China or Japan: Which Will Lead Asia?

Who will likely win the struggle between China and Japan for regional hegemony?

Annus horribilis! In 2011, Japan suffered its biggest crisis since WWII with three combined disasters:  an earthquake with a magnitude of nine on the Richter scale, a massive tsunami and the world’s worst nuclear crisis since Chernobyl. This came amidst what many consider as an irreversible decline for a country handicapped by many structural weaknesses: demographic challenges, sky-rocketing public debt, dependence on imported energy and raw materials, and political paralysis. According to a widely held view, Asia’s future is already mapped out with the unstoppable rise of China and the ineluctable decline of Japan, already eclipsed by China in 2010 as the world’s second-biggest economy. But such a view is probably ill-advised, just as the notion of an unstoppable Japan proved to be in the 1980s.

In my book, considered provocative by some, I wish to open a debate on the issue of leadership in Asia, which by 2030 will be home to three of the world’s leading economies. China and Japan are competing for supremacy in the integration process taking place in the region. Indeed, beyond conflicting memories of the war and antagonistic assertion of national identities, it is the clash of ambitions which really fuels the rivalry between the two countries, as both of them aspire to leadership in Asia. Each of the two dominant powers has strong assets to lay claim for such leadership, but neither of them meets all the requirements for unquestionable hegemony on economic, diplomatic and military fronts. If China could maintain its economic expansion, diplomatic dynamism and the modernization of its armed forces at current pace, one can safely assume that its domination in Asia would be uncontested by the next quarter century. Japan, on the other hand, cannot bring itself to such a dialectic reversal of the turbulent history linking it to the Middle Kingdom. It tries to curb Chinese ambitions thanks to its economic leadership and the stepping up of its regional influence, especially in security matters.

Its economic influence in Asia is overwhelming and it is probable that its technological lead over China will endure for the next fifteen years. Japan’s industrial sector has emerged stronger after a fifteen-year period of crisis that imposed thorough restructuring of industrial companies and a revitalization of the economic system. Ongoing technological innovation is at the core of Japanese industry and is the key to its international competitiveness and financial strength. In spite of the crisis of the 1990s and late 2000s, it is by far the foremost creditor in the world: its financial system has stabilized and its banking groups are among the world’s global leaders. However, this domination has its limitations. Long-term growth prospects are poor, given the Japanese economy’s maturity level, very high public sector debt and rapid ageing of the population. China, on the contrary, will likely register robust growth for the next two decades, and by 2030, it will have overtaken the United States with a GDP likely to be four times that of Japan. It has strong assets to achieve this: large savings held by economic agents, massive inflow of foreign investment stimulating technological progress, considerable sources of low cost manpower and consequently an excellent export competitiveness-price ratio. However its expansion rate could be slowed during such a long period as heavy constraints weigh in on Chinese growth: a rise in inequalities, financial fragilities, and above all, dependence on foreign countries for natural resources, technologies and export markets.

If Japan’s economic supremacy in the Asian region is unquestionable, China still holds strong assets at the diplomatic and strategic levels. Being a permanent member of the UN Security Council and a nuclear power, it is an influential player for regional cooperation and security. One of the main goals of Chinese foreign policy is to back up the legitimacy of the Party by stepping up the international influence of the People’s Republic of China. This can be broken down into three objectives: to reduce American influence in Asia, to oppose any move of Taiwan to independence and to prevent Japan from standing out as the dominant power in Asia. Japan, for its part, wants to establish itself as a ‘global power’ and is no longer satisfied with being relegated to the status of ‘political dwarf’ by the pacifism of its Constitution. Its candidacy for permanent membership of the UN Security Council is justified, from its point of view, both by its economic influence and diplomatic action: a great democracy of Asia, Japan actively works for peace-maintenance, within the confines of its Constitution, and seeks to exert more and more influence in finding solutions for major international problems. It wants to become a great civilian power, serving the cause of peace and global public goods (disarmament, environment, poverty) within the framework of the United Nations.  Its pacifist position is itself subjected to a double tension, a desire for a ‘normalization’ and anxiety for its own security. Thus, national ambition and external threats drive it to redefine its strategic options: to contemplate constitutional reform to clarify the role of the Self-Defence Forces and to shift the emphasis of its defence policy along more ‘interventionist’ lines. As the current economic leader of Asia, Japan has many strategic assets to counter China’s ambitions. However, its diplomatic action in Asia sometimes lacks clarity: it wishes to play a leading regional role but fluctuates between regionalism and multilateralism in trying to get around its neighbours’ mistrust.

Japan and China, inevitable economic partners and strategic rivals, remain divided by the weight of the past and their ambitions in the present. Neither of the two dominant powers can currently claim real economic and political leadership in Asia; this leadership can only be shared, so that during the next two decades, supremacy in Asia will likely be held between the two countries in an unstable and often conflictual configuration. Japan will maintain its technological and financial supremacy, albeit with China increasingly hard on its heels. In turn, China’s political and strategic clout will leave its mark on the reordering of the region and then will assert its economic and strategic hegemony towards the end of the next decade.

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