Japanese Economic Growth

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Japanese were encouraged by the outcome of the most recent U.S. - China summit in October. Although uncertainties remain, and there are serious differences of views and positions between the U.S. and China, it was encouraging to see that the two principal actors on the Asia-Pacific scene seem to be more willing to cooperate rather than confront. In my view, this is only a part of the broader process in which the U.S., Japan and China are currently engaged, with the basic question being: How can the U.S. and Japan shape triangular relationships with China in ways that are consistent with our common interests in Asia and the Pacific? Or to put it another way, how are we to convince China that the political and economic orders we wish to build in the Asia-Pacific region are consistent with China's own interests and, therefore, worth supporting? While I am not a China expert, I think that China today is beset by three major problems that shape Chinese perceptions, and these, in turn, determine to a great extent China's behavior on the international scene. The first is China's self-image as a poor, weak and vulnerable country, which stems from its historical legacy. The second relates to the inherent tensions in China's fragile political system. The third is the long-pending question of unification with Taiwan, which is becoming increasingly elusive. As long as China is unable to find solutions to these three problems, it will view the so-called unipolar world under American hegemony as inimical to its own interests. This scenario worries Japan and other countries in Asia as any political or economic order which excludes China is bound to be very fragile and unstable. It is imperative for the U.S. and Japan to understand that China's perceptions of the world and the place it occupies in the world order are quite different from the way we see them, and that these perceptions create in the minds of the Chinese leadership a deep sense of insecurity. Our respective China policies must start by recognizing that this sense of insecurity is not an entirely groundless obsession. In spite of its tremendous growth over the past twenty years, China is still a poor country which has to cope with centrifugal forces arising from ethnic problems in its border regions. In order to maintain its territorial integrity, the responsibility from which no government can escape, China must cope with these centrifugal forces. We must also remember that it has been less than 50 years since China was liberated from foreign colonialism and aggression, conditions which it suffered since the 19th century. In fact, Hong Kong was returned to China only four months ago. Let me now say a few words about the tensions in China's political system. The Chinese leadership is committed to economic modernization. This means moving more and more towards economic pluralism. China's leadership knows that this is the only way to build a strong, stable and prosperous China, and that the legitimacy of the government depends largely on how successful these leaders will be in achieving economic modernization. But this presents the Chinese leadership with an enormous dilemma. The more China moves toward a market economy, the more irrelevant its political system becomes to the Chinese people, who are mainly interested in getting more rich and prosperous. When Jiang Zemin and his colleagues look at the Russian experience, it is no wonder that they regard instability as an inevitable byproduct of political freedom, one which could prove fatal to their political legitimacy, let alone to China's continued economic growth. It is against this background that we have to formulate proper China policies in order to build a balanced and stable triangular relationships between the U.S., Japan and China in the years ahead. In this context, let me offer some basic guidelines to which the U.S. and Japan must adhere in their dealings with China. First, we must be patient and take a long-term view of China's evolution towards a pluralistic society. If we look back over the past twenty years, no one can fail to recognize that China has changed tremendously. I believe that China will continue to change even more rapidly in the coming twenty years given the twin impacts of the technological revolution and of globalization. I also believe that the more China moves towards economic modernization and pluralism, the more pressure it will face re: bringing its political system more in line with its emerging economy. As previously noted, this presents enormous risks to social stability, risks which any government must take into account. We need to be patient as China evolve towards a more pluralistic society. None of us wants to see China implode. Second, we must acknowledge that the world is multipolar, and recognize that China has a very important say in such a multipolar world. Nevertheless, we must continue to insist that a multipolar world requires international cooperation. No nation is exempt from abiding by agreed international rules, whether they be in the area of security, of non-proliferation of weapons of mass destruction, of the global environment, of food, of energy, etc.. There are, in fact, many areas where all of us have to work together in order to bring about a more stable peace and prosperity in Asia and the Pacific. The third guideline is that we must continue to encourage China's economic reform and stress the crucial importance of the rule of law in its overall success. Capitalism without the rule of law breeds only corruption and exploitation, and the rule of law makes no distinction between economic and political activities. Here the example of Hong Kong is most instructive. The British legacy with respect to the rule of law provided the base for Hong Kong s economic prosperity. If Hong Kong is going to continue to contribute to the growth and development of China's economy in future years, the rule of law is going to play a very crucial role. While China is now in the process of strengthening and modernizing its legal system -- and this is a welcome development -- what is equally important is who writes the law, who changes the law and who administers the law. The sooner China joins the World Trade Organization the better. To leave China on the sidelines only weakens the global trading system. We need to strike a correct balance between the need to bring China under international discipline in the global economic system and the need for China to have a fairly reasonable period of transition. There are certain things which China cannot do overnight to clear the international hurdles required to join the WTO, particularly in the services sector. We have to bend the rules a little bit in order to get China into the WTO. The fact is that China's international trade is going to grow, its direct foreign investment is going to increase, and China will become a major trading nation in the very near future. This growth will take place regardless of whether China is or is not in the WTO. Since China will play by its own rather than international rules if it is left out, getting China into the WTO as quickly as possible seems to me to be a most reasonable proposition. The fourth guideline we should follow is to use

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