By David Pilling
Published: November 22 2010 21:53 | Last updated: November 22 2010 21:53
Fan club: Women do their morning exercises on the Bund in Shanghai. Markets such as China are ever more profitable for consumer goods multinationals
We can detect a nascent self-possession the east has not known for many centuries. That is what is new among Asians elusive, unannounced and unmistakable all at once.
Patrick Smith, Somebody Elses Century: East and West in a post-Western World
A sense of the great shift east could be found this month on Station Parade in the London suburb of Ruislip. At Bainbridges auction house, an anonymous bidder with a Beijing accent stumped up £53m ($85m) for a 16-inch Qing dynasty vase. The purchase, for what is believed to be the highest price paid for a Chinese work of art, forms part of a trend: huge sums of Chinese money are being marshalled to bring the countrys heritage back home.
How does one calibrate the momentous shift of economic and geopolitical clout towards the east? Symbolised by the rise of China, it is part of a broader movement of capital, innovation and economic muscle to Asia that is, in many peoples reckoning, the most important rebalancing of global wealth and power since America emerged as a new force at the end of the 19th century.
Does one find this transition in the remarkable growth rates of China, India and Indonesia; in the western levels of income in Japan, South Korea and Singapore; or in the mountains of foreign currency reserves piled up in the vaults of Asian central banks? Should one look for it, instead, in the innards of the Tianhe-1A, the worlds fastest supercomputer, built by scientists not from America or Europe but from China? Or might it lurk in the pitying remark of a senior Indian diplomat who, speaking before President Barack Obamas visit to India this month, said New Delhi needed to spend billions on American aircraft and equipment to help them out with all that unemployment?
Naturally, it is to be found in all these things and a myriad of other data points, financial league tables and attitudinal changes besides. From sales of vehicles in China, which surpassed those in the US last year, to the rising global presence of companies such as Reliance of India, Samsung from South Korea and numerous Chinese resources groups, there is a palpable sense that the worlds centre of gravity is shifting eastwards.
Though these shifts have been laid bare by the 2008 collapse of Lehman Brothers, the US investment bank, they started at least 30 years ago with the initial success of Chinas economic reforms, and before that with Japans miraculous industrialisation. Yet even now, when western powers are staring with alarm in the mirror of their own indebtedness and military weakness, the magnitude of this move eastwards may not yet have fully hit home.
Some of them are just thinking this is a bad fiscal and trade-balance crisis, which surely will shake itself out in five years time and well be back to normal, says Paul Kennedy, a Yale historian who has long forecast the rise of Asia. I just dont think thats right. The dollars role in the world is coming to a rendering of account, theres a shift of naval power to Asia ... and [Asian states] are pretty much convinced that the US is on the way out of Asia, he says. The worlds weights and balances are shifting before our eyes.
Zbigniew Brzezinski, US national security adviser when Jimmy Carter was president, says: We are dealing with something qualitatively different from what has gone before. It is a general awakening of the far east.
Before examining the economic, geopolitical and even psychological changes taking place, there are important caveats. First, the rise of China and, behind it, that of India, is not preordained (see chart at bottom). Enormous economic, political and environmental pressures at the heart of both national experiments could yet halt their progress. Breathless predictions in the 1980s that Japan was destined to become the worlds largest economy are a cautionary tale against straight-line projections.
Second, it is too easy to conflate the rise of China with the rise of Asia. In one sense, the economic upsurge of first Japan, then the Asian tigers, and now China and India is part of a tilt back to a region that accounted for half of world output in the 18th century. Lord Patten, former British governor of Hong Kong, argues that we are witnessing the restoration of a more normal equilibrium.
But others counter that Asia is a region defined by the west and that, in the words of Amartya Sen, Nobel Prize-winning economist, the way you choose to partition the world makes a difference to the perception of whats going on. Of economic progress in Asia, he says: Am I excited about it, do I think it is a gigantic change? No. That fact, that India and China produced 50 per cent of global GDP in the 18th century, is a fact. But I am not sure it is so interesting. They are big countries.
The idea of a shift also masks the tensions that are accompanying the emergence of China as a regional colossus. Many Asian countries are fearful of Chinas rise even though their economies are riding on its back.
Third, these are relative shifts. Britain grew richer throughout most of the 20th century even as its place in the world shrank. The rise of Asia does not necessarily threaten the comfort or security of people in the west, though the narrative of a globalisation in which everybody wins has taken some pretty hard knocks.
Chris Gibson-Smith, chairman of the London Stock Exchange, has no time for talk of a struggle for power. By the time Chinas economy is as big as that of the US and Europe in dollar terms, he calculates, the global economy will have grown from $58,000bn today to $150,000bn. And if you cant find your place in a $150,000bn economy, well, shame on you.
Fourth, and related: it would be foolish to write off the US. America still has the best technology, the biggest middle class, the largest and most sophisticated armed forces, the most creative companies and many of the best universities. Its unipolar moment may be over but it could remain the most important power for decades to come. Its not that China has a big hammer and hits America on the head and it disappears from the world, says Mr Brzezinski. Obviously, theres going to be some reshuffling of advantages. But it depends on what we do in America.
That said, few would deny the relative shift to Asia (and to other parts of the developing world, such as Brazil). Jonathan Garner, Asian and emerging markets strategist at Morgan Stanley, calls it the third transition. Next year, China is set to overtake the US as the biggest producer of manufactured goods by value only the third change in global manufacturing leadership in 250 years. In 1990, says Mr Garner, China and other emerging markets accounted for just 14 per cent of manufacturing value added. Now, that number is 37 per cent.
This change is mirrored elsewhere. In 1973, Japan, China and India together accounted for 15 per cent of global gross domestic product in purchasing power parity terms. This year, the three countries will have reached 24 per cent, notwithstanding Japans relative decline. Asia as a whole accounts for around one-third.
Anthony Bolton, the legendary Fidelity stock-picker who deferred his retirement in order to invest in China, talks about a secular shift east. Not only are four of the worlds top 10 banks by market capitalisation now Chinese, he says, but western multinationals are increasingly tilting their strategies towards Asia.
In the five years to 2009, for example, emerging market revenues at Procter & Gamble, the US consumer goods company, rose from 23 per cent of the total to 32 per cent. In the first nine months of this year, Citigroup reported $3.5bn of profit in Asia out of roughly $9bn globally. Asian multinationals such as Lenovo, the Chinese company that bought IBMs personal computing business, and Indias Tata Motors, which bought Jaguar and Land Rover, are just two pioneers in what is expected to be a wave of outward Asian investment.
Asias economic progress underpins growing geopolitical clout. The US military is getting obsessed with China, says Prof Kennedy, adding that the Chinese navy is doubling in size every seven years, at a time when Washington is considering cutting defence budgets. Beijing has become more assertive in pressing its claims over disputed territory, catalysing an arms build-up. India already has one aircraft carrier and is procuring two more. Vietnam, South Korea and Australia are building up their navies. Even Japan, constrained by a pacifist constitution but nervous of Chinas capabilities, is bigger navally than the UK, France and Italy combined.
Beijing, for its part, has shown it can shoot down satellites and has tested long-range ballistic missiles for potential use against aircraft carriers within a 1,000-mile radius. Lord Patten says China may be overplaying its hand. Im not sure China is handling this all that well. Hide your brightness, bide your time was much better advice than throw your weight around, he says, quoting the entreaty of the late Deng Xiaoping, the Chinese leader who put his country on the road to economic might.
Diplomacy in Asia is far from united. But over all, the region has carved out a much bigger international role. Shortly before the collapse of Lehman, many leaders of the Group of Seven industrial nations openly scoffed at the idea of enlarging their club. Now, China, India, South Korea, Indonesia and Australia have claimed a seat at global summits and few imagine they will be easily dislodged.
Since the financial crisis, Beijing has taken to lecturing the US about its loose fiscal and monetary policy and has floated the idea of an alternative to the dollar as a global reserve currency. Newly emerging Asian powers have challenged accepted (western) wisdom on everything from the make-up of the International Monetary Fund to the best way of conducting aid programmes for Africa.
Patrick Smith, an author on Asian affairs, argues that along with the regions material progress will come something much more profound: self-confidence, and an overcoming of historical resentment born of the regions colonial experience. A new way of looking at the world, when it fully emerges, will affect how we think of everything from the role of the individual in society to the meaning of economic progress and the history of the novel, he says.
Asias coming contribution to the global debate should not be confused with any glib version of Asian values, a supposed set of common ideas trumpeted by authoritarian governments to justify themselves, Mr Smith argues. But, he says, it would be short-sighted to imagine that the only consequence of Asias historic re-emergence will be a change in the Made in labels on the products we consume. I dont think that Asias rise or advance, its material success, means that anybody has to lose out, he adds. But if the 19th and 20th centuries belonged to the west, the 21st century will be somebody elses.