Brexit may be all-consuming back home but, in China and elsewhere, there’s scarcely any interest. To the extent that anyone expressed a view, our national crisis was regarded — with bemused detachment — as a bizarre act of self-harm.
UK may sometimes claim to be the world’s fifth largest economy but, from an Asian perspective, we’re merely a small country many thousands of miles away that, once upon a time, punched considerably above its weight.
Asia is faced with its own challenges. China itself is slowing down. This morning we discovered economic growth had dropped to a rather sedentary (by Chinese standards) 6.4 per cent in the final quarter of last year. Before the global financial crisis, China’s economy was expanding at a double-digit rate. China may still be one of the fastest-growing economies but the swagger of old has gone: the easy gains of the pre-crisis years are now a distant memory.
Debt has risen dramatically, suggesting there’s less room for stimulus in the event that China’s economy slows down even more abruptly. Meanwhile, political attitudes towards China’s renaissance are changing elsewhere in the world. Politicians across the political spectrum in Washington have shifted their views on Sino-American relations: in an environment of mounting mistrust regarding intellectual property, cybercrime and trade, Washington’s movers and shakers talk openly about a policy of Chinese “containment”.
It’s not hard to see why. As economic and political power has shifted from West to East, the old “certainties” following the end of the Cold War — notably that the US model of free-market capitalism and liberal democracy would naturally spread elsewhere — no longer hold. Donald Trump’s election in November 2016 was, arguably, a reflection of a new sense of paranoia among US voters regarding America’s destiny. In an environment of increased protectionism, isolationism and exceptionalism, it’s been relatively easy to portray China as public enemy number one.
The widening schism between the US and China is resetting patterns of global trade. Imports from the US into China have been falling in recent months, a direct consequence of the escalating trade war between them. Yet imports into China from Brazil and Russia have been surging. There’s more than one country in the world, after all, that produces oil, gas and soya beans. America’s disengagement from China has, thus, opened up opportunities. But it has also raised new problems. If the UK ever gets around to leaving the EU, negotiating free trade agreements with the US and China simultaneously won’t be easy.
Elsewhere in Asia, nations find themselves in an awkward position: do they look to the US for political and military protection or do they fall into bed with China, hoping that the economic opportunities will more than offset the perceived political risks? President Xi’s Belt and Road Initiative – a plan to invest vast amounts in cross-border infrastructure and logistics in order to create new economic connections throughout Asia has generated mixed feelings in recipient countries.
Incoming Chinese investment is often funded through big increases in domestic debt, a process not dissimilar to that experienced by African nations during the Cold War when over generous lending by both the Americans and Soviets contributed to subsequent decades of debt-induced impoverishment.
“China may still be one of the fastest-growing economies in the world but the swagger of old has gone”
Despite these misgivings, however, Asia’s love affair with globalisation isn’t going away anytime soon. Some Asian nations have been among the biggest beneficiaries of a more economically interconnected world. In the Pre-independence early Sixties, Singapore’s citizens lived off incomes that were no higher than those in Senegal.
Today, Singaporeans are, on average, 26 times richer than their Senegalese equivalents. At the end of the Korean War, the citizens of South Korea were no better off than those of Mauritania: today, Koreans are 10 times richer.
Asian success has stemmed from high levels of numeracy and literacy, an ability to attract good quality capital from elsewhere in the world, a determination to produce goods that compete with the best on world markets, a high level of domestic savings with which to fund investment and a willingness to extend finance through government agencies only to those companies able to demonstrate success on the world stage.
Yet none of this could easily have happened in the absence of American economic leadership, setting the “rules of the game” for the international economic community. As the US withdraws from this role, Asian nations need a new leader.
China, naturally, is waiting in the wings.
Not everyone is content with this change in the world economic order: Japan, for one, is uneasy. Yet China has ready-made institutions with which it hopes to provide 21st century economic leadership: the Asia Infrastructure Investment Bank, the Regional Comprehensive Economic Partnership and the Shanghai Co-operation Organisation. Whether it’s investment, trade, energy or security, Beijing appears to have it covered.
In these circumstances, it’s not hard to imagine the world splitting into regional spheres of influence. Some countries will align with the US, some with China and some, perhaps, with Russia.
European nations will be faced with an interesting choice: do they keep looking towards the US for political and economic leadership or do they look east for economic opportunity? In this uncertain world, members of the EU can take comfort from having safety in numbers.
No wonder the few Asian observers who expressed an opinion regarded Brexit as a bewildering moment in British history.
Editor’s note: The article reflects the author’s opinion only, and not necessarily the views of editorial opinion of Belt & Road News.