China’s dream of a greater Asia co-prosperity sphere

In my post “China’s Greater Asia Co-prosperity Sphere” on January 29, I say that if China succeeds in turning North Korea into a prosperous country by its model of free economy, China may set a North Korea model for poor Asian countries to copy.

It will facilitate realisation of China’s dream of a greater Asia co-prosperity sphere centred on China.

As China’s central leading group is a black box, we cannot find any documentary evidence on that dream. However, we can judge whether my allegation is correct by what China has been doing.

First, China, Japan and South Korea have all tried to set up a free-trade zone with ASEAN, ideally including all of them, but only China has succeeded to actually conclude a free trade agreement (FTA) with ASEAN, which has so far been performed satisfactorily.

Japan and South Korea both have their own interests to protect in reaching such an agreement with ASEAN. Neither of them had been making earnest efforts for that purpose. Now, envying China’s success, they have decided to conduct negotiation in earnest for an FTA among them, which if concluded will certainly be expanded to include ASEAN.

On the other hand, China has concluded an FTA with New Zealand. China’s two FTAs have made Australia anxious for an FTA with China. According to SCMP’s report today, Australian Deputy Prime Minister Wayne Swan is expected to visit Beijing to discuss a wider range of issues including an FTA with China.

China’s success in an FTA with any of the three (Japan, South Korea or Australia) may trigger a chain-reaction to attract another two, ASEAN and India, into a large free trade zone.

There is in addition the Shanghai Cooperation Organisation (SCG) consisting of China, Russia and four Central Asian countries. In their recent summit, they have adopted a scheme for closer economic relations within the organisation. If those countries have also been attracted to join the free-trade zone, what a great zone it will be. It will be much greater than the EU and the North American Free Trade Agreement.

Even if such a great zone cannot be established due to the conflicts of interests between other countries. If China succeeds in concluding bilateral FTAs with Japan, South Korea, Australia and SGO members, for China, a greater Asia co-prosperity sphere will have come into being and China will be benefited by it to have access to the natural resources, cheap labour and market in all those countries.

In fact, the US is also striving to set up a Pacific free trade zone consisting of those countries, but has so far only succeeded in concluding an FTA with South Korea. The best result will be a great Pacific free trade zone containing both China and the US.

It will certainly benefit China, but the US is now trying hard to take back jobs from China. In addition, it is afraid that the zone will enable China to grow even more powerful and surpass the US. Therefore, a zone containing both the US and China does not seem possible.

Then which of the two will succeed? Will China be able to set up a greater Asian zone excluding the US or will the US be able to set up a Pacific zone excluding China? It depends first of all on whether there will be a leader in the US to reinvigorate US economy. Neither of the candidates for the next US President seems to be competent for that. We have to wait for the new president in 2016.

As for China, the current leadership has found the ways: further economic liberalisation to remove the monopoly of the state-owned sector and stimulate competition and expansion of China’s domestic market. If the expansion is successful, all countries in the world will be attracted by China’s huge growing market of 1.3 billion people.

However, we have to wait and see whether the successors to current Chinese leaders will be able to persist in carrying out their predecessors’ strategy and policies.



Categories: Finance & Economy

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  1. June 28 2012 China Daily Mail Headlines « Craig Hill

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