Policy Alert #62 | October 28, 2013

On October 1, the U.S. government shutdown for the first time in seventeen years, generating enormous anxieties over a potential default on U.S. debts and its consequences for the world economy and U.S. foreign policy. In this Policy Alert, we examine commentary from China, Russia, India, Japan, and South Korea on the U.S. government shutdown.

CHINA

Chinese newspapers focused on the October 17 debt ceiling deadline, calling on the United States to resolve the government gridlock and ensure the safety of China’s investments in the U.S.

• Vice-Minister of Finance Zhu Guangyao called on the United States to “solve the political impasse and stay solvent to ensure the safety of massive Chinese assets.” Zhu added that it is “the U.S.’s responsibility” to protect the interest of its creditors, namely, China.
• Noting President Obama’s cancellation of a planned trip to Asia for the APEC summit this week, the South China Morning Post contrasted Obama’s no-show with Chinese President Xi Jinping’s ongoing first trip to Southeast Asia. Whereas Xi is receiving “serious face time” across Asia, Obama’s absence “does not bode well for the so-called pivot, or rebalance in U.S. policy, towards Asia.”

RUSSIA

In Russia, observers noted America’s increasingly isolationist behavior as its preoccupation with domestic issues continue, while looking ahead to the October 17 deadline on raising the debt ceiling and assessing the potential impact on Russia’s economy.

• Fyodor Lukyanov, editor-in-chief of the Russia in Global Affairs journal, predicted a return to a more isolationist U.S. foreign policy as Washington increasingly focuses on domestic issues. He wrote, “The fact that many countries are striving to achieve a multipolar world is not an indication of anti-Americanism, but a desire to reduce dependence on the U.S. as the world’s sole power.”
• The Moscow Times predicted that if both houses of Congress fail to strike an agreement to increase the debt ceiling later this month, “Such a default could send shockwaves through global markets, including Russia.”

INDIA

Indian newspapers were at odds with the effects of the U.S. government shutdown on India’s economy, while expressing concerns on America’s new isolationist orientation.

• Anupam Shah, chairman of India’s largest engineering exporters’ body Engineering Export Promotion Council, expressed alarm that “Indian exports to America face the demurrage threat due to U.S. shutdown in the world’s largest economy.”
• The Economic Times disagreed, predicting that the U.S. shutdown does not mean much for India’s economy unless it is prolonged, and adding that “analysts do not believe this will draw out into the long term.”
• The Hindustan Times analyzed the government shutdown as a sign of new U.S. isolationism: “The world should live with the fact that the sole superpower will remain inwardly focused for a few more years…Washington will need a few more years to work out the populist poison that has infected its body politic since the subprime crisis. Until then, expect the U.S. to seemingly act like an emerging economy or an isolationist nation: shutting down at home and shutting out the world.”

JAPAN

Japanese newspapers remained critical of the budgetary upheaval in the United States, voicing anxieties on its implications for the global economy and the U.S. “pivot” to Asia.

• The Japan Times warned that “This game of legislative chicken [over Obamacare] could ruin the global economy as U.S. debts become suspect,” criticizing Republicans’ “anti-democratic” strategy to undo the already adapted healthcare law at the cost of U.S. creditworthiness.
• The Sankei Shimbun shared a similar concern, calling on the United States “not to threaten the world economy with its political wrangling,” but to “recognize its responsibility as a superpower.” Sankei added that this political wrangling will jeopardize U.S. global leadership and its “pivot” to Asia, as President Obama had to cancel a trip to the APEC and ASEAN summits.
• The Yomiuri Shimbun predicted that the canceling of President Obama’s trip to Asia “will certainly cast a shadow” over the APEC summit meeting, questioning the prospect of concluding the free trade negotiations by the end of this year.

SOUTH KOREA

Korean media expressed fears that the country’s economy could be hit by a potential U.S. default, but remained optimistic that the budgetary battle in the United States will not affect its military presence in South Korea.

• The Korean JoongAng Daily, quoting the U.S. Treasury that the U.S. economy “could plunge into a downturn worse than the Great Recession if the U.S. Congress drags its feet on raising the debt ceiling,” cautioned that the export-oriented Korean economy will significantly suffer from such consequences.
• The Chosun Ilbo reassured Koreans that the U.S. will maintain its military presence in South Korea despite budgetary upheaval at home, quoting Defense Secretary Chuck Hagel, who was on a four day trip to South Korea. He promised that the Pentagon would maintain the 28,500 troops in South Korea regardless of budgetary constraints.