Asia Update, Fall 2010

by Richard Harris

It’s been an exciting autumn for Asia watchers, with developments in North Korea taking center stage. For the US, the current troubles with China will continue to dominate short-term policy making. While it’s not likely that the US can do much to influence Chinese economic behavior, a more expensive yuan would help make US firms more competitive and curtail China’s astronomic growth – as such, the US will likely continue trying to push China to reevaluate its currency. China, seeing American intentions as clear as day, will probably continue to deflect those initiatives. Long-term, North Korea will continue to dominate Asian security – how smoothly Kim Jong-un’s succession will unfold, and whether we’ll see more or less military activity from North Korea at that time are high concerns for the US as well as for China, South Korea, and Japan. Any kind of long-term policy with North Korea now hinges on two points – what kind of leader will Kim Jong-un be (and what kind of power will he be able to hold) and how far can the US rely on China to constrain North Korea’s actions. In short, the US is going to have to continue courting and constraining China in equal measure, as has been the status quo for at least the last few years.

North Korea
Kim Jong-il, widely thought to be in poor health, is thought to have selected his youngest son, Kim Jong-un, to be the successor of the North Korean regime at the end of September. Educated in Switzerland and widely unknown both inside and outside of North Korea, Kim Jong-un was promoted to a four-star general (despite lacking any military experience) and became vice-chairman of the Central Military Commission and a member of the Central Committee of the Workers’ Party. These mirror similar actions taken by the first leader of North Korea, Kim Il-sung, when Kim Jong-il was being groomed for leadership; high-level positions in the party and in the military secured Kim’s position as leader. Whether Kim Jong-un assumes control of the country after his father’s death, or whether his leadership proves to be a stabilizing or destabilizing force in Asia, remains to be seen. This development comes only a few months after the sinking of the South Korean Navy ship, Cheonan, commonly thought to be caused by North Korea.

Japan
Faced by continued lackluster economic growth, the Bank of Japan cut its already low interest rate to effectively zero in the beginning of October – Japan’s current interest rate now fluctuates somewhere between 0 and 0.1%. Japan’s growth over the last couple of decades, usually no more than 2% per year, has generally been termed anemic, and its low interest rates over the last few years haven’t seemed to spur growth previously. The Yen (currently at roughly 81 yen to the dollar) is at the strongest it has been in years, further hurting the export-dependent Japanese economy. Politically, the Democratic Party of Japan (DPJ) Prime Minister Naoto Kan survived a leadership challenge from DPJ member Ichiro Ozawa in mid-September. Ozawa, known as the Shadow Shogun for his behind-the-scenes political strength and widely credited with bringing the DPJ to power in 2009, had challenged Kan for the leadership of the DPJ, less than a year after previous DPJ PM Hatoyama had been ousted from power. Kan, who had supported the widely unpopular idea of increasing the consumption tax to solve budgetary shortfalls, was thought to be in danger of losing his post. In early October, Ozawa was indicted in a Tokyo court for his role in a financial scandal, and is best known to the Western world for his recent comments that Americans were “simple” and “unicellular.”

China
Economic tensions between China and the United States remain high. The debate concerns the conversion rate of the Chinese yuan, widely thought by American leadership to be undervalued. In the US, a bill that would give the US Commerce Department the power to levy duties to imports from undervalued currencies is working its way through Congress, and a report that would declare the yuan undervalued is expected to be released soon (the US has, to this point, shied away from issuing reports calling the yuan undervalued, instead remarking on their concern over the situation). Earlier this year, China allowed the yuan to fluctuate daily against the dollar by a small amount, in response to earlier claims that the currency was kept artificially low.

China’s relations with Japan and Norway are no better at the moment. China still awaits an official apology from Japan after the latter arrested the crew of a fishing boat in the senkaku/daioyu island chain, to which both Japan and China lay territorial claims. Protests in Chinese cities against Japan’s actions, and Japanese protests at the Chinese embassy in Tokyo, are not helping the situation. China has also expressed its great displeasure toward Norway, after the Nobel Committee decided to award the Nobel Peace Prize to Liu Xiaobo, who has been incarcerated as a political prisoner for helping to release Charter 08, a document calling for human rights in China.

To keep up on current affairs in East Asia, check out The Economist, which sports a pretty robust section on Asia, as well as the BBC or the New York Times for daily updates. CSIS also publishes Comparative Connections, which is a quarterly e-journal detailing continuing developments in Asia – Georgetown faculty often contribute to the journal as well.

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