cannot match the global impact of values associated with the US such as democracy and human rights.

Even in the economic sphere, the Chinese Gross Domestic Product is only equal in size to the US in purchasing power terms, and not in dollar terms where the US GDP is more than one and the half times that of China.

In per capita terms, US GDP is at least four times more. And the US is still far more advanced in the sophistication of its financial market and industrial structures.

The significance of this AIIB development is not a demonstration of raw Chinese economic power.

It is unlikely to do away with the WB or the IMF.

It is really another symptom, this time in Europe and in the financial arena, of the global centre of gravity shifting to Asia.

By Dr. Lee Poh Ping

> Dr Lee Poh Ping is a Senior Research Fellow at the Institute of China Studies in the University of Malaya. The views expressed here are entirely the writer’s own.


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The AIIB groundswell; Asian development to the fore

Washington's Lobbying Efforts Against China's 'World Bank' Fail As Italy, France Welcomed Aboard. The cheese really does stand alone. Every single U.S. ally with the exception of Japan have all hopped on board the Asian Infrastructure Investment Bank, or AIIB. Italy and France were approved on Thursday to become founding members, bringing the total membership base to 33 from the original 21.

The AIIB groundswell

Just in time for the deadline, an impressive coalition of countries have signed on for the newest development bank on the block

THE deadline of March 31 has passed, and 52 countries are now on the list of would-be founders of the Asian Infrastructure Investment Bank (AIIB).

The China-led bank was launched in October last year at the Great Hall of the People in Beijing, a year after Chinese President Xi Jinping proposed a bank to offer funds for development projects during his official visit to Indonesia.

The initiative would promote regional inter-connectivity and economic integration, he said when delivering a speech at the Indonesian Parliament.

In the past few days leading up to the deadline, news of more countries hurrying to join the AIIB made headlines, especially when a few of them announced the decision at the recently concluded Boao Forum in Hainan province, which Xi officiated.

The world was watching closely to see if the United States and Japan would sign up as founding members just before the deadline, but both have decided to opt out of the bank that is seen as a rival to the Western-dominated World Bank and International Monetary Fund.

Back in October last year, the bank had confirmation from 21 countries to participate as founding members – Malaysia was one of them – all of which are in the Asian continent.

The tipping point came when the United Kingdom announced its decision to join the AIIB in the middle of March, to the surprise of many.

More countries followed suit right after that, including France, Italy, Germany and Switzerland.

Martin Jacques, a senior fellow at the Department of Politics and International Studies at Britain’s Cambridge University, said the rise and growing awareness of the Chinese possibility in the context of a multilateral initiative pressed Britain to act the way it did, making AIIB not just an Asian institution but a global one.

“I think this is an extraordinary historical moment,” he said in a panel discussion during the Boao Forum.

“The new institutions (AIIB and the New Development Bank operated by Brazil, Russia, India, China and South Africa) do not necessarily conflict with the Bretton Woods institutions. They are very different.

“The developing countries now account for nearly 60% of global Gross Domestic Product and they represent 85% of the world population.

“The new institutions, unlike the Bretton Woods institutions, are being defined as relevant to the needs of this 85% of world population, most of whom are concentrated in this continent.”

Countries which have missed the March 31 deadline can still join as ordinary members, while those that have already submitted their application will find out if they are on the final list of founding members by April 15.

With an initial capital of US$50bil (RM184bil), AIIB is scheduled to be officially established at the end of the year, after the rules are finalised and signed in mid-2015.

New Zealand’s former Prime Minister Jenny Shipley said there is a need to define “infrastructure” to determine the types of projects that are qualified to obtain funding from the AIIB.

“If I could be provocative – if you were to put a diverse group of qualified women and men together and ask them the question, you’ll get a broader definition than if you just ask the question of classical male concept of buildings,” she said.

“We need to stand in the shoes of the people whose lives will be unleashed if we get this right. Just bringing in the classical morals of the same thing would not give us the breakthrough.”

Josette Sheeran, the president and Chief Executive Officer of the Asia Society, chipped in on this, citing Indian Prime Minister Narendra Modi’s agenda of building more toilets as an example.

“The reason young girls don’t go to school in India is that there is no toilet. That’s the kind of infrastructure that would really capture the mind of humanity and transform hope in the world,” she said.

Former Pakistan Prime Minister Shaukat Aziz was more concerned about the governance of the new banks, placing emphasis on professionalism, transparency and quality leadership.

“The people hired for AIIB must be professionals who know what infrastructure financing is all about,” he said.

“The quality of people will determine the ability of these banks to analyse risks to give money and to make credible loans which are payable back.”

Transparency, in the opinion of Deloitte global chairman Steve Almond, is also key to attract the private sector to come onboard.

“The regional or sub-regional projects are arguably the ones that bring the greatest impact to economic development. But because they go across the borders, they are also harder to manage and least likely to attract private sector capital,” he said.

“We need the mechanism to provide confidence to the private sector, and transparency governance is one of the compelling reasons to encourage them to come and join the projects.”

And what is the magic that would make good governance work?

Li Ruogum, former chairman and president of Export-Import Bank of China, believes in understanding.

“This newly established institution cannot just clone the older one, as we are working in a very different environment.

“We have to accumulate our experiences and need to have a mind of innovation. All should come together and understand each other, and try to achieve good governance.”

Check-in-China by Tho Xin Yi

 
Asian development to the fore

Chinese President Xi Jinping. - AFP  
Hungry for development: In 2013, President Xi Jinping proposed a new development bank, the Asian Infrastructure Investment Bank. One year later, 22 Asian countries had signed up, including 10 Asean countries - Blooberg

Asia’s need for better infrastructure and more development is too important to be held to ransom by outdated big power politics and petty posturing.

FOR many observers, the US “pivot” (later renamed “rebalancing”) to the Asia-Pacific was classic Obama: the rhetorical flourish was more dramatic than the policy substance.

In the second half of its first term, the Obama administration sought to assign two-thirds of its military assets to the Asia-Pacific theatre, up from the standard half from the even split between the Pacific and the Atlantic.

By the middle of its second term, officials were struggling to maintain a semblance of a policy largely left to coast under its steadily diminishing momentum. US foreign policy, and by extension US defence policy, appeared distracted by other concerns.

The State Department and the Pentagon seemed consumed at once by the Syrian debacle, Iraq’s instability, rising terrorism everywhere, civil war in Ukraine, Europe’s problems with Russia, Iran’s nuclear programme and an uppity Israel.

Then there were the ever-present ­budgetary constraints. Deploying another 16% of military assets to the Asia-Pacific, from half to two-thirds, seemed hardly noticeable or achievable.

Meanwhile, officials were anxious to insist that the rebalancing had nothing to do with the rise of China and its growing assertiveness in the region. It was, they said, part of efforts to preserve US strategic interests.

Whatever the choice of words, and however implicit China may be as motivation, rebalancing was fast becoming history. By March last year, a Pentagon official admitted it was going nowhere.

However, the Obama administration’s gift of verbalising policy intent made US intentions clear enough.

President Obama had famously said the US should be writing trade rules in the Asia-Pacific rather than let China do it.

Thus, the Trans-Pacific Partnership, a trade pact with controversial demands that swiftly became synonymous with US trade preferences. But China had not been idle either.

In 2013, President Xi Jinping proposed a new development bank, the Asian Infrastructure Investment Bank (AIIB). One year later, 22 Asian countries had signed up, including all 10 Asean countries.

In Asia, the world’s most promising continent for rapid economic growth, infrastructure needs for development are peaking. The IMF, World Bank and Asian Development Bank (ADB) can serve only a fraction of its needs: between 2010 and 2020 alone, some RM30tril is needed.

China set a deadline of March 31 this year for countries around the world to sign up as Prospective Founding Members (PFMs) before operations begin later in 2015. China would provide the biggest contribution to the authorised capital of US$100bil (RM363.49bil) and initial subscribed capital of US$50bil (RM181.75bil).

The US immediately saw this as a game-changer challenge to its dominance in global lending. For decades, it has controlled the World Bank, and through its European allies, the IMF and through its ally Japan, the ADB.

These institutions have been known to set tough conditions on debtor countries that may not serve domestic aspirations or national interests. A cash-rich China also felt it remained under-represented in these institutions even after becoming a leading global economy.

Washington had hoped, even expected, that its allies and friends would stay away from the AIIB as a rival institution. But like its pivot or rebalancing strategy, that hope steadily faded.

In Europe, Britain as the closest US ally was the first to sign up to the AIIB early last month. Soon, other major European economies like France, Germany and Italy followed, as did all the Scandinavian countries.

Washington then quietly pressured Japan, South Korea and Australia to stay away. But Seoul and Canberra signed up anyway. By then, the US had started to soften its stand, denying that it had ever pressured any country to stay away. It was only unsure if the AIIB would adhere to best practices in international lending.

Then, other US allies like Taiwan and Israel also signed up. The US was becoming increasingly isolated, with only Japan as the other major economy for company.

But not for long, perhaps. Last Monday, Japan’s ambassador to China, Masato Kitera, said in a Financial Times (FT) interview that Japan would join the AIIB as well, probably around June.

That came as a bombshell to the conservative Japanese government. It would seem too much of a betrayal of yet another US ally, the final one being the “unkindest cut of all”.

The next day, on the deadline for countries to sign up as PFMs for the AIIB, Tokyo denied that Ambassador Kitera ever said such a thing. Chief Cabinet Secretary Yoshihide Suga said Japan had no imme­diate plans to join the AIIB.

Besides being a US ally, Japan was also wary of the prospect of the AIIB undercutting the ADB.

Whatever the actual chances of Japan joining the AIIB, Tokyo would want to underplay it as much as possible.

Like the US, Japan said it was reluctant to sign up because of uncertainty over the AIIB’s standards. But countries such as Britain and Singapore that have joined said the best way to ensure high standards was to get on board and be part of the decision-making process.

To be part of that process, it was necessary to sign up early before the big decisions were made. The terms and conditions of lending and borrowing have still to be firmed up as dozens of countries including giants like India and Russia are already in.

The FT report also revealed that Japanese business leaders were pressuring their government to join the AIIB. Mitsubishi bosses, for example, had expressed confidence in Jin Liqun, a former senior ADB official who will head the AIIB.

On the deadline last Tuesday, China announced that 30 countries had been admitted as PFMs. More than a dozen others were in the queue.

Then a flood of criticisms and denuncia­tions of the stubborn US position came, mostly from within the US itself. Analysts and commentators, including in Forbes and The Economist, said the US administration had miscalculated badly in staying out, only damaging US long-term interests in East Asia and the Pacific.

Former US Secretary of State Madeleine Albright also condemned the US position, lamenting the way Washington had scored another own goal by rebuffing the AIIB. The US had placed itself behind the curve in changes in the Asia-Pacific rather than stay at the leading edge.

If and when Japan finally signs up, the US may have to be resigned to becoming a part of the AIIB. But as a latecomer, it may be limited to playing only a bit part such as an observer rather than sit at the main table.

China has long regretted the US fixation with what it calls a Cold War “them against us” bipolar mentality that frustrates progress on many fronts. For the countries of Asia hungry for more development, progress must not be held hostage to big power rivalry.

Ultimately, any rivalry between the US and China today is not over political ideology but economic ideology: the Washington Consensus of free trade rhetoric where the state and private industry are at odds with each other versus the emerging Beijing Consensus of close public-private partnerships that have worked so well for so much of Asia already.

US opposition to a proven formula for Asia is most unlikely to win friends and supporters anywhere, least of all in Asia.

By Bunn Nagara Behind the headlines

> Bunn Nagara is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia.

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Chinese President Xi Jinping's (C-R) meeting with the members of the Asian Infrastructure Investment Bank (AIIB) in the Great Hall of the People in Beijing, China 24 October 2014. 21 Asian countries are the founding ...

It's not news if it's good, the Western news

The success story of regional integration in Latin America today is seldom heard elsewhere in the world, even as people there experience it daily.

LATIN America has been experiencing a progressive, historic but silent revolution for 10 years now. However, few people in the rest of the world seem aware of it.

The silence is not because these countries had sought to avoid world attention. Rather, the international media dominated by Western news agencies seem to have other priorities.

Often enough significant events and key issues are neglected, bypassed by the saucy, the sensational and the scandalous – all that glitters is not gold, much that matters may never be told.

Without exception, Western news agencies have doggedly promoted the so-called Arab Spring to the point of tedium.

The standard bogeymen of Western storytelling – Saddam Hussein, Muammar Gaddafi, Bashar Assad – are going or gone, so jubilation in Occidental newsrooms may be expected. But there should be limits and other (news) priorities too.

Elsewhere, countries that succeed outside Western norms, dictates and development models may seem unimportant or “politically incorrect”. So they are routinely ignored or underrated.

Worse, the changes said to be wrought by “Arab Spring” uprisings are said to be positive when the exact opposite is happening.

In virtually all these countries, living conditions have deteriorated rather than improved.

But the nine countries of Latin America and the Caribbean that came together in 2004 as the Bolivarian Alliance for the Peoples of Our America (Alba) have been making great strides in every critical area of national development.

Antigua and Barbuda, Bolivia, Cuba, Dominica, Ecuador, Nicaragua, Saint Lucia, Saint Vincent and the Grenadines, and Venezuela have raised standards of living for their people in social, economic and political terms.

Standards in housing, health care, education and employment have risen. These countries have also scored a high 0.721 in the UN Human Development Index, which measures national achievements beyond economic growth and material development.

On Dec 14, 2004, Venezuela and Cuba signed the joint declaration for the establishment of Alba. The alliance is based on humanist principles that place the citizen rather than the state or the corporation at the centre of national policymaking.

This people-centred alliance soon attracted the interest of other countries. Next to join were Bolivia, then Nicaragua, and Dominica, with Ecuador, Antigua and Barbuda as well as St Vincent and the Grenadines joining together – followed by St Lucia.

Grenada and St Kitts and Nevis will be the next members. Other countries attending Alba summits as Participants are Guatemala, Haiti, Honduras, Paraguay, St Kitts and Nevis, and Uruguay.

With a proud record of a decade’s achievements under its belt, Alba marked the passage of its first decade at a forum in Kuala Lumpur on Thursday.

Ambassador Lourdes Puma Puma of Ecuador explained Alba’s background and objectives, including the use of the Sucre (Unified System for Regional Compensation) as a virtual currency in trade among member nations.

There is also a Bank of Alba with regional integration as its core purpose. The bank encourages and offers financial support for projects that promote the social development of all the peoples of the continent regardless of race, religion, politics or other background.

The areas that Alba covers in promoting regional integration are comprehensive and ambitious. There are medical schools and a health sciences university with scholarships, and a pharmaceutical company and a drugs regulatory centre with free access to medication.

There are plans for a new financial architecture and an emphasis on science and technology, without neglecting the arts.

There are also awards and scholarships for literature, culture, research and cinematography.

Alba is also working with the People’s Trade Agreement that lobbies for the social, cultural and environmental rights of the region’s peoples. It also works with Petrocaribe, an alliance of nations over oil purchases, as well as Mercosur, a regional customs union for advancing free trade and the movement of goods, people and currency.

The guest speaker at the Kuala Lumpur forum was Dr Chandra Muzaffar, president of the Interna­tional Movement for a Just World.

Dr Chandra identified the significant distinction between Alba and other regional organisations in the way it places priority on the human being, the individual person, in public policymaking.

This humanist aspect of a caring regional society that Alba seeks to build is widely cherished by the national leaders of its member countries. And despite a priority on economic development, Alba is also conscious of environmental needs and emphasises sustainable development.

In pursuing technology, Alba also seeks independence of telecommunications content in programming. Telecoms and broadcasting community services will also be provided to rural and other marginal areas.

Despite their achievements, Alba countries are still developing nations with much to do to achieve full development status. In the meantime basic needs have not been forgotten, with a food fund that has cut malnourishment to under 5% in four Alba countries and eliminated illiteracy in five countries.

More broadly, Alba seeks a more multipolar world that avoids war as a matter of policy. It much prefers human development that addresses the real needs of real people, particularly the most disadvantaged members of society.

Alba is named after the great 18th-19th century Venezuelan leader and liberator Simon Bolivar, hailed as a Latin American independence hero and a regional beacon of progress and development.

Bolivar is the only person in history to have two countries named after him: Bolivia, and the Bolivarian Republic of Venezuela.

Bolivar’s goals for Venezuela and its neighbouring countries labouring under the Spanish colonial yoke may be summed up in four basic priorities: a popular and participatory democracy for the people, economic independence for real development, fairer wealth distribution and elimination of corruption.

In the Latin America of his time, Bolivar led territories that included Bolivia, Colombia (then including Panama), Ecuador, Peru and Venezuela. As a political and military leader he fought many private and public battles against slavery and for the liberation of his people.

Bolivar died in 1830 at the age of 47. He had paved the way for democracy in many countries in Latin America, but much else remains to be done.

After an era of cruel dictatorships, Latin America is again ready to embrace its history of decency and human achievement. But obstacles remain in the way of Alba countries, particularly when they seek their own way to development.

They prefer a more direct way that impacts positively on the people, particularly the most vulnerable in society such as the poor and the weak. Thus they avoid the customary assistance from powerful transnational institutions that comes with strings, cables and levers attached.

And yet when the UN established the Bretton Woods aid organisations the World Bank and the IMF, they were also supposed to help the poorest without encumbering them. But a problem with institutions is that their practices become institutionalised and worse.

Alba has been established with much goodwill and its achievements have been impressive.

Alba countries deserve support and admiration for their record so far, and encouragement on their promise.

Alba emerged from Venezuela’s rejection of the proposed Free Trade Area for the Americas, which would heighten inequality by enhancing the power of transnational corporations at the expense of the poor.

Neither the World Bank nor the IMF may want to call Alba’s achievements a “miracle”, but they are miraculous nonetheless.

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Oct 26, 2014 - When major international policies are based on short-sighted self-interests and emotive impulses, problems are never far away.

Behind The Headlines By Bunn Narara

Bunn Nagara is a Senior Fellow at the Institute of Strategic and International Studies (ISIS) Malaysia. The views expressed are entirely the writer’s own.

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Asia Pacific Economic Leadership Shifting from the US to China for Free Trade framework

All together now: Apec leaders posing for a family picture at the International Convention Center at Yanqi Lake in Beijing. Front row from left, Indonesian President Joko Widodo, US President Barack Obama, Xi, Russian President Vladimir Putin, Philippine President Benigno Aquino III, (backrow from left) Japanese Prime Minister Shinzo Abe, Australian Prime Minister Tony Abbott, Najib and New Zealand Prime Minister John Key. — EPA

The Asia-Pacific Economic Cooperation (APEC) Summit that just concluded in Beijing was no doubt China’s show. Beijing came out looking very much what it is touted to be — the world’s second-largest economy now leading the charge towards a free-trade region known as the Free Trade Area of the Asia-Pacific (FTAAP). For a once-closed economy that was not even part of the global trading system, this is one giant leap. In doing so, China overshadowed and reduced a rival initiative by the United States — the Trans-Pacific Partnership (TPP), which excludes Beijing — to what is a subsidiary platform

Chinese President Xi Jinping has shown that the agenda of liberalising trade in the Asia-Pacific region cannot but take China into account; indeed, this agenda will be dictated by China from now on. To show how serious it is, the Beijing APEC Declaration came complete with a road map towards the realisation of the FTAAP, though a clear deadline was shelved for now.

With the US outmanoeuvred, the economic power game entered a second stage in Myanmar this week, where the Association of South-east Asian Nations (Asean) hosted the East Asia Summit, in which both China and the US are members (with Beijing represented by Prime Minister Li Keqiang).

Interestingly, Beijing saw the revival of APEC as a major platform for regional economic integration — led by China. APEC has actually been the vehicle for trade liberalisation in the Asia-Pacific region since it was formed in 1989. Indeed, the FTAAP is not a Chinese idea, as Singapore Prime Minister Lee Hsien Loong made clear, but an APEC vision conceived in 2004 with its end-goal being a huge Asia-Pacific free-trade area.

But APEC lost its shine over time when no clear big-power champion emerged with the visionary leadership and commitment of then US President Bill Clinton, who hosted the first summit in Seattle in 1993.

During APEC’s downtime years, ASEAN fell back on its own trade liberalisation process, the Asean Free Trade Area (AFTA), and preached the message of trade liberalisation to the wider region. Two major platforms then emerged: One was the TPP, for which the US took leadership, with the exclusion of China. The other was the Regional Comprehensive Economic Partnership (RCEP), an outgrowth of the Asean Plus Three Summit comprising the association’s three North-east Asian trading partners, China, Japan and South Korea, as well as Australia, India and New Zealand.

China easily dominates the RCEP and insists that it be an East Asian platform — meaning it has no room for the US. This is partly the reason the US is eager to have the TPP as the key pathway to reach the FTAAP.

While the RCEP and the TPP evolve as competing platforms, both China and the US have, of late, downplayed this rivalry. This is just as well for Asean, whose members are divided between support for the RCEP and for the TPP. Only four of the 10 Asean members — Brunei, Malaysia, Singapore and Vietnam — are currently involved in the TPP negotiations, which demand a higher standard of trade liberalisation. The RCEP, on the other hand, sits better with many Asean members, virtually all of which benefit from huge trade with China.

The Asean dilemma

But while Asean as a whole values China as a close economic partner, the group is also wary about Beijing as a security threat. This has resulted in a two-dimensional relationship — a duality, as some have called it — that Asean has with China: A growing economic relationship paradoxically matched by increasing political tension caused by Beijing’s aggressive claims to parts of the South China Sea.

How this two-dimensional relationship could be managed provided the backdrop for the Asean Summit this week in Myanmar and the East Asia Summit.

By stepping on the accelerator towards the FTAAP, China has virtually also quickened the pace of Asean’s own economic and political integration. The goal of an Asean Community — including a fully-integrated Asean Economic Community by December 31 next year — cannot be further delayed. At the moment, 80 per cent of its integration targets have been realised, with the remaining “hard part” set to be tackled after 2015.

But surely, the next lap cannot be only about tackling the unfinished business. If Asean Community 2015 is yet another pathway to the FTAAP, what is the vision of Asean after next year? This is where the group’s leaders must put on their thinking caps and collectively forge a road map to a new Asean that is a global player firmly situated in the 21st century.

This new vision must take into account the rapidly evolving economic and security architecture in the Asia-Pacific region. As displayed in Beijing this week, it will be a future in which China will not be shy to assert its economic leadership — in the same way it has staked its political dominance in the region.

As Asean leaders were convening for their summit in Naypyidaw, US President Barack Obama and Mr Xi in Beijing attempted to reforge the strategic relationship between the US and China, probing each other for a new calculus. Their major bilateral agreement on climate change was achieved in this context. But Mr Obama is a lame-duck President on his way out, while Mr Xi, who is only two years in office, will be around for a full decade to lead a rising superpower.

Asean’s dilemma is this: It appreciates the increasingly prosperous relationship that is blossoming with China under Mr Xi. Yet, Asean knows it is also entering a potentially tense future with Beijing under a leader who is prepared to flex China’s muscles — as seen in the resulting volatility regarding the South China Sea. Curiously, the tensions over the territorial disputes cooled down somewhat during the busy summit period.

Will Asean remain a mere bystander, watching from the wings as the power game continues to unfold between the two giants? Or will Asean do something to secure its pivotal position so it can shape the future regional balance in its favour? This key question must have preoccupied Asean leaders in Naypyidaw. ― Today

By Yang Razali Kassim, a senior fellow at the S Rajaratnam School of International Studies at Nanyang Technological University.

Apec leaders all for free trade framework

BEIJING: The Asia-Pacific Economic Cooperation Economic Leaders’ Meeting hosted by China endorsed the Beijing Roadmap for Apec to promote and realise the Free Trade Area of the Asia-Pacific (FTAAP).

The roadmap details actions to be taken to achieve FTAAP – a trade liberalisation framework that China had pushed for – and includes undertaking a collective strategic study with results to be reported by 2016.

Prime Minister Datuk Seri Najib Tun Razak, during the summit held by the Yanqi Lake in the Huairou district, expressed Malaysia’s support on the roadmap.

“Malaysia sees the FTAAP as a natural progression for an overall trade arrangement across all economies in the region.

“What we have on the table now, such as the Trans-Pacific Partnership, Regional Comprehensive Economic Partnership and Pacific Alliance, are building blocks towards the larger FTAAP,” he said.

Najib also called on Apec members to find a way out of the World Trade Organisation (WTO) impasse and place the Bali decisions back on track.

It was reported that an impasse over a global pact hammered out in Bali last December to streamline Customs procedures had paralysed all negotiations in the WTO.

“If we do not find a way out of the impasse, it means that the WTO can no longer hold sway as a rule-making entity,” said Najib yesterday.

The Apec summit, attended by heads of states from 21 Pacific Rim economies, also adopted a Connec­tivity Blueprint to promote integration through physical, institutional and people-to-people connectivity.

Najib told Malaysian reporters here that Malaysia could play a role in enhancing connectivity in the Asia-Pacific region, citing bilateral projects such as the Malaysia-Singapore high-speed rail project as an example.

Chinese Premier Li Keqiang had reportedly expressed China’s interest to help build the rail link during his meeting with Najib on Monday.

Commenting on this, Najib said it was a bilateral project between Malaysia and Singapore and both countries would call for international tenders.

Najib also said Malaysia welcomed the blueprint on connectivity and commended China for initiating the Asian Infrastructure Investment Bank.

He left Beijing yesterday evening.

Commenting on the visit, Tan Sri Ong Ka Ting, who is the Prime Minister’s Special Envoy to China, said mutual trust between China and Malaysia was growing stronger, judging from Najib’s bilateral meetings with Chinese President Xi Jinping and Li in the Chinese capital.

“Najib was given special treatment. At China’s initiatives, he met both Xi and Li on the sidelines of the Apec summit,” Ong noted. He added that Xi called for mutual support as China strived to realise the Chinese Dream and Malaysia the goal of becoming a high-income nation by 2020.

By Tho Xin Yin The Star/Asia News Network

ASEAN SUMMIT: China pushes for code at South China Sea

Standing united: Najib (fifth from right) posing for photographs with Thein Sein (centre) and other Asean leaders during the closing of the 25th Asean Summit at the Myanmar International Convention Centre.

Beijing pledges US$20b in loans to boost Southeast Asian connectivity

China will push for the implementation of a code of conduct for the South China Sea - a document that will lessen the risk of escalating tensions in the area-but experts said such an agreement faces obstacles, at least in the short term.

Chinese Premier Li Keqiang reaffirmed China's resolve to safeguard territorial sovereignty at a series of three regional meetings in Nay Pyi Taw, Myanmar, on Thursday, saying the country is willing to adhere to the code, which has been under discussion for more than a decade.

Leaders from the Philippines and Vietnam, countries that have seen maritime tensions with China rise, also attended the meetings.

"China and Southeast Asian countries are close neighbours with common interests and diversified concerns. It is inevitable-not strange at all-that differences emerge among us, but those differences will not affect the general stability in the South China Sea," Li said at the East Asia summit.

"I believe that as long as we treat each other with sincerity and seek common ground while acknowledging differences, there will be no insurmountable obstacles that will stand in our way," Li said.

Li said China's policy of building partnerships with its neighbours is sincere and consistent, and the situation in the South China Sea has been stable as freedom and safety of navigation is ensured.

Foreign Minister Wang Yi said last year that the code should reflect "consensus through negotiations" and "elimination of interference", indicating that maritime issues should be left to the parties directly involved to sort out through dialogue.

The declaration on the Conduct of Parties in the South China Sea was signed in 2002, in which all signatories agreed to work out a code of conduct to guide future activities in the region. But limited progress has been made in drafting the code since then.

In a bid to reach long-lasting peace in the region, Li pledged to speed up negotiations on a cooperation treaty.

China also agreed to establish a hotline for joint search and rescue efforts at sea as well as a hotline for senior officials.

Wu Shicun, president of the National Institute for South China Sea Studies, said the negotiation of the code has gone on for more than 10 years because of different opinions regarding how the document will be drafted and whether it will allow third-party intervention.

Lu Jianren, the chief researcher of Sino-Asean relations at Guangxi University, said the importance of the code lies in the fact that it rules out the use of military force as a means to resolve issues and that no party is allowed to take further action to escalate tension.

Economic ties

Also at Thursday's summit, China promised more loans and economic aid to Southeast Asia.

China will provide $10 billion in preferential loans to Asean countries and another development loan of $10 billion specifically for infrastructure.

China also started on projects for the second phase of the China-Asean Investment Cooperation Fund, which totals $3 billion.

Engineers have begun preliminary work on a rail network, which will start in Kunming, Yunnan province, and connect Laos, Vietnam, Cambodia, Myanmar, Thailand, Malaysia and Singapore.

Kavi Chongkittavorn, senior fellow at the Institute of Security and International Study in Thailand, said China and Asean were forging ever closer ties and despite differences there are areas of growing cooperation.

"Economic opportunities exist for each party," he said.

By Zhao Yinan and Zhao Yanron, China Daily/Asia News Network

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US's Quantitative Easing (QE) ended, but not financial supremacy

By Luo Jie

The Federal Reserve has officially announced an end to the third round of its quantitative easing bond-buying program. To deal with the financial crisis and make up for the failure of the US government to adequately stimulate the economy, the Federal Reserve has generated trillions of dollars for the American economy in the past six years. It shifted its own financial burden to the rest of the world to some extent.

Europe and Japan also adopted the policy of quantitative easing, albeit with little result. But the US achieved its goal. The fundamental reason is that it is the dollar, rather than the euro or the yen, which is the world's currency for clearance and reserve. The US dominance of the world's financial system has remained quite solid.

When the US pushed forward this policy of quantitative easing, the world complained because the US was dragging down countries and institutions that hold US dollars. Now that the US government and the Federal Reserve have gained some confidence, quantitative easing was abandoned. But Washington has shown indifference to the world's reactions.

In the past six years, there has been much discussion of US decline. The situation in Iraq and Afghanistan enables people to see the limitation of US influence, but the capabilities of US systems still surpass those of other countries. These capabilities are more than enough to maintain the US as a global superpower when it is at the center of a global crisis.

Some media recently speculated that on the purchasing-power basis, China is overtaking the US and becoming the world's biggest economy. China's GDP has been supported by low-end economic activities. It has a long way to go to build up its high-end economic capabilities and build financial systems. Besides the economy, China lags behind the US in terms of national defense, soft power and diplomatic partnerships.

To put it more precisely, China cannot compare with the US. But comparing the two has been popular both within and outside China. Chasing or passing the US can hardly become a China policy. China needs to undergo a tough process to make it stronger.

Both China and the US should keep a sober mind to discuss the possibilities of big power relationship patterns in the 21st century. US financial dominance indeed makes China uneasy, while China takes the initiative to establish an Asian infrastructure investment bank, the US is highly alert and tries to exclude its allies such as Australia and South Korea.

China is clear about its gap with the US. How to narrow it is not only an issue for China, but also for both. The US will not be able to monopolize the world's development opportunities. Its material decline is real, and only when it adds flexibility to the current world order, can its interests be maximized. In the international community, when the strength of a superpower is declining, its morality will be tested.

Souce: Global Time

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