2011 has been a pivotal year in the history of the world. The Arab Spring – which has changed the Middle East completely – has used traditional and new social media channels to inspire revolution. The importance of social media extends to the other global movement of the past year, the Occupy protests North America and Europe. Indeed, Eric Hobsbawn, the marxist historian, has equated 2011 to 1848, or the year of revolutions that set Europe on fire.
Asia has perhaps been a bit quieter in comparison. But the changes here have been just as important – and probably more so. For this was the year that the continent, in particular Asia-Pacific, has started to really take off. The flow of power and wealth that has been flowing from West to East since the financial world collapsed 5 years ago is now being entrenched, aided by the EU’s woes, America’s political deadlock, and the continued economic development of the Asian nations.
It is certain that we are one or two years away – at most – from the tipping point, when the fulcrum of the world moves from the Atlantic to the Pacific.
The Pacific century is about to begin.
Here are some of the more important events from Asia this year:
China flexes its might
China’s relations with its South East Asian neighbours have slightly deteriorated this year. Despite new initiatives to bolster Beijing’s influence, such as the deployment of Chinese police to the Mekong river, the region’s governments are seeking to
broaden their relations with other countries, especially the US. The visit to Burma by Hilary Clinton and Vietnam’s welcome of a US aircraft carrier are just two such initiatives.
Chinese sabre rattling – such as Hu Jintao telling his navy to prepare for warfare, and intransigence over China’s claim to the South China Sea – has been a main source of these new tensions, but there are others too. Huge numbers of Chinese immigrants to Laos have led to concerns there, and South Korea and Japan have had clashes with their giant neighbour thanks to wayward fishing vessels.
China’s ‘peaceful rise’ might still be the official mantra, but it is looking less and less convincing to her fellow Asians – let alone the US.
US nails its colours to the Pacific mast
Washington has taken advantage of this regional anxiety by seeking to restrict China’s room for strategic manoeuvre in Asia-Pacific. It has done this with a mixture of bilateral and regional deals.
The US free trade agreement with Seoul and its sale of fighter aircraft to Tokyo are two examples of America bolstering its influence with specific nations.
Washington is also looking to cement its position as the regional leader by joining the Trans-Pacific Partnership, and using that as a vehicle for APAC domination. If the TPP – which China is excluded from because of the liberal economic rules that dictate who can and can’t be a member – becomes the main APAC trading block then the US will have succeeded in maintaining its hegemony in the Pacific region.
All of which is looked upon with alarm by China, as numerous articles in its official newspapers bear witness. The chances of Beijing accepting America’s dominance are close to zero, so 2011 is only going to be the beginning.
The march of the Yuan to world currency status
China’s recent currency deal with Japan is a small but important step to making the Yuan a global reserve currency alongside the US dollar, the Euro (for now), and the Yen and Sterling. The deal – which allows Chinese and Japanese trading companies switch between yuan and yen without converting to dollars first – is not though just about regional trade. China seeks a bigger role for its currency in global markets, and wants power in international forums that is commensurate with its economic might. The sooner its currency is fully convertible and its economy is open to global investment, the sooner this will happen.
March 11 saw a huge earthquake and tsunami hit Japan, leaving at least 16,000 dead and causing $235 billion of damage – the world’s most expensive natural disaster. This came on top of two decades of economic stagnation which has led to Japan being overtaken by China as the planet’s second largest economy.
The net effect of the tsunami has been to shake Japan into realising its precariousness. For too long the country has been mired in deflationary decay and with a highly unhealthy political system that has seen 7 prime ministers since 2006.
The incumbant leader, Prime Minister Noda, seems to have recognised this and is looking for solutions. Reaching out to the Trans-Pacific Partnership earlier this year was a watershed in Japanese relations with its neighbours, and she has been busy making bilateral currency deals with China and South Korea.
Given the short-term nature of his position, it is hopeful that Noda can continue his apparent mission to further integrate Japan with the world economy well into next year.
India paralysed ahead of its 2012 elections
The world’s largest democracy has some way to go to catch up with its Asian rival China, as can be seen here. But it is not helping itself by sacrificing its economic development on the altar of party politics ahead of next year’s elections.
The ruling Congress Party has been attempting to reassert its leadership and kick-start investment in the deteriorating economy, but has been blocked in several initiatives by opposition from other parties keen to position themselves ahead of 2012. The Government’s decision to halt foreign investment in the country’s huge retail sector is the main victim of this politicking, and has damaged India’s reputation as a place to invest.
The rupee’s 13% slide in 2011 – Asia’s worst performing currency – is a reflection on a lack of investment confidence.
If India is to start competing seriously with China then it needs to get its politics inline with what is best for its economy.
North Korea’s succession plans
The death of Kim Jong-il has been a major source of world anxiety. There has been widespread alarm at the youth of the apparent successor, Kim Jong-un, and the instability that his inexperience could bring.
Given the strong messages coming from Pyongyang over the last few weeks it seems likely that the young pretender is increasing his grip on the country. The worry therefore is less about a power vacuum, but perhaps too much power and with a need to use it.
As with all these events, time will tell. 2012 is going to be an interesting year indeed.