CFR Presents

Asia Unbound

CFR experts give their take on the cutting-edge issues emerging in Asia today.

China’s Great Rebalancing Act

by Evan A. Feigenbaum Wednesday, August 17, 2011

A resident cycles past the Wumen Gate of the Forbidden City in Beijing. Reuters/Jason Lee.

As Vice President Biden meets with Xi Jinping and other Chinese leaders this week, his number one economic talking point is almost certain to be about “rebalancing.”  Nearly all of Washington’s principal economic concerns, from currency valuation to Chinese industrial policy, touch this central issue.  But, quite frankly, rebalancing is not just an American goal.  It is, too, a Chinese objective because Beijing’s existing growth model—predicated on the two pillars of exports and capital-intensive investment—is delivering diminishing returns, and China’s savvy leaders know it.

A major new report from Eurasia Group, China Great Rebalancing Act, explains why.

First, a little truth in advertising:  I’m the head of the Asia practice group at Eurasia Group, so I helped write the report.  But our team’s report is well worth reading because it provides a very comprehensive overview of the forces and dynamics shaping the future of China’s political economy.

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Thailand’s Economy Survives it All

by Joshua Kurlantzick Tuesday, August 16, 2011
A Thai investor walks past an electronic board displaying live market data at a stock broker's office in central Bangkok August 9, 2011.

A Thai investor walks past an electronic board displaying live market data at a stock broker's office in central Bangkok August 9, 2011 (Chaiwat Subprasom/Courtesy Reuters).

A notable new entry on New Mandala points to the latest World Bank report on Thailand. In this announcement, the Bank upgrades Thailand’s economy from lower middle income to upper middle income, which is defined by average incomes of $3976 to $12275.

The fact that Thailand’s economy has grown strongly for nearly a decade and poverty has been reduced, as New Mandala notes, clearly helps to account for the growing political awareness of the rural population, which has resulted in continued support for the various populist, pro-Thaksin parties. But it is also simply amazing that, despite the political meltdown of the past five years, and the bloody standoff in Bangkok last spring, Thailand has maintained its economic momentum. In fact, despite last year’s violence, Thailand’s economy grew by over seven percent in 2010.

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Thaksin Closer to Coming Back?

by Joshua Kurlantzick Tuesday, August 16, 2011
Thailand's former premier Thaksin Shinawatra greets journalists outside his home in Dubai.

Thailand's former premier Thaksin Shinawatra greets journalists outside his home in Dubai (Jumana El Heloueh/Courtesy Reuters).

This week’s news that, only one week after Thaksin Shinawatra’s sister Yingluck officially became prime minister of Thailand, the Thai government is working to rehabilitate Thaksin, does not bode well for Thai politics. The new foreign minister, who has little experience in foreign affairs but is seen as close to Thaksin, apparently has pushed to help Thaksin travel more freely, including to Japan, even though in theory he is a fugitive from justice in Thailand. Inside the Puea Thai Party, meanwhile, many sources say that Thaksin’s allies are pushing to have him return to Thailand by the fall or early winter, when his daughter is scheduled to be married.

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China’s Dalian Demonstrations and a “More Democratic Time”

by Elizabeth C. Economy Tuesday, August 16, 2011

Residents hold a banner among demonstrators protesting against a petrochemical plant at the People's Square in Dalian, Liaoning province on August 14, 2011. The banner reads, "Give me back my beautiful home". (Stringer/Courtesy of Reuters)

No one has pinpointed the number of protestors—observers are claiming anywhere from 12,000 (the official number) to 70,000—but it almost doesn’t matter. What does matter is that once again, the Chinese people have spoken their mind through mass protest; once again the local government has listened and (apparently) capitulated; and once again civil society has emerged at the forefront of a push for political change.

What Happened?

Over the weekend, on Sunday, August 14, a largely middle-class group of Chinese citizens organized a large-scale demonstration in the coastal city of Dalian via the Internet. They were protesting what they believed to be inadequate safeguards at a local Paraxylene (a carcinogenic benzene-based chemical referred to as “PX”) factory. A protective dike around the factory had been breached by rain and high waves that resulted from the tropical storm Muifa. Residents nearby the plant were evacuated, and in the wake of the evacuation, officials reportedly began to consider relocating the factory.

However, the decision was taken away from the government by the protestors. Although the government reported that the factory had not been damaged and no chemical contamination had occurred, residents were worried about the potential for a future disaster; the chemical plant is only twenty kilometers from the center of the city. The government quickly agreed to shut down and relocate the factory. (Of course, at least one news report has noted that the factory is continuing to operate even after the government’s pledge to shut it down immediately.)

Many news reports have made analogies to a protest in 2007, further down the coast in Xiamen, where the local government, also under significant popular pressure, agreed not to site a PX factory close to the city center. There are similarities—the protesters numbered in the thousands, people communicated via the Internet and cell phones, and the type of plant was the same. In the Xiamen case, however, no plant had yet been built; the opportunity cost for the local government was significant but the actual financial loss was non-existent. In the Dalian situation, the economic losses—first from shuttering the factory and then from relocating it—will be considerable.

What It Signifies

The real significance of the protest, however, is far greater than simply another demonstration of the political potency of mass protest in China. Read more »

Yingluck’s Appointees

by Joshua Kurlantzick Wednesday, August 10, 2011
Members of Thailand's new cabinet take a group photo at the Government House in Bangkok August 10, 2011.

Members of Thailand's new cabinet take a group photo at the Government House in Bangkok August 10, 2011. (Chaiwat Subprasom/Courtesy Reuters)

New Thai Prime Minister Yingluck Shinawatra is not exactly getting off to a great start in asserting her independence from her brother, exiled former prime minister Thaksin Shinawatra. Thaksin was unfairly forced out of the country following the 2006 coup and further pressure on his allies. He is clearly the savviest politician in Thailand, but he also remains a lightning rod in the country whose continued influence over government, and possible return, are the main dangers that could cause renewed Bangkok street protests of the type that in 2006 helped spark a coup.

No one ever thought that Yingluck, whom Thaksin, nearly two decades older, treated almost like a daughter, would be completely independent. After all, Puea Thai advertised Yingluck in part as a symbol of Thaksin, which they knew would resonate with voters in the North and Northeast. The campaign featured slogans like “Thaksin thinks, Puea Thai acts.”  Thaksin at one point famously claimed that Yingluck was his “clone.”

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The Return of Suharto (Tommy)

by Joshua Kurlantzick Tuesday, August 9, 2011
Hutomo "Tommy" Mandala Putra, the son of former Indonesian president Suharto, arrives at the Attorney General's office in Jakarta August 16, 2007.

Hutomo "Tommy" Mandala Putra, the son of former Indonesian president Suharto, arrives at the Attorney General's office in Jakarta August 16, 2007. (Dadang Tri/Courtesy Reuters)

Recent articles that Hutomo Mandala Putra, or “Tommy” Suharto, is gearing up to reenter Indonesian politics, might on the face seem shocking. After all, Tommy’s father oversaw numerous brutal campaigns of repression and Tommy himself served a long sentence in jail for allegedly masterminding the murder of a Supreme Court judge. But Tommy seems to have understood the zeitgeist. In a poll released several months ago, residents of Indonesia, the supposed democratic success story of the 2000s, said, by a margin of two to one, that conditions in the county were better during Suharto’s time than under the government of democratically elected Yudhoyono. In significant part, this frustration is due to the continued challenge of graft in Indonesia, as well as to economic growth that, though strong, has not been well distributed. Read more »

What Will Vice President Biden Find in China? Take Two

by Evan A. Feigenbaum Monday, August 8, 2011

U.S. Vice President Biden speaks at the U.S.-China Strategic and Economic Dialogue (S&ED) in Washington, DC, May 2011 (Courtesy Reuters/Kevin Lamarque)

In her latest post, my colleague, Liz Economy, asks:  What will Vice President Biden find in China?  I thought I’d try out my own response to this very direct question:

1.  Biden will find a China whose rise depends on economic growth but whose growth model is no longer sustainable.

Bluntly put, China’s leaders know that their capital-intensive, export-oriented approach is delivering diminishing returns and threatens to become a major political vulnerability for the government. The global economic crisis provided clear evidence that China’s export-driven economy is vulnerable to dips in demand in the rest of the world. Meanwhile, its dependence on investment has introduced distortions and imbalances into the Chinese economy.

Why should this matter to Biden and the United States?

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What Will Vice President Biden Find in China?

by Elizabeth C. Economy Monday, August 8, 2011

Then-U.S. Senate Foreign Relations Committee Chairman Joseph Biden at the Great Wall of China at Badaling, north of Beijing, on August 10, 2001.

Next week Vice President Biden heads to China for a round of talks with the country’s current and future leaders. Certainly it is not the easiest time for the vice president to make such a trip. Few things have been as dispiriting as the terrible heat waves the United States has endured this summer, except perhaps the state of American politics. Our president seems lost, the Democrats marginalized and voiceless, and the Republicans an ugly house divided.

So, in the midst of this U.S. political and economic funk, what is the reception likely to be in Beijing? What is on the mind of Chinese observers and media analysts? Are they similarly bearish on the United States? Were all the predictions of a serious loss in U.S. international prestige on target?

Here is what I found: Read more »

China Must Worry about an American Version of Shady RAT

by Adam Segal Saturday, August 6, 2011

One of the most widespread reactions to the revelation of Operation Shady RAT, the five-year long hacking of over 70 organizations in 14 different territories, has been: how did this go on for so long without anyone knowing about it? Or to put the question in a more strategic context, why hasn’t the United States (or the West more broadly) told China to put a stop to this? Read more »

On Shady Rats

by Adam Segal Thursday, August 4, 2011

Flags of member nations flying at United Nations Headquarters. (Courtesy UN/Joao Araujo Pinto)

Another week, another report of massive cyber hacking. This time it is a McAfee report, Revealed: Operation Shady RAT, that details hacking that started at least 5 years ago and targeted companies, governments, and nonprofits in 14 countries and territories as well as international organizations such as the UN, ASEAN, the International Olympic Committee, and the World Anti-Doping Agency.  Few of the organizations and companies that were attacked are named in the report, so it is hard to know if these attacks are different from others reported on Lockheed MartinRSA, the Canadian government, or Oak Ridge National Laboratory to name just a few.  While the attacks described in the McAfee report used one Command and Control server, all of these attacks seem to share the same techniques—a spear phishing email that often exploits a zero-day vulnerability (the security researcher Mikko H. Hypponen has posted a pdf of a presentation that explains all of this)—and go after a similar type of information which makes you wonder how clearly one can divide one “operation” from the next.  So I am less worked up about the specific operations and code names, and more about the larger trend—which is that hackers have been gaining access to and stealing data from companies and countries for years.

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