亚洲面临的挑战

The Rise of China

Let me now turn to China.

In the last 20 years, China's GDP has grown by an annual rate of almost ten percent. Its foreign trade has grown even faster, at 15 per cent. China is now an important trading partner of the US, Japan, Korea, the EU and the ASEAN countries, and a major investment destination for the world. It has become an immense opportunity for everyone, but also a challenge.

For instance, by one calculation, 16 per cent of Japan's exports to the US are in competition with China. The figures for Southeast Asian countries are much higher. Almost 36 per cent of Singapore's exports to the US, 48 per cent of Malaysia's export, 65 per cent of Thailand's exports, and 82 per cent of Indonesia's exports, are in competition with China in the US market.

What role will a rising China play regionally and internationally? How should we view such a China?

A prosperous and globally integrated China is in all our interests. The alternative of a poor and isolated China will be like having 60 North Koreas at our doorstep. It will pose challenges without the opportunities.

China is conscious that it needs to be seen as a responsible power and has taken pains to cultivate this image. This is comforting to regional countries. Nevertheless, many in the region would feel more assured if East Asia remains in balance as China grows. In fact, maintaining balance is the over-arching strategic objective in East Asia currently, and only with the help of the US can East Asia achieve this.

The US-China relationship is therefore the key bilateral relationship in East Asia. If the relationship is stable, it has a calming effect on the entire region. If US-China relations are brittle, the region is unsettled.

As China's strategic weight grows, its influence, especially in the region, must increase. On the other hand, as the pre-eminent global power, the preservation of the status quo is, by and large, the US interest. This fundamental difference is real. But it does not doom US-China relations to conflict. Let me explain.

The current US Administration is more sceptical towards China than its predecessor. But the US needs China, among others, to support the global anti-terrorism effort. In Washington, the debate between those who view China as a strategic competitor and those who want a more constructive relationship is still unresolved. However, the anti-terrorism campaign has muted the debate and restrained the hawks' approach towards China.

For its part, China is uncomfortable with US unilateralism. It is also distrustful of Japan's military support for the US beyond Japanese waters. But China has refrained from pressing these concerns. It has its own problems with terrorism. It faces internal political and social challenges and has just undergone a leadership transition. Moreover, it wants to concentrate on economic growth. Beijing therefore wants stable and constructive relations with the US. It does not want to tangle with an US that is in a mood of heightened assertiveness. For example, it has taken a restrained stand on the Iraqi question to keep its relations with the US on an even keel.

Overall, therefore, I see the immediate US-China strategic situation as stable.

North Korea aside, Taiwan is still the issue most likely to give the region anxious moments. With the end of the Cold War, "One China" may be less of a strategic imperative for the US. But for China, it remains a non-negotiable issue. Even so, China has softened its posture without compromising its bottom-line. It now recognizes that its growing economy has shifted long-term trends in its favour. China has also been assured that the present US Administration will not support Taiwan's independence.

As for Japan's relations with China, I think that Japan is rightly concerned that a rising China might relegate it to a secondary status in Asia. China's proposal for a free trade agreement (FTA) with ASEAN was therefore met by an immediate riposte from Japan in the form of a Comprehensive Economic Partnership. These are only the opening moves in a new geo-political chess game in East Asia. ASEAN countries will be watching to see how China and Japan turn these moves into real benefits for them.

Indeed, Japan must remain centrally involved in ASEAN. Japan is still the second largest economy in the world, of great importance to Singapore and the region. But I am concerned that Japanese investments into ASEAN have decreased sharply since 1997. Japan's trade flows with ASEAN have been declining since 1995.

It is in this context that I view Prime Minister Koizumi's efforts to reform the Japanese economy as of vital importance, not just to Japan but to East Asia as a whole. Of course, it takes two hands to clap. Southeast Asia governments too, have to take painful but necessary measures to restore their region as an attractive economic partner.

This brings me to my next topic.