What happened to the Asian Century? Implications for Australia

Origin of an Asian Century

No-one knows for sure who first mentioned the idea of an Asian Century – although it may have come out of a 1988 meeting between Chinese leader Deng Xiaoping and Indian Prime minister Rajiv Gandhi.

But the idea of an Asian Century hit the headlines in Australia in 2012 when Australian Prime Minister Julia Gillard launched her government’s White Paper on Australia in the Asian Century.

Gillard declared “Whatever this century brings, it will bring Asia’s return to global leadership, Asia’s rise. This is not only unstoppable, it is gathering pace.”

And of course the message was that the opportunities offered by an Asian Century are a great thing for Australia.

But the world has changed

Today, a little more than a decade later, the world seems very different.

China and other Asian countries are now less dynamic than before.

Mature democracy and good governance are not common in Asia.

Political relations are tense between many Asian countries.

The US and China have locked horns in great power rivalry, while Australia has clearly taken sides with the US.

In my brief remarks today, I will discuss how this all happened, focusing mainly on China, and make some modest suggestions about what this means for Australia.

Beginning of the Asian Century?

First, let’s go back to the beginning.

Following World War 2, no-one imagined that we might one day be talking about an Asian Century.

Most saw little hope for Asia. It had been destroyed by war, and suffered from widespread poverty and overpopulation.

This view was epitomised by the 1968 study, “Asian Drama: An Inquiry into the Poverty of Nations”, by Nobel-prize winning Swedish economist Gunnar Myrdal.

But, despite this pessimism, below the surface Asia was stirring.

Japan rose quickly from the ashes of war. In 1964, just 19 years after Hiroshima and Nagasaki, Japan hosted the Olympic Games. During the same year, it joined the OECD, the club of capitalist democracies. And in 1964, Japan launched its first high speed train – from Tokyo to Osaka. Needless to say, Australia still does not have a high-speed train.

By 1968, Japan had overtaken Germany as the world’s second largest economy. Most significantly, our American friends transformed Japan into a democracy – and today, Japan remains a healthy democracy. In sum, Japan led the way for a possible Asian Century.

South Korea and Taiwan followed in Japan’s footsteps with rapid development. And as middle class societies developed, these countries shed their authoritarian regimes and also became democracies.

Then came the big one, China.

Partly inspired by Japan, Deng Xiaoping started opening the Chinese economy in 1978, which led to rapid development.

Over the three decades from 1980 to 2010, China achieved extraordinary economic growth, averaging 10 percent annually, which led to a dramatic reduction in poverty.

Today, China has the world’s largest or second largest economy, depending on your measure. But on a per capita basis, China remains a backward economy, only the 68th biggest in the world, with a GDP per capita of 15 percent of that of the US.

A major event in China’s rise was its admission into the World Trade Organisation in 2001.

Asian Century Dream

One motivation for allowing China to join the WTO was what I call the “Asian Century Dream”.

What are the main elements of the Asian Century Dream?

It was hoped that rapid economic development would:

(i) improve the lives of our Asian friends, through poverty reduction;

(ii) provide a boost to economies the world over, including Australia;

(iii) foster middle class societies which would demand political openness, the rule of law, and hopefully even democracy.

It was also hoped that our Asian friends would recognise that their development benefited enormously from the liberal, rules-based world order that the US and Western countries built in the postwar period – and that they would become responsible stakeholders in the rules-based order.

What seemed like a burgeoning Asian Century was inspired and facilitated by the US.

The US helped rebuild Asia after World War 2. Its open markets facilitated development. Many young Asians studied in the US.

The US won the Cold War against the USSR. The 1990s was America’s unipolar moment, and the era of globalisation. The US was clearly the world’s leader.

US leadership comes unstuck

But US leadership would quickly become unstuck.

In 1999, a World Trade Organisation ministerial meeting in Seattle collapsed under massive protests. This was an early sign that not everyone was happy with globalisation. Many were concerned about the impact of globalisation on the environment, income inequality, and developing countries.

After the tragic 9/11 terrorist attacks, the US invaded not only Afghanistan, but also Iraq without a UN mandate. This is widely interpreted as the US defying the much vaunted rules-based world order by violating the sovereignty of another country.

Then the 2008/9 global financial crisis wreaked havoc on the world economy. This was also seen as evidence that American turbo-charged financial globalisation had deep problems.

Thus began the unravelling of US politics and society, and its credibility as the world leader. For anyone looking for the source of Donald Trump’s popularity, and his isolationist and protectionist policies, here it is.

China was changing too

China itself was also changing in several ways.

It interpreted these factors as signs of American weakness. Chinese President Xi Jinping is fond of saying “The East is rising, the West is declining”.

China saw this moment as an opportunity to assert itself internationally, notably by occupying and militarising the South China Sea. it made clear its desire to take over leadership of East Asia from the US. It also expressed its impatience to take over Taiwan.

China has also begun building an alternative world order, notably through the Belt and Road Initiative, and the Asian Infrastructure Investment Bank.

Ironically, keen observers could see that below the surface the Chinese economy was showing cracks due to its ageing population and its turn away from market economics.

These signs of a new China were already evident during the second term of President Hu Jintao, 2009-13. But they certainly came to the fore under the leadership of Xi Jinping from 2013, who has his own style of leadership – meaning greater assertion internationally and greater repression at home.

These changes in the US and China, provoked reactions from both sides.

US and Chinese reactions

US President Obama responded to the new China by his “Pivot to Asia”, curiously launched in a speech to the Australian parliament in 2011.

The idea was to strengthen US economic, military and diplomatic efforts in Asia. As admirable as these ideas are, the US did very little by way of implementation, in part due to it being bogged down in the Middle East. And the rise of protectionism in the US meant that Obama’s Trans-Pacific Partnership trade deal, the most important element of the Pivot, was still born.

The irony is that while the US was not pivoting, China was undertaking its own pivot to Asia. Today, the US finds itself in a weaker position vis-a-vis China in Asia.

China is now the leading trading partner of most Asian countries. Diplomatically, it is more active in Asia than the US is. And when China built artificial islands in the South China Sea and then militarised them, against the solemn word of the Chinese president to the American president, the US did not mount any meaningful opposition.

It was not until Donald Trump’s presidency that the US jettisoned its policy of “strategic engagement” with China, and started getting serious about the China challenge. Trump labelled China a “strategic competitor” and “revisionist power” – instead of a “responsible stakeholder”.

US/China relations would deteriorate dramatically under Donald Trump. First there was Trump’s trade war against China. Second there was the war of words over the origin of Covid-19. But most significantly, Trump did nothing to improve the US’ position in Asia. Indeed, he seemed to delight in criticising traditional US allies like Japan and Korea.

President Biden has basically maintained Trump’s approach to China. But he has made great efforts to strengthen US relations with allies, partners and friends – notably through AUKUS (a security partnership between Australia, the UK and US) and the Quad (Quadrilateral Security Dialogue).

Australia’s relations with China

Over the past decade, relations between China and Australia have gone off the rails. This is astonishing because it was not so long ago that there were excellent relations between the two countries.

When President Xi Jinping visited Australia in 2014, he said there was an “ocean of goodwill” between the two countries. The Australian prime minister and Chinese president agreed to describe the relationship as a “comprehensive strategic partnership”, while the China–Australia Free Trade Agreement entered into force on 20 December 2015.

How did Australia/China relations go off the rails?

First, following many reports of Chinese interference in Australian politics and society, Australia introduced anti-foreign interference legislation, which displeased China.

Second, in August 2018 the Australian government banned China’s tech giant Huawei from taking part in its 5G network due to security concerns.

Third, Australia-China tensions reached a crescendo in April 2020 with the Australian government’s call for an independent, international enquiry into the origins of COVID-19. China responded by launching a wide array of trade sanctions against Australia, and freezing high level official contact.

Fourth, Australia joined forces with the US and UK in AUKUS. This trilateral security partnership is clearly designed to contain China.

Australia’s new Labor government is doing a commendable job, trying to stabilise relations with China. But it is not easy, and may become more difficult if China’s economic woes worsen, and the government becomes even more assertive on the international stage.

The fading Asian Century

The prospects for an Asian Century offering Australia a rosy future is fading from you.

China is mired in economic challenges.

India’s democracy seems compromised, and its economy lacks dynamism.

Indonesia’s economy is underperforming, and the quality of its democracy deteriorated under the Jokowi presidency, and there is now an even bigger question mark following the recent election of Prabowo Subianto, a former military warrior, as President.

Japan has been stagnating for three decades, due to its ageing population. Korea, Taiwan, Thailand and others face these same challenges.

Democracy is struggling to make progress in Asia. According to the Economist Intelligence Unit, only three of Asia’s 48 countries would be full democracies – Taiwan, Japan and South Korea.

According to some commentators, we are now in the midst of Cold War 2, with the great power rivalry between China and the US.

China has emerged as a key partner of Russia in the Ukraine war, and India has also provided support to Russia.

In these circumstances, Australia has felt obliged to take sides in this rivalry, and has clearly opted for the US, notably through AUKUS.

Asia is important and will probably always be important. But it is not the Asia of the Asian Century dream.

And the US will always be a key political partner for Australia. But the protectionist and isolationist turn in America seems to be here to stay. And anything could happen if there is a return to the presidency by Donald Trump.

Today, Australia may be facing the most challenging geo-political and geo-economic environment of our modern history.

What should or could Australia do?

There is much that Australia could and should do to enable it to thrive in the emerging geo-political and geo-economic environment.

First, Australia must strengthen its economy and productivity. Geopolitical success depends on having a strong economy, which provides the resources to defend and protect yourself. This means many things – notably improving human capital, technological capacities, research and development, and competition in domestic markets. Unfortunately productivity growth in Australia has been chronically low over recent times. But I agree with Australia’s Productivity Commission that the answer is not a return to industry policy which subsidises and protects favoured industries through initiatives like the present government’s “Future Made in Australia” policy.

Second, Australia needs China, and needs to maintain pragmatic relations with China. Our two economies are very complementary. China needs our resources. Australia also needs Chinese students and tourists. In sum, Australia’s prosperity depends on China. Managing our relationship with China is very difficult, especially in light of our alignment with the US. But Australia must do its best to manage the relationship, without compromising our values.

Third, Australia must prepare for a post-China world. Australia has had a dream run these past 70-80 years, with the rise of Japan, Korea and Taiwan, and now China. All these countries needed our resources. When and if China no longer needs so much of our resources, there is no obvious replacement. Neither India nor Indonesia are growing as fast, nor do they have as great a need for our resources. Preparing for a post-China world is another reason why we must strengthen our economy.

Fourth, Australia is wise to have a strong alliance with the US. But Australia must ensure that our sovereignty is not compromised too much, and that we remain independent in the formulation of our foreign policy. We must also be ready for the risk that the US may wind back its engagement with the Indo-Pacific. The upcoming US elections may influence US/Australian relations. Australia must also, as we are doing, foster good relations with as many countries as possible – like Japan, Korea, India, Vietnam – while noting our values may not always align with these partners.

Finally, I return to my starting point of Julia Gillard’s White Paper on the Asian Century. The White Paper sets out what actions can be taken by Australian governments, businesses and communities in order for Australia to become a more Asia-literate and Asia-capable nation. This is extremely critical, but unfortunately, Australia has been moving backwards, rather than forwards, in the area over the past decade.

Acknowledgements

This is the text of a speech that John West made at the Sydney-based Union, University & Schools Club.