A China-centric economic order in East Asia

Abstract

East Asia (EA) is conventionally defined to comprise China and Japan, the four newly industrialized economies (NIEs) of South Korea, Taiwan, Hong Kong and Singapore, and the Association of Southeast Asian Nations (ASEANs) economies. The EA region is well known for its dynamic economic growth through the past 50 years. The first wave of EA's high growth was led by Japan, and it soon spread to the four NIEs and some ASEAN economies. This marks the first rise of EA or EA-I. Japanese economists used to explain such a phenomenon as the 'flying geese pattern'. The second wave of EA's high growth was led by China, and it is currently spreading into the whole of the EA region. The second rise of EA or EA-II is economically much more formidable than EA-I because of China's vast economic scale compounded by its high rates economic growth. The China-led EA-II today accounts for 24.4% of global GDP (higher than the US share of 21.5%), as compared to 15.2% of the Japan-led EA-I. Increasingly, China's economy operates not just as an engine of growth for the EA region but also a catalyst for regional economic integration. After the 2008 Global Financial Crisis, global economic gravity has clearly shifted to EA. However, individual EA economies are still beset by problems of structural imbalance. Above all, the future of EA-II critically depends on the continuing economic rise of China, i.e. the ability of China's economy to sustain its dynamic economic growth without falling into the 'middle-income trap'. EA economic growth has been taking place in the kind of regional order that is, from time to time, undermined by bilateral discord and regional conflict. China as the region's largest economy will no doubt continue to lead the region's economic growth and shape the pattern of economic relations among the EA economies. Increasingly trade and investment in the region are gravitating towards China. However, for a long time, China will not be able to shape the region's geo-political landscape. China's message of 'peaceful rise' has not been unequivocally accepted in the region. China's overall relations with other EA economies will continue to be 'hot in economics and cold in politics'. The growing political and strategic role of the USA has further complicated China's relations with other EA economies in the region. For years to come, China's geo-political leverage in the region will remain limited as opposed to its expanding geo-economic influence. The existing regional order in EA will, therefore, continue to be marred by uncertainty and instability. It is still a long way from the East Asian Community, which is to be based on not just sustainable economic growth and increasing integration, but also harmonious political and security relations. © 2013 Copyright Taylor and Francis Group, LLC.