Policy Alert #61 | October 28. 2013

The United States’ prolonged budget upheaval has cast doubts on America’s role as a leader in Asia. Would a decline in U.S. power create new opportunities for Chinese leadership in Asia? In this Policy Alert, we examine commentary from China, Russia, India, Japan, and South Korea on the prospects of a potential leadership reconfiguration in Asia in light of ongoing U.S. domestic struggles.

CHINA

In China, newspapers uniformly criticized the United States for failing to quickly resolve the government shutdown and called on China to reduce its dependence on the U.S. economy.

• “U.S. fiscal failure warrants a de-Americanized world,” ran the headline of a scathing commentary published in government-run Xinhua. “Instead of honoring its duties as a responsible leading power, a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas.”

• Shen Dingli, Associate Dean of the Institute of International Studies at Fudan University, noted President Obama’s absence at the APEC forum last week, writing, “No one wants the U.S. to stay away from East Asia- but if it cannot manage the task, perhaps it should stay focused on the problems within its own borders.” Predicting “an imminent downgrade for the U.S. debt,” Li Daokui, former advisor to China’s central bank noted that “the fundamental issue remains unsolved; a crisis like this could happen again.” A number of commentaries agreed, calling on China to diversify its foreign exchange portfolio:

• “It is urgent for China to rebalance its growth away from exports and investment, and toward domestic consumption,” wrote the China Daily.

• Financial expert Zhao Qingming agreed, warning, “To avert risks linked to its weighty investment in the U.S…a long term solution for this conundrum lies in China switching from an export-reliant economy to one that is driven by domestic consumption.”

• Liu Chang, a writer for Xinhua, characterized recent events as “an opportunity to move faster and more resolutely on the track of internationalizing China’s RMB currency, so that it can move gradually away from the dangers posed by a troubling U.S. fiscal mechanism.”

RUSSIA

While Russia seemed unconcerned about what a U.S. debt default might mean for its own economy, it questioned what recent events might mean for the United States’ leadership role.

• “There will be no consequences for us if the default occurs,” stated Finance Minister Anton Siluanov. Ksenia Yudayeva, first deputy chairwoman of the Central Bank added, “Even if it happens, Russia will not reduce its investment in U.S. Treasuries anytime soon.”

• “Will China ‘de-Americanize’ the world?” asked the Russia Times. Highlighting Xi Jinping’s successful tour of Asia last week, RT outlined Beijing’s ‘de-Americanization’ strategy: “Beijing’s game, in a nutshell, is to bypass the US dollar by all means available. That’s the idea behind setting up currency swaps with over 20 of its top trading partners – from BRICS countries to African commodity producers and strategic energy partner Iran. China is slowly but surely driving the progressive global flight from the US dollar.”

INDIA

Indian commentators discussed the implications of the U.S. budget upheaval on the “great game” between the United States and China over global hegemony.

• Manoj Joshi, a distinguished fellow at the Observer Research Foundation, New Delhi, observed that China is now wining the “Great Game” with the United States. “In contrast to a flagging American foreign policy, China is hitting all the right notes in forging relationships and configuring partnerships [in Asia]…that will help China assume its rightful place as a world power of consequence.”

• Rajesh Rajagopalan, RPI author and professor of international politics at Jawaharlal Nehru University took a different view. Because China needs the United States in the region as a security provider for smaller countries, he argued, “much of the fevered commentary about America’s decline in the region and China’s concurrent rise is misplaced.” Rajagopalan added that Washington “needs to relearn” a simple truth: that great powers do not have the luxury of opting out of the “great game.”

JAPAN

Japanese newspapers expressed pessimism about the relative decline of U.S. presence in Asia, noting China’s increasing influence and the need for Japan to expand its leadership in the region.

• The Yomiuri Shimbun voiced “serious doubt” concerning the effectiveness of U.S. diplomacy towards Asia. The Yomiuri also observed that China is expanding its influence in the region via a new conciliatory “smiling diplomacy” based on increased economic cooperation with Southeast Asian countries.

• The Sankei Shimbun argued that given a declining U.S. presence, Japan must expand its security role in the region. In contrast to China’s rapid military expansion and growing maritime assertiveness, Japan must assume such a role by championing “rule of law” and “common values” such as freedom and democracy.

SOUTH KOREA

Korean media were at odds with the ramifications of a perceived U.S. decline and China’s subsequent leadership role in Asia.

• The Chosun Ilbo expressed worries that despite its declaration of “pivot” to Asia, the Obama administration’s attention has “pivoted away” from the region, adding that in the absence of the United States, China has gained influence.

• The Dong A Ilbo remained more optimistic, arguing that anxieties over the further intensification of strategic competition between China and the U.S. are overemphasized. “Chinese leaders are only focusing on economic reform, while keeping an indifferent eye on the U.S. offensives of rebalancing in the Asia-Pacific region. In order to achieve its rise, the world’s most populous country is taking a strategic tactic to only focus on its own agenda.”