Indonesia, sometimes known as the “fifth BRIC” (after Brazil Russia India China) because of its population size and growth potential, now has debt rated at investment grade for the first time since the Asian financial crisis:

While a credit-rating cut hangs over some nations, the Southeast Asian giant’s sovereign debt has been bumped back up to investment grade by Fitch Ratings, in December, and Moody’s Investors Service this week. Standard & Poor’s will surely follow suit.

Investors have already rewarded the country for solid fundamentals—foreign direct investment grew 20.2% last year to a record $19.3 billion, the government said Thursday, and, earlier this month, Indonesia sold 30-year bonds at a record-low yield of 5.375%. Meanwhile, gross domestic product growth is trotting along at a healthy 6%-plus, public debt is under control, and inflation is relatively benign at under 6%. Still, there are reasons to be cautious.

Corruption and weak infrastructure are perennial problems. Crumbling roads and inadequate ports especially stifle trade, costing as much as 1% of GDP, according to analysts. A recently enacted land acquisition bill should help. But there is much work to be done.

While India and China gain many more headlines, Indonesia may be both a more attractive bet for investors and a better case study for development professionals trying to find lessons applicable to less developed countries.

Southeast Asia has consistently outperformed Sub-Saharan Africa in income growth. As the below chart indicates, its inhabitants were much poorer than Africans in 1960; today they are two and one-half times richer. In fact, over the past half-century, the region has been the most consistently successful in the developing world, growing almost continuously (apart from a brief hiatus after the 1997 Asian financial crisis).

Source: Tracking Development

Southeast Asia’s growth has also been much more inclusive than Africa’s. Whereas the latter’s two growth spurts since independence—in the 1960s and 2000s—have yielded little poverty reduction, Southeast Asia has produced spectacular reductions. Indonesia, for instance, reduced poverty from 60 percent in 1970 to 22 percent in 1984. Vietnam reduced it from 58 percent in 1993 to 14 percent in 2008.

Yet, the region does not meet the standard model for economic success, at least as defined by the World Bank and the rest of the Western development community. Governments have historically not been held in check by elections. Corruption is widespread. Governance has rated low on most indicators.

What then explains this success? (more…)

Posted without comment:

It turns out that my last post on the Security Council and Syria was wrong.

Exceptionally wrong, in fact.

Rather than acquiesce to a resolution condemning the Syrian government for repressing its people, China and Russia used their vetoes.  And rather than support the EU-drafted resolution (as had seemed increasingly likely) Brazil, India and South Africa abstained.

This is a big set-back for the EU and the Americans, who were firmly behind the European initiative.  It’s a big win for Russia, which would have been embarrassed if China had even abstained.  And it’s a grim moment for Brasilia, Delhi and Pretoria, who have missed the chance to carve out a distinctive position in the Council on Syria, and opted to avoid a confrontation.  This was a moment the “IBSA” countries  could have seized to show why they deserved more respect at the UN.  They missed it.

More analysis tomorrow.  For now, congratulations to Gabon and Nigeria for voting for the resolution, refuting the claim that all developing countries are anti-interventionist.

It now looks like the Security Council will vote on a (still too weak) resolution demanding the end of the Syrian crackdown today or tomorrow.  Russia is still bad-mouthing the proposal, drafted by the Council’s European members, but other powers are lining up to back it.  Brazil – previously numbered among opponents of a resolution along with China, India and South Africa – looks like it’s on board:

In a joint statement issued the same day European nations were to seek a vote on a UN Security Council resolution condemning Syria’s crackdown on protests, EU leaders and visiting Brazilian President Dilma Roussef said the two sides “expressed grave concern” at the current situation in Syria.

“They agreed on the need to continue urging the Syrian authorities to put an end to the violence and to initiate a peaceful transition to democracy.”

The well-informed David Bosco predicts that India and South Africa will also vote for the resolution, although the Indians were fighting a rearguard action against it last week.  He thinks that China and, in the end, Russia will abstain.  Meanwhile, Turkey is giving the resolution full support from outside the Council:

Turkish Prime Minister Recep Tayyip Erdogan voiced support for the proposed UN resolution and said he would soon announce sanctions on the neighbouring country.

“The draft resolution before the council today is in the nature of sending a warning. We hope there will a positive outcome of this vote and that there will then be further discussions about whatever further steps need to be taken,” Erdogan told a news conference during a visit to South Africa.

The political picture could change again before the vote, and it can’t be repeated too often that the EU’s resolution has been watered down a lot , with a threat of sanctions reduced to near-invisibility.  But I think that this episode underlines the point Franziska Brantner and I made in our recent update on human rights and the UN for ECFR: many non-Western powers, especially rising powers like Brazil, want to distance themselves from Russia’s obstructionism in UN debates.  Even China is ready to step away from the Russians, as it did over Côte d’Ivoire.   As we noted in our paper, and I repeated here last week, this opens up the EU’s options for coalition-building in New York.  It looks like the EU is finally finding ways to use those options…

It’s obvious that the Asia-Pacific will dominate American strategic thought for the foreseeable future.  Today an Obama administration official confirmed just that:

The Obama administration is “rebalancing” U.S. foreign policy by enacting a “turn to Asia,” a senior State Department official said Tuesday.  “As the long shadow of 9/11 recedes, we are witnessing the re-emergence of the Asia-Pacific as a key theater of global politics and economics,” Kurt Campbell, assistant secretary of State, told a House panel.

What does this mean for America’s NATO allies?  This is a topic I addressed briefly in an op-ed for the EU Institute for Security Studies (EUISS), which has launched an enjoyable online debate about transatlantic cooperation:

Since the Iraq war peaked, US strategic debate has increasingly shifted away from counter-insurgency and stabilisation operations to securing the Asia-Pacific. This has involved diplomatic outreach to India and South-East Asia and a military focus on China’s growing capabilities and its threat to US vessels in the western Pacific.

The European security debate is also evolving, but it is driven by financial concerns. While China’s rise will frame American security policy for years ahead – even in the event of a major terrorist attack – no comparable challenge shapes European worldviews. Russia’s uneven resurgence worries many EU and NATO members, but Moscow’s ambitions centre on energy deals and it does not present a true strategic game-changer. Instead, the need for austerity dominates European thinking.

Do European military forces  have any role to play in Asian-Pacific affairs?  In another contribution to the EUISS debate, Daniel Keohane argues that Europe won’t look far beyond its periphery, and he doesn’t find this surprising:

Put simply, the US is an Asian power, but the Europeans are not. This is not new. During the Cold war, France and Britain carried out a military operation in the Suez Canal, but they did not join the Americans in Vietnam.

Indeed, future historians may conclude that Afghanistan was the exception that proved this post-World War II rule. Most Europeans went to Afghanistan for the sake of their close relationship with the United States, not because it was an existential threat to their security. That unhappy experience makes it very unlikely that Europeans would follow Americans on future military operations beyond Europe’s neighbourhood.

Richard Gowan, therefore, is right about the emerging strategic divergence between Europeans and Americans. But for Europeans the issue is not so much that the Pentagon cares more about Asia; it is that Washington cares much less about Europe.

There are lots of other contributions to the EUISS debate, and they’re all worth a look.  But most of them don’t really address the problem of Europe’s (ir)relevance in the Pacific theater.  Quite a few contributors are still focused on the need for better Euro-American cooperation in the European theater instead, and  all (including Daniel and me) recognize that financial concerns will affect both European and American security policy very deeply.  Nonetheless, I wonder whether the European Security community – and U.S. commentators focused on Europe – have really grappled with the implications of a shift from an Atlantic-centered to a post-Atlantic security order…

China is not Egypt, Libya or Tunisia. As the Pew Global Attitudes project noted in March this year, only 28% of Egyptians were then ‘satisfied’ with their country’s direction, down from 47% a few years earlier; whereas in China the figure was 87% in March, up from 83%.

So why, asks James Fallows in last month’s The Atlantic, is the Chinese government so clearly freaking out about protests this year and the risk of a “Jasmine Revolution” – when the protests clearly don’t add up to a national movement? As he puts it,

Why … has the government reacted as if the country were on the brink of revolt? Do the Chinese authorities know something about their country’s realities that groups like Pew have missed, and therefore understand that they are hanging by a thread? Or, out of reflex and paranoia, are they responding far more harshly than circumstances really require, in ways that could backfire in the long run?

Fallows sets out the pros and cons for each view. Here are some snippets to set out the first camp’s rationale:

Those who think the government has good reason to be worried say that the accumulated tensions—political, economic, environmental, and social—of China’s all-out growth have reached an unbearable extreme. By this interpretation, the seeming satisfaction of the Chinese public is a veneer that could easily crack. “If one were to read only the Party-controlled media, one might get the impression that China is prosperous, stable, and headed for an age of ‘great peace and prosperity,’” Liu Xiaobo himself wrote, in an essay shortly before he was arrested. (The English version, translated by Perry Link of Princeton, will appear this fall in a collection of Liu’s essays and poems, No Enemies, No Hatred.) He continued:

Not only from the Internet, but from foreign news sources as well as the internal documents of the regime itself—its ‘crisis reports’—we know that more and more major conflicts, often involving violence and bloodshed, have been breaking out between citizens and officials all across China. The country rests at the brink of a volcano.

By June of this year, a wave of bombings, riots, and violent protests at widely dispersed sites across the country illustrated what Liu was warning about. The trigger of the uprisings varied city by city—ethnic tensions in some areas, beatings by police or chengguan in others—but they added to a mood of nationwide tension. “With rampant official corruption, inflation, economic disparity, and all sorts of social injustice and political tensions, the threat to the CCP rule is very much real,” Cheng Li, who grew up in Shanghai and is now a specialist in Chinese politics at the Brookings Institution, told me this summer.

The second camp’s rationale, on the other hand, which Fallows tends towards himself:

…that the situation in China is indeed tense—but that it has always been tense, and that so many people have so much to lose from any radical change, that the country’s own buffering forces would contain a disruption even if the government weren’t cracking down so hard. The main reason is that for all the complaints and dissatisfactions with today’s Communist rule, there is no visible alternative—in part, of course, because the government has worked so hard to keep such alternatives from emerging. This is a less satisfying side of the argument to advance. You look worse if you turn out to be wrong, and it seems unimaginative to say that an uneasy status quo might go on indefinitely. Still, it is what I would guess if forced to choose.

I asked Chas Freeman what he made of China’s current turmoil. He is a former diplomat who served as Richard Nixon’s interpreter during his visit to China in 1972 … Freeman said that he takes seriously the complaints about economic inequality, ethnic tension, and other potential sources of instability. But, he said, they remind him of conversations he had when living in Taiwan in the 1970s, before Chiang Kai-Shek’s Kuomintang party had moved from quasi-military rule to open elections. “People would say they are corrupt, they have no vision, they have a ridiculous ideology we have to kowtow to, but that no one believes in practice,” he told me. “And I would say, ‘If they’re so bad, why don’t you get rid of them?’ That would be greeted with absolute incredulity.” Taiwanese of that era would tell him that, corrupt or not, the party was steadily bringing prosperity. Or that there was no point in complaining, since the party would eliminate anyone who challenged its rule. The parallel with mainland China was obvious. A generation later, Taiwan had become democratized.

Of course, Freeman’s analogy only holds up if you think that China will indeed manage to follow Taiwan’s record of “steadily bringing prosperity”. And that’s why, unlike Fallows, I tend towards the first camp. I noted last month that there are already weak signals of the arrival of “jobless growth” in China. And more broadly, I think China looks in bad shape to manage a whole range of global threats that will shape its outlook – just like the United States.

I’m not an expert on Chinese internal politics, so I won’t attempt to guess how all this will play out domestically. But I do see good reasons to question the wisdom of relying on steadily increasing prosperity. As for the lack of a “visible alternative” - surely we’re not going to assume that as a guarantee of stability after the year so far in the Middle East?

UN Watch is an NGO that specializes in getting cross about the numerous misdeeds (whether major or minor) of the UN system.  This week it has had something pretty straightforward to be peeved about: North Korea is chairing a plenary session of the Conference on Disarmament (CD) this month.  Yes, that North Korea. 

“Allowing an international outlaw to oversee international arms control efforts is just plain wrong,” advocacy group U.N. Watch’s director Hillel Neuer said today. “North Korea is a ruthless regime that menaces its neighbors and starves its own people, and should not be granted the propaganda coup of heading a world body dedicated to peace.”

Fireworks did not, however, ensue.  The CD’s members held what appears to have been an exceptionally turgid debate on why everyone thinks that the CD doesn’t matter any more.  It clearly gripped some of the participants, as the photo from the session reproduced above shows.  But something very important did happen at this meeting, if the UN’s own summary is to be believed.  The representaive of Iran managed to come with a statement on the CD’s woes that, to my mind, may be the finest piece of hollow UN rhetoric delivered in any forum on any subject:

Changing the Rules of Procedure was not the answer to breaking the impasse and many treaties had been negotiated under these same rules. Thus, they should deal with the root causes of the problem rather than advocating cosmetic changes in the procedures without tackling the substance and crux of the problem which was a lack of political will for creating an environment in which the security concerns of all countries could be addressed.   [Emphasis added.]

Go on, read it out loud.  Feel the words trip off your tongue.  Luxuriate in them.

An interesting weak signal from Beijing:

Foxconn, the world’s largest contract electronics manufacturer by revenue, plans to increase the use of robots in its factories 100-fold to 1m within three years, according to Terry Gou, chairman and chief executive. The move underlines the drastic changes China-based manufacturers are forced to make as the country’s unlimited supply of cheap labour is running out [...]

Foxconn, which makes iPhones and iPads for Apple and other electronic gadgets for more than a dozen branded vendors, has said before that it will increase automated production. But Mr Gou outlined the scale of the changes for the first time in a speech on Friday at a party organised for workers at its largest plant in Shenzhen.

According to people in the audience, the chief executive said the group currently uses just 10,000 robots, but that number would increase to 300,000 next year and to 1m in three years. The numbers are likely to cause jitters among local governments in China as several provinces have set high hopes on the group, China’s biggest employer, to create jobs for their young people.

If this is an indication of things to come, then it answers one of the questions I wondered about in my 2020 Development Futures report in January this year, in which I speculated on whether we’d see the phenomenon of jobless growth arriving in the emerging economies:

In some developed economies (and especially the US), research suggests that job opportunities are increasingly being polarised into high and low skill jobs, while middle class jobs are disappearing due to “automation of routine work and, to a smaller extent, the international integration of labour markets through trade and, more recently, offshoring”. Meanwhile, data also show that while more women are entering the global labour force, the ‘gender gap’ on income and quality of work is widening between women and men. These trends raise a number of critical uncertainties for employment and development to 2020.

If automation of routine work genuinely is a more significant factor in developed economy job polarization than international trade or offshoring, then the implication is that developing economies may increasingly also fall prey to job polarisation as new technologies emerge and become competitive with human labour between now and 2020. Chinese manufacturing and Indian service industry jobs could increasingly be replaced by technology, for example, and find their existing rates of inequality exacerbated still  further.

As Colum Lynch notes,  Ban Ki-moon has been showered with “glowing plaudits” since he won a second term as UN Secretary-General last week. In a short memo to Ban published yesterday, Bruce Jones and I offer our own (slightly qualified) praise:

Dear Secretary-General,

Congratulations. You have not only won a second five-year term at the United Nations, but you also won with a minimum of fuss. In a month in which the Security Council has been rocked by disputes over Syria, all fifteen members backed you. Last week, the General Assembly gave you unanimous support.

You’ve had a lot of critics since you took office in 2007. They’ve called you a poor manager and an uninspiring public figure. Some will doubtless grumble that your success this month reflected your capacity to avoid controversies with all the major powers. But politics is politics and a win is a win. You have also taken a courageous and consistent stance in favor of the Arab Spring, belying your reputation for caution.

OK, that’s not exactly “whoop whoop, go Ban, yippe-aye-yea!” But as Bruce and I go on to point out, Ban has no time to rest on his laurels:

The top three immediate concerns are Libya, the wider Middle East and Sudan. If you fumble on any one of these, you’ll risk being written off as a lame-duck Secretary-General rather fast:

• Libya: the anti-Gaddafi coalition has asked you to plan for post-conflict recovery, and this is already underway. There’s a high chance that you’ll end up having to manage a very messy post-conflict situation, and while nobody wants to turn Libya into another Kosovo a fairly hefty peacekeeping force could be required to restore order. There are good models out there – think of the way the U.N. responded in southern Lebanon in summer 2006, mobilizing a serious force within a week. At a minimum, the U.N. may have to deploy a sizeable civilian political mission to oversee a transition to democracy as it did in Afghanistan. The U.N. is short of good Arabists and deep expertise on Libya. You’ll need to invest personally in ensuring that the U.N. deploys a credible mission.

• The wider Middle East: beyond Libya, there’s potentially huge demand for the U.N.’s services in mediation, electoral assistance and constitutional reforms across the wider Middle East. Six months from now there could be U.N. assistance missions in Yemen and Syria as well as Libya. But again the lack of qualified U.N. personnel is a problem. In most Arab countries, U.N. development officials worked hand-in-glove with the pre-revolutionary regimes. The sheer speed with which events are unfolding in the region is also difficult for the U.N. bureaucracy to keep up with (although it’s hardly unique in that). You need to think about restructuring the organization’s presence across the Middle East and North Africa, possibly under some sort of regional presence or a super-envoy mandated with ensuring that the U.N. can respond fast to requests for assistance.

• Sudan: at the start of the year, the U.N. oversaw a successful independence referendum in South Sudan, which will achieve statehood in July. But violence on the border between North and South Sudan has intensified, the North has launched a separate and vicious campaign against rebels in the Nuba Mountains and South Sudan’s infrastructure is in an appalling state. You can take a good chunk of the credit for the successful referendum. But you must now take responsibility for ensuring that the new South Sudanese state gets effective governance assistance and that U.N. troops are sufficiently well-armed to deter further violent flare-ups. It’s pretty hard to explain why the international community is spending almost $1,000,000,000 maintaining troops in Sudan if they can’t respond to even small flare-ups, let alone forestall another major round of violence. Sudan is also a test case for your proposed reforms on civilian staffing – seeing those implemented will require you to personally back your chosen SRSG in taking a creative, flexible approach. You can and should challenge the member states to support you on this.

Ban has lots of other issues to tackle over the next three years (climate change, the MDGs, food scarcity, you name it) but he needs to get a grip on these immediate crises if he is to have the credibility to tackle other problems.

Francis Fukuyama has got a lot of attention for his new book The Origins of Political Order.  He’s still so closely associated with having announced the “end of history” in the early 1990s (a complex idea that’s more often  cited than understood) people are struck that he’s decided to go back to the beginning, tracing the evolution of political order in different societies from prehistory to the French Revolution.  As I argue in a new review for The National, “this is a remarkably old-fashioned project”:

In tracing the highways and byways of human development, Fukuyama appears far more interested in probing the classics of political philosophy and sociology than current development theory. The majority of books in the bibliography date from before 2000, and the argument includes detailed discussions of Thomas Hobbes, Karl Marx, Max Weber and Friedrich von Hayek. With some authors, this might be dismissed as a tokenistic tour through “Great Books of Political Theory”. But Fukuyama embraces such non-household names as “the great English jurist Sir Edward Coke”. As has been said of another Coke, this is the real thing.

But there are obvious differences between this book and its intellectual forebears:

Marx apparently failed to grasp huge differences between ancient Indian and Chinese societies, lumping them together under the headline of “Oriental despotism”. Weber failed to see just how far ancient Chinese society advanced.

As his dismissals of Marx and Weber suggest, Fukuyama does not treat the histories of the great Asian empires as an adjunct to “the rise of the West”. He notes at the outset that he will downplay Greece and Rome. Socrates and Aristotle make only cameo appearances. By contrast, Fukuyama treats Confucianism and Hindu thought in considerable detail.

Does this mean that Fukuyama, once associated with the Project for a New American Century, is giving up on the West? Not so. As I argue in the review, his strategy is to cast more light on non-Western societies and ideas so to emphasize the enduring strength of Western political models:

India, Fukuyama posits fairly early on, has yet to escape from the norms of its pre-colonial politics. Caste groups and kin ties were so crucial to its development – and continue to play a significant role today – that the country remains difficult to unite.

If that’s bad news for Delhi, what about Beijing? Fukuyama argues on the very last page of The Origins of Political Order that today’s Chinese system bears the hallmarks of its imperial predecessors, with power concentrated in the centre and too little accountability.

“An authoritarian system can periodically run rings around a liberal democratic one under good leadership,” he argues, clearly thinking of today’s Sino-American competition, but at the same time it will always be in peril of slipping into political decay. In spite of Fukuyama’s attention to the histories of today’s Asian powers, his message is clear: if you want to get ahead in today’s global competition, it’s still best to refer to the ideas that shaped the West.

So this is good reading not only in its own right (and it’s a stimulating work of history and ideas) but also intellectual material for those who in the West who still believe that, as Barack Obama said in London, “the time for our leadership is now”…

Everybody say...aaah!

Horrific new data released by the latest census in India and analysed on the Guardian’s development blog shows that things are getting worse for girls.  The ratio of girls to boys at birth has fallen from 927 girls per 1000 boys in 2001, to 914 girls per 1000 boys today.  In the worst district, the ratio is 774 girls to 1000 boys.  Usually you’d expect about 950 girls per 1000 boys. That adds up to 15 million girls not born in India in the last 10 years.

Wealth and urbanisation aren’t changing this – Mumbai’s figures are worse than the national average.  They might even be making it worse, since medical progress, through the easy availabilty of ultrasound, makes it easier to identify girls and safer abortions reduce the risk of getting rid of them.

This is a tragedy, an abuse of just about all the rights I can think of, and a pretty horrific illustration of how new technology can sometimes serve outmoded and repressive ideologies rather than contribute to their overthrow, as the technological optimists would have it. 

But it’s also, possibly, storing up big economic problems for the future – for all of us.  Research in China, where the ratio is even worse, at about 819 girls per 1000 boys, finds an interesting link between the one-child policy, the preference for boys, and high savings rates.  It goes like this: there are more boys than girls.  When the boys grow up, they are competing over the limited number of girls in the marriage market, and so their parents give them a helping hand by saving up for a nice flat, a nice car (yep, this stuff really does work, like it or not). The authors show that Chinese savings rates shot up in around 2002, when the generation where boys really outnumbered girls reached the age when they started to think about marriage, and that savings rates are higher in areas where the gender ratio is most skewed.  They argue that this effect explains about half of China’s high savings rate.

Now, as I’m sure all the well-informed readers of this blog will know, the high rate of savings in China was one of the factors causing the global imbalances which were one of the contributors to the financial crisis. 

So there you have it.  Women’s rights are good for financial stability.  Perhaps a cause that the likely first woman head of the IMF, Christine Lagarde, would like to take up?

I’m flattered that David Miliband has quoted me in speech on Europe he gave in Poland.  The former Foreign Secretary believes that “America’s attention today is on the home front” while China is cautious about asserting itself on foreign policy issues.

So Europe faces a choice. Breathe a sigh of relief that the world is not being carved up by others, and become what Richard Gowan has called a “strategic suburbia: a collection of small, quiet and obsessively inward-looking communities suspicious of the outside world” ; or recognise that nature abhors a vacuum, and move forward into it?

It’s always nice to be cited, and Miliband’s speech is a serious and well-argued plea for “a vision of Europe in the world based on clear ideals, hard heads, and real delivery.”  But I have to quibble with his argument that the EU should be trying to fill a global vacuum created by American exhaustion and Chinese caution.

In the piece Miliband cites, published by E!Sharp last month, my case is that EU”s economic woes and its desire for investment from China, India and other emerging powers create the conditions for a “Scramble for Europe”.  This would involve the BRICs buying influence in the EU, making it harder and harder for European leaders to develop and defend independent foreign policy positions:

Unless the major emerging economies suffer significant setbacks in the years ahead – by no means impossible – they should have little difficulty dividing and ruling in Europe. It’s possible to imagine a scenario ten years from now in which the UK regularly stands up for India’s interests in the EU while France and Germany speak for China. That won’t be a problem if Sino-Indian relations are stable – but if the two Asian giants are in a state economic or strategic tension, their friends in the EU might also find themselves at odds.

This hardly means that French or British troops will rush off to fight on different sides in a Himalayan war. Yet, as Russia has shown through its energy diplomacy over the last decade, it’s not difficult for outside powers to manipulate individual European governments, making it well-nigh impossible to define coherent EU positions. In 2020, the greatest potentates in Brussels may be the Chinese, Brazilian ambassadors – alongside their U.S. and Russian counterparts – lobbying against each others’ interests.

If European governments coordinate their economic and foreign policies more effectively, they may be able to play the rising powers off against each, balancing India’s influence against China’s or Brazil’s. But EU policy-makers should not imagine that they can somehow rake in cash from Asia and Latin America yet insulate themselves from competition between the emerging powers and the U.S. for global influence.

Strategic irrelevance is not an option. Europe’s ability to shape the outside world may be shrinking, but that doesn’t mean that outsiders will refrain from shaping European politics to suit their needs.

So, whereas David Miliband sees the EU filling a vacuum in global affairs left by the U.S. and China, my concern is that China and other powers will rush in and fill the political-economic vacuum that the EU itself could so easily become…

I’ve been struck by a lot of thought provoking stuff in the Economist over the last couple weeks on China suggesting greater global risks in the near future due to three things (health warning – I am not a China expert):

1. China’s reserves (aka 50% of the global imbalances)

These continue to grow: China now has $3 trillion which enough to buy the debt of struggling debt-laden, Portugal, Ireland, Greece and Spain AND have enough left over to buy Microsoft, Google, IBM and Apple AND all the real estate in Manhattan and Washington AND the 50 most valuable sports teams or alternatively China could buy all the gold in the world plus all US military equipment and have a $1trillion to spare.

(more…)

ECFR and the Asia Centre have a new edition of China Analysis just out which is on the question of whether China has become too bold in its dealings with the rest of the world – and focuses, rather intriguingly, on some of the apparently quite charged debates that Chinese policymakers are having among themselves on this theme.

Some of the key themes to emerge, they say, are:

• Alarm about a trend towards triumphalism and confrontational behaviour in dealing with both the USA and Asian states over the past year, and the belief in some quarters that “2010 was unequivocally a year of losses for China,” during which its relationships with everyone – except the Europeans and North Korea – deteriorated 
   
• Concern that Chinese insensitivity might encourage other countries to form balancing coalitions against China – noting, for example, astute US exploitation of Beijing’s recent disputes with neighbours, for example over the South China Sea
   
• A sense that Chinese foreign policy has become internally divisive because nobody is driving it – not even the foreign ministry
   
• An unprecedented degree of confidence in the inevitability of China’s rise, despite its foreign policy problems; a feeling that China’s future on the world stage will be determined by its own choices, rather than by anyone else

Download the pdf here.