YEAREND - China, Japan vie for
economic dominance in Asia
09:06 p.m Dec 13, 1998 Eastern
By Linda Sieg
TOKYO, Dec 14 (Reuters) - A year of Asian turmoil
which saw China raise its economic profile while
Japan sank deeper into the mire has left many
convinced the region has a new rising star.
But while demographics and the developing economy
dynamics mean future Chinese growth will outstrip
that of Japan, some experts say it would be a mistake
to conclude that China can fill Japan's shoes any time
soon in terms of the trade, investment and aid flows
vital to the Asian economy.
''Japan's potential growth, even if the government
gets reforms in place, is on the low side because of
demographics while China's potential growth is
considerably higher,'' said one international economist.
''Clearly, China is a much more important
international economic player than it was. But to put
that in a framework that says China's gains are at
Japan's expense...I think is simplistic,'' the economist
added. ''They are two very different economies at
very different stages of development.''
BEIJING EARNED KUDOS ON CURRENCY
Beijing earned global kudos on the crisis front last
summer when it stood firmly behind its yuan currency
and declined to devalue it despite a steeply falling yen.
Analysts had feared a yuan devaluation would trigger
another regional crisis.
China's leaders also won praise from the United
States and elsewhere for their commitment to
economic reform, while Japanese policymakers faced
a barrage of criticism for what cynics saw as efforts to
perpetuate an outdated economic system which
strangles growth and dampens dynamism.
''How quickly China continues to rise depends on
accelerating the reform process and cleaning up the
state enterprises and the banking system,'' said Bill
Belchere, head of fixed income and economic
research at Merrill Lynch in Singapore.
''They've taken steps in that direction...and given that
they are starting from a much lower base they can
probably change relatively quickly and close the very
large gap with Japan.''
DOUBTS ON JAPANESE RECOVERY
REMAIN
Tokyo, despite its hefty contributions to international
bailout packages for crisis-hit Asian economies and its
$30 billion Miyazawa Plan to help the region,
emerged as something of a whipping boy for failing to
pull its own economy out of its worst post-war
recession.
The Japanese say a mammoth 24 trillion yen stimulus
package unveiled in November, in addition to public
fund infusions into top banks and financial sector
restructuring, will pull the economy out of recession in
1999 and restore real growth a year or two later.
Some cautious optimists also see signs that Japan has
shed its policy paralysis and set off on the road to
recovery.
''We've seen a more credible assessment of Japanese
banks (by authorities), legislation in place for public
money to deal with banks that at not insolvent
and...some signs that the better banks are trying to
assert themselves and differentiate themselves from
the rest,'' the international economist said.
For many others, however, doubts run deep.
Some see a Japanese financial crisis brewing that
would spell another round of disaster for the region.
''They're talking about stimulating the economy, but if
the Japanese economy could have been stimulated out
of its morass it would have got out of it years ago,''
said David Roche, president of financial analysis firm
Independent Strategy.
''The reason they don't want to do it (real financial
sector reform) is they know perfectly well that at the
heart of the bad debt problems of Japan, of the rotten
financial system, lies the state itself,'' Roche told
Reuters Television.
CLOUDS OVER CHINA GROWTH
Worries about the durability of China's recent robust
growth are meanwhile increasing, as are questions as
to what extent recent gains were an illusion based on
dubious data.
Official figures show China's economy grew 7.2
percent in the first three quarters of 1998 and Beijing
has forecast an eight percent rise for the year as a
whole.
But Rolf Willi, Asia-Pacific chairman of Dresdner
Bank, told Reuters that China would be lucky to have
grown at half that rate and said the faster than
expected slowdown would threaten badly-needed
reforms of banks and state-owned enterprises.
Others echo those concerns.
''I think the optimism about China is grossly
overestimated both by their own statistics and also by
people's perceptions of them,'' Roche said. ''My view
is that China is not growing and most of the growth
and optimism we hear about are fabricated.''
Some Japanese experts also bridle at the notion that
China -- which skilfully won points for a stable
currency stance many say was easy to maintain given
official capital controls -- is set to overtake Japan in
terms of regional clout and leadership.
''China has a huge population and area but it is far
behind (Japan) in terms of being a mature power and
society,'' said one Japanese foreign policy expert.
''Its population is still growing and its environment is
in a crisis situation. If we consider such problems,
China has drastic challenges to confront,'' he added.
Even analysts who argue that China -- with a
population nearly 10 times that of Japan but an
economy only one-sixth the size -- is on the rise and
Japan is in danger of fading into a second rate global
player agree the shift in relative economic influence
could take more than a decade to complete.
''If Japan gets its economy right and opens up...then it
is much more important than China, which is a very
new and much less important player,'' said Merrill
Lynch's Belchere. ''We're talking very, very long
term.''
Copyright 1998 Reuters Limited |
