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谢国忠

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麻省理工学院经济学博士

个性介绍: 1960年出生于上海,1983年毕业于上海同济大学路桥系,1987年获麻省理工学院土木工程学硕士,1990年获麻省理工学院经济学博士。同年加入世界银行,担任经济分析员。在世行的五年时间,谢国忠所参与的项目涉及拉美、南亚及东亚地区,并负责处理该银行于印尼的工商业发展项目,以及其他亚太地区国家的电讯及电力发展项目。1995年,加入新加坡的Macquarie Bank,担任企业财务部的联席董事。1997年加入摩根士丹利,任亚太区经济学家,2006年9月辞去该职务。

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謝國忠:东亚共同体可能吗?(英文版)  

2009-11-18 09:57:15|  分类: 财经专栏 |  标签: |举报 |字号 订阅

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东亚共同体可能吗? / 謝國忠


Is East Asian Community possible?

 

Various proposals and suggestions have been floated on an Asian block a la the EU. Free trade agreements (‘FTA’) for bilateral or multi Asian countries have been suggested. The main impetus for the flurry of new ideas is that the new Japanese DPJ government wants to differentiate from its LDP predecessor. By floating Asia leaning ideas, it is signaling that Japan wants to be more independent from the US. It also offers Japanese people some hope for the future. Its economy has been comatose for two decades. More integration with its neighbors could bring more growth.

 

Also, whenever global trade is in trouble, Asian countries talk about regional cooperation in the hope of creating another growth driver. But, when the global trade recovers, the talks die out. Today’s chatters fall into this pattern. The difference this time is that global trade won’t recover as strongly as before to sustain East Asia’s export model. Some sort of regional integration does become necessary for reviving the region’s growth.

 

The current main regional organizations are ASEAN and APEC. The former is too small, the later too big. ASEAN comprises of the ten countries in Southeast Asia. It has total population over six hundred million and GDP of $1.5 trillion in 2008. The grouping has embraced an FTA process since 1992. The Asian Financial Crisis of 1997-98 propelled the group to accelerate the process. The AFTA is almost reality. That is certainly a miracle. When the AFTA was announced, not many people gave it much of a chance to succeed, giving the huge disparities in per capita income and economic systems in the region. In addition to the Asian Financial Crisis, the need to compete against China in size has been another driver for the region’s speed towards integration.

 

ASEAN has succeeded behind its wildest dreams. China, Japan, and Korea join its annual meetings as dialogue partners. EU and the US all participate in its regional forums and hold bilateral discussions. China and ASEAN completed their FTA negotiations last year. It has demonstrated that it can function as a block in economic matters. China is ASEAN’s third largest trading partner. There is great upside for the economic cooperation between the two.

 

As I suggested before, the Asian Financial Crisis was the most important driver for the ASEAN to function as an economic block. The crisis was a huge and set the region back for a decade or more. The region was touted as the East Asian Miracle by the International Financial Institutions for its high GDP growth rates that lasted over two decades. In early 1990s, the US suffered a banking crisis. The Fed kept interest rate low to help the US banks to recover. It led to a period of weak dollar and triggered massive cross-border capital flows into emerging economies. As the region’s currencies were pegged to the dollar, the inflows mainly increased their credit growth. The credit expansion was supporting land speculation. The resulting bubble diverted the region’s businesses away from production to asset speculation.

 

Even though the region was touted as an export success story, when I visited many export companies, I found that they were not making money from their businesses but were profiting from financial games. That was the time that China first built up its export sector and began to exert downward pressure on the prices of tradable goods. Instead of focusing on the competitiveness problem, the region hid in a financial bubble to postpone the problem. Before the Asian Financial Crisis, ASEAN’s GDP was higher than China’s. Last year China’s GDP was three times ASEAN’s.

 

I’m telling this story because China is facing similar challenges that ASEAN did before the Crisis. When I visit manufacturing companies in China, I often discover that they make profits from property development, lending, or outright speculation. As asset prices are still rising, such practices are still effective at subsidizing their manufacturing operations. The asset game can work wonderfully in the short term, as the US’s experience demonstrates. When property and stock markets are worth over two times GDP, 20% appreciation would be equivalent to four years’ business profits in a normal economy. You can’t blame businesses for shifting their attention to the asset game in a bubbly environment. As they focus on finance rather than manufacturing, their competitiveness erodes. You can see where this leads to.

 

I digress. The main story for this article is regional integration, not China’s bubble challenge.

 

ASEAN’s success in part reflects its soft image: none of the other major players view it as a competitive threat. Its FTA with China has put pressure on other major players like India and Japan to pursue FTA with it also. Another dimension is that the region’s annual meetings have become important occasions for China, Japan, and Korea to meet.

 

In contrast to ASEAN’s successes, the APEC has been an abject failure. After two decades it has become a photo opportunity for the leaders of its members that compromise most countries in Americas, Australasia, Russia, and Asia. The APEC was set up after the Soviet Block collapsed. At the time it served a psychological purpose in the post cold war transition. It was reassuring for the global community to see the leaders of the countries that were enemies to be together.

 

However, the grouping is just too big and diverse to build a structure upon. Anything that the APEC members can agree on could probably pass the United Nations. Two decades after the Cold War, APEC has clearly outlived its usefulness. But, it is difficult to shut it down. When it comes to international organizations, they wither but never shut down. At its annual summit the APEC offers a venue for the leaders of the member countries to meet on the side to discuss their bilateral issues. Maybe it is useful this way, offering an efficient venue for the leaders to have multiple summits on the same day.

 

Even though ASEAN has been successful on its own agenda and achieved considerable success in relating to other countries in Asia, it clearly cannot assume the role like the European Union (‘EU’) in Europe. Should Asia have an EU-like organization? Asia as it is defined clearly cannot. It includes the sub-continent, the Middle East, and central Asia. Any organization that encompasses the whole Asia would be as unwieldy as APEC and couldn’t produce a sustainable structure.

 

I am always puzzled by the word Asia. The Greeks invented it. In Herodotus’ Histories it seems he primarily referred Asia Minor, i.e., today’s Turkey, as Asia. Probably Syria was included too. I haven’t read many Greek books. But I don’t even recall that India was included in Asia in any of the ancient Greek references. When I checked Wikipedia on the origin of the word Asia, it speculates that it means the place that sun rises, i.e., anyplace to one’s east. (This is how China named Japan. Japanese people took it seriously and put the sun emblem on its national flag.)

 

As far as I can see, Asia as a region has no internal logic at all. It seems to encompass all the places that are not Europe or Africa. Africa is a coherent continent with a thin neck connected to the Middle East. Europe is a small place with a shared cultural and religious past. Asia is essentially defined by not belonging to either. I think Asia should not be considered an organic entity at all.

 

Malaysia’s ex-Prime Minister Mahathir was a strong supporter for East Asia Economic Caucus (‘EAEC’). It would comprise ASEA plus China, Japan, and Korea. As Japan wouldn’t participate in an organization that would exclude the US, the idea sank. There is some logic to it. East Asia has a shared history. Intra-regional trade goes back centuries. Population movements have been significant also. As tourism takes off, the relationships among the countries in the region would become closer and closer. One could envision a future of free capital, goods, and labor movement in the region.

 

The differences among the region’s countries are much greater than in Europe. ASEAN has per capita income of $2,000, China $3,500, and Japan $40,000. China, Japan, Korea, and Vietnam share Confucian and Mahayana Buddhism. Most Southeast Asian countries embrace Islam or Hinayana Buddhism and are more relegious in general. I have traveled extensively in East Asia and Europe. I think that an EU-like organization in East Asia is very hard to establish. What is possible would be much looser.

 

Because Japan’s opposition sank Mahathir’s EAEC idea, when Prime Minister Hatoyama proposed something similar, East Asia Community, at the ASEAN Summit at Hua Hin last month, it caught a lot of attention. If Japan is fully committed to an East Asia organization, it could take off in some form or shape. It may not be like EU but would take on substance over time. However, Hatoyama failed to clarify the role of the US in any such organization. If the US is included, it wouldn’t be too different from the APEC and couldn’t fly.

 

As I mentioned before, Japan proposing the idea is probably for domestic politics. But, the fundamental case for Japan to integrate more with Asia and away from the US is growing stronger by the day. Even though its income per capita is $40,000, it remains an export-oriented economy. It missed the opportunity to develop a consumption led economy in the 1980s and 90s. In the foolish belief that rising property price would spread wealth beyond the industrial heartland of the Tokyo-Osaka corridor the Tanaka government pursued the high-land price policy under Prime Minister Tanaka. The high property price deterred the middle class from pursuing a consumption-led life style, as they saved for purchasing property.

 

More seriously, high property price was a major cause for the rapidly declining birth rate, as high land price inflated living cost. Now with a declining population and public debt twice GDP it has little room to rejuvenate its economy by promoting domestic demand. It needs trade to achieve any growth at all. Without growth Japan will sooner or later suffer a public debt crisis.

 

Japan’s property experience holds a major lesson for China. As every Chinese city is copying the Hong Kong model-raising money from high and rising land market to fund urban development, it has led to rapid urbanization growth. But, this is borrowing growth from the future. Rising land price leads to rising cost and, hence, slower growth ahead. It will lead to the same rapid decline in birth rate. Unless China reverses its high-land price policy, the consequences would be more disastrous than in Japan or Hong Kong, as China is shifting to the asset game much earlier in its development.

 

I digress again.

 

The point is that Japan genuinely has a strong case in favor of more integration with East Asia. The US is unlikely to recover soon and strong enough to feed Japan’s export machine again. The room for more fiscal stimulus is not possible. Devaluing yen to gain market share is not an option, as the US is pursuing a weak dollar policy. Without a new source of trade Japan’s economy is doomed. More integration with East Asia is the only possible way out.

 

In addition to Hatoyama’s EAC proposal, China, Japan, and Korea have initiated a joint study on a possible FTA among them. Of course, ASEAN could offer a template for any East Asian block. China has signed an FTA with ASEAN. Both Japan and Korea are talking to ASEAN on the same. If they eventually sign, the regional integration would be halfway there.

 

Whatever proposals anyone has about East Asian integration, the key issue is if an FTA is possible between China and Japan. Bringing other parties between China and Japan is avoiding the main issue. China and Japan together are six times ASEAN’s size and ten times Korea’s. Without an FTA between China and Japan no combination in East Asia would be truly about regional integration.

 

Five years ago I wrote an op-ed piece in the Financial Times with the title: China and Japan: Natural Partners. At the time the prevailing sentiment was that China and Japan were antithetical: both were and are still manufacturing export-led economies and could only gain at each other’s expense. I saw complementarities in demographics and capital: Japan had declining labor force and China needed to employ tens of millions of youth migrating from countryside into cities, and China needed capital and Japan had capital surplus. Japan’s trade with China rose to 17.4% of its total from 10.4% between 2004-08.

 

Today’s situation has changed. China has capital surplus rather than shortage. The complimentarity in demographics remains good and can last for another decade. As China shifts its development model from resource intensive to environment friendly, a new complimentarity is emerging. Japan has already made the transition. Its technologies for supporting the transition need a market like China’s to prosper. Even without a new trade agreement the bilateral trade will continue to grow.

 

An FTA between China and Japan will significantly accelerate their trade. I think the resulting efficiency gain would be more than $1 trillion. Japan’s aging population gives urgency to increasing the investment returns. On the other hand, as China prepares to make a numerical commitment on its greenhouse gas emission at the Copenhagen Round on global warming, it needs to invest heavily and quickly to restructure the economy. Japan’s technologies could come quite handy.

More importantly, an FTA between China and Japan will lay the foundation for an East Asian free trade block. The region has 2.1 billion in population and $13 trillion of GDP in 2009, rivaling EU and the US’s. With low base, capital, technology, and market, the region’s GDP can easily double in a decade. The upside from the region’s integration is unimaginable.

 

Trade and technology are the twin engines of growth and prosperity. No boom is sustained without either. When both are together, the boom can be massive. The prosperity in the past decade, for example, is due to IT and the opening up of China and other ex-planning economies. Both factors have been absorbed. The world needs another engine. East Asian integration is significant enough to play this role.

 

The best approach would be for China and Japan to negotiate a comprehensive FTA that encompasses the free flow of goods, services, and capital. While this task appears too difficult, the recent changes have made it possible. The two countries should give it a try.

 

 

It would be wrong to work on an FTA among China, Japan, and Korea first. With three parties the difficulty for reaching an agreement triples. Further, Korea doesn’t have a meaningful FTA with anyone. To imagine that it would do so with China or Japan is naïve. If an FTA negotiation involves Korea, you might as well forget it. China and Japan should see this and negotiate bilaterally.

 

The key issue is if China and Japan want to put economics before politics. If Japan’s DPJ government wants to gain popularity by increasing international influence rather than boosting the economy, then all the discussions and speculations are for nothing. If the DPJ wants to sustain its power by rejuvenating Japan’s moribund economy, we have a good chance.

 

Even though Japan is talking, China should be doing. China should aggressively initiate the FTA process with Japan. Regardless of China’s current difficulties, China has growth potential and vast market that Japan could never have at home or anywhere else. Hence, China could compromise from a position of strength.

 

A free trade area for East Asia seems beyond reach. However, history belongs to the daring. The world has changed enough to make it possible. China and Japan should seize the opportunity.

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