A New Security Umbrella for Asia-Pacific to Sustain the Pace of Development
(Keynote Speech of Former PRESIDENT FIDEL VALDEZ RAMOS, Chairman, Ramos Peace and Development Foundation (RPDEV) and the Boao Forum for Asia (BFA), The Eighth Annual CEO Forum, organized by the Chinese Peoples Association for Friendship with Foreign Countries, and BusinessWeek Events/DNM Strategies, China World Hotel, Beijing, China.)
AS in the late 19th century, Chinas "illimitable" market and its infinite supply of workpeople are once again attracting multitudes of foreign investors. Although China still has 150 million jobless workpeople, a critical mass of middle-class Chinese is beginning to earn consumer-level incomes, of some $7,000 to $10,000 individually. Hence, the sales of cars, television sets, and refrigerators are expanding by some 26 percent to 30 percent yearly. Already China is the biggest market for mobile phones. Mainland tourists are also flooding Southeast Asian destinations.
In a word, China has become a new pole of global growth.
However, Chinas on-going policy adjustments to soften or prevent the overheating of its economy still consists of a heavy dose of "macro-control" executive administrative measures emanating from the central government and cautious compromises to "market forces." "Macro-controls" include: Measures to reduce corruption using a stronger legal framework; prohibitions on over-investment in steel, cement, vehicle and aluminum production, hotel construction and resort development; limiting the conversion of arable land to industrial estates (some 19,000,000 hectares of farmland were lost by conversion in the recent past); cracking down on "underground" lenders to property developers and the overall reform of the state banking system.
On the other hand, Chinas embrace of free-market tools such as allowing the increase in interest rates (announced last 28 October 2004 which represents a historic shift away from "macro-control"), credit tightening for property developers and privatization has served to cool the economy. The continued fixing of the renminbi/yuan to the USD at 8.8 to 1 is still in effect, although most experts believe that allowing some flexibility in the exchangerate regime would be in Chinas best interest, given the high cost of resource misallocation during the latest round of over-investment.
The rise in interest rates has increased fears of a slowdown in other Asian economies and caused some anxiety over their loss of exports. It could also dampen Chinas huge appetite for oil. A mitigating factor for Southeast Asian countries is the forthcoming signing in November of the ASEAN + China Free Trade Agreement (FTA) that would first liberalize trade in goods, and then move on to the liberalization of trade in services, facilitation of investment flows, and establishment of a dispute settlement mechanism. The tightening of Intellectual Property Rights (IPR) controls would decrease the incidence of smuggling and the manufacture of fake pharmaceuticals from which China itself suffers.
"Pax Asia-Pacifica" to replace "Pax Americana"
Chinas transition from a centrally-planned, state sector-dominated economy to one that relies on market dynamics seems to be irreversible. Outward-looking policies are being set and national leaders are focused on their goal of making the country grow sustainably. And for this to happen, China will need a period of stability in East Asia and the Asia-Pacific region.
If Chinas transformation is to take place without major mishaps, we who are Chinas neighbors need to draw it into regional and global networks and structures that will soften and smoothen its relatively abrupt rise to great-power status.
Over the foreseeable future, all Asia-Pacific countries, big and small, must accept the reality of living with a larger Chinese presence. How, then, can long-term stability in the Asia-Pacific region be ensured? In my view, a shift from "Pax Americana" (or peace and security guaranteed by the power of American arms) to a "Pax Asia-Pacifica" in our region could well be the answer in which the major countries and sub-regional blocs contribute to and share in the maintenance of Asia-Pacific security and stability. …