Age of uncertainty for Asia-Pacific

Within our region, three forces are driving underlying de­stabilisation.

Our Asia-Pacific region is continuing to drive global economic growth as the new financial year sets off. But beneath this layer of business as usual, life is unsettled and fractious.

The settings that formerly provided stability are in play, from the governance of global institutions to the guarantees of security.

Some seek out those who ­appear to promise strong leadership, while others reject their opportunism.

Within our region, three forces are driving that underlying de­stabilisation.

First, economic nationalism is on the rise, especially in the US and China. In this area at least Donald Trump has been consistent for years — he takes a crudely mercantilist view of international economic relations. Xi Jinping was wildly applauded by the cognoscenti at Davos 18 months ago for his rhetorical championing of economic globalism.

But Xi’s China too remains in certain respects protective, as with the “Made in China 2025” campaign, and continuing barriers to investment there. In recent years, Beijing has also directed economic boycotts to back political campaigns, against countries including Japan, France, Norway, The Philippines, and most energetically, South Korea.

Australian businesspeople are warning that this could also happen to us. But the initial reports that American bans on supplying hi-tech parts risked fatally wounding telco giant ZTE underlines the fact that Chinese companies too are vulnerable to politically directed attacks. Make the US great. Make China great. Indeed. But what does that make of the rest of us?

The mighty effort led by Japan to salvage the Trans-Pacific Partnership marks a response that indicates the continuing conviction of most countries in our region that we need to lower barriers in order to heighten growth opportunities.

It will be interesting to observe the tone with which the 40th anniversary of the launch of Deng Xiaoping’s reform and opening era for China is marked at year’s end.

For we are not seeing, as China seeks to pivot from exports and inputs towards services and consumption, the same opening to international service and consumer companies that Beijing provided to manufacturers in Deng Xiaoping’s earlier stage of ­modernisation.

One senses why: China today spends more on importing semiconductors than it does importing oil. The danger is that this trend may threaten the great Asian value chain that has brought such complementarity and stability to our region, and in which we ourselves play an important part, chiefly as resource suppliers.

We are all set up to be casualties of a US-China trade war, if it should come to that, with global growth and global market confidence certainly hit. And a posited resolution of such a war — China and the US privileging each other’s economic outputs above those of international competitors — could be even worse for the rest of us than the war itself.

Singapore-based Richard Martin, who runs the IMA Asia business advisory, warns of “major changes to Asia’s industrial structure and to the globalised supply chains that characterised Asia’s export sector over the last 40 years”. It is this restructuring, rather than marginal variations in growth, that will profoundly affect businesses.

The second underlying regional theme is an intensifying contest between democratic and autocratic systems of governance.

It is no coincidence that this is heating up as the US is partially withdrawing under Trump from its longstanding role as the global champion of the liberal democratic way.

We are seeing Myanmar start to walk back towards a greater role for the military, away from its apparent hour of change when Aung San Suu Kyi’s National League for Democracy won the election there two years ago.

Cambodia’s strongman Hun Sen continues to consolidate his power after 33 years; no opposition party is now tolerated.

The Philippines’ President Rodrigo “Dirty” Duterte has presided over the extrajudicial murders of thousands since his election two years ago.

The military junta that seized power in Thailand four years ago retains total control, and indeed is now basking in the reflected glory of the delivery of the Wild Boar soccer team.

But at the same time, sprightly new 92-year-old leader Mahathir Mohammad has unseated UMNO — which he formerly led — after 61 years in power.

Elections have brought change in the last few years to other parts of Asia too, including South Korea, Taiwan, Sri Lanka and Indonesia. Vietnam’s ruling communist party is slowly edging towards more democratic governance, with a tentative start to separation of powers and to genuine contestability of party positions. North Korea’s behaviour has tested the whole region’s resilience, and continues to threaten to undermine many longstanding arrangements and understandings, especially on security.

Meanwhile, Trump appears to view US alliances, including those in the Asia-Pacific, as holding only immediate, transactional value. The region is nervous and sullen. The result is one Trump would love to see his NATO partners adopt — it is arming at a faster rate than any other region in the world.

The third important theme for our region — and the wider world — is the extraordinarily ambitious and successful pursuit of control at home and unprecedented influence internationally by Xi Jinping, a step likely to have rather more lasting significance than changes wrought by Trump.

China has in recent months written into both its communist party and national constitutions “Xi Jinping’s Thought on Socialism with Chinese Characteristics for a New Era”.

Xi’s China is supremely purposeful. Xi’s Era is one of centralisation and personalisation of decision-making. Xi has transformed the Chinese internet in the name of cyber sovereignty into a great tool of control. The goal, in the phrase of Martin Chorzempa, a fellow at the Peterson Institute for International Economics, is “algorithmic governance”.

In this new era — clearly differentiated from the old Deng Xiaoping era — Xi wants China’s economic heft to be reflected in international respect, and in a capacity to transform global institutions to better suit its own ambitions.

What kind of countries are these, that seek to recast so many global settings? Those that are being re-cast themselves under Trump and Xi.

So much at stake, and all three forces for change are only just starting to gain momentum.

Rowan Callick is an industry fellow of Griffith University’s Asia Institute.