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Asia Unbound

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

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China’s Great Rebalancing Act

by Evan A. Feigenbaum

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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Who Will Win as China’s Economy Changes?

by Evan A. Feigenbaum

A worker stands inside the shell of a wind turbine tower in the assembly workshop of the Guodian United Power Technology Company in Baoding, China. Courtesy Reuters/David Gray.

My latest “DC Diary” column in India’s financial daily, the Business Standard, focuses on Asia’s new geography of manufacturing:

China has unsettled its neighbors with naval displays and diplomatic spats. But could erstwhile Asian strategic rivals end up as big winners from China’s economic success?

In one sense, at least, Asian economies are already winning from Chinese growth: slack global demand has meant that China increasingly powers the growth of nearly every major economy in Asia.

But the question increasingly matters in another sense, as well: Chinese leaders are committed to rebalancing at least some elements of their country’s economy. And while that, in time, will mean a more competitive and powerful China, it will also create new opportunities for those countries in Asia that get manufacturing and investment policies right.

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China’s “Hyper IPR Environment”

by Adam Segal
Counterfeit goods seized by the U.S. government are shown on display at the National Intellectual Property Rights Coordination Center in northern Virginia on October 7, 2010.

Counterfeit goods seized by the U.S. government are shown on display at the National Intellectual Property Rights Coordination Center in northern Virginia on October 7, 2010. (Jason Reed/Courtesy Reuters)

Richard Suttmeier and Xiangkui Yao have just published a new and excellent paper on China’s intellectual property (IP) rights transition. It is well worth the read, and, until September 8, you can download it for free from the National Bureau of Asian Research’s site.

There is much good analysis of the 2006 Medium- to Long-Term Scientific and Technological Development, the 2008 National Intellectual Property Strategy, as well as the 2010 National Patent Development Strategy and how these and other policies fit into and help shape China’s emerging IP regime.  Suttmeier and Yao’s main argument seems to be that outside observers (and probably the Chinese themselves) have no idea which way China is going to go. We could be at the beginning of “harmonization”, with Chinese laws and, more importantly, practices increasingly coming to look more like the rest of the world’s. Alternatively, the rise of strategic behavior and techno-nationalist policies could promote “tit for tat behavior” and create “an IP security dilemma that would undermine China’s aspirations and make international cooperation much more difficult.”

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Open, Interoperable, Secure, and Reliable

by Adam Segal
Howard Schmidt Releases International Strategy for Cyberspace

Cybersecurity Coordinator and Special Assistant to the President Howard Schmidt addresses the White House Launch of the International Strategy for Cyberspace in the Eisenhower Executive Office Building, May 16, 2011. (Lawrence Jackson/Courtesy White House)

The White House released its International Strategy for Cyberspace yesterday.  Many of the ideas and objectives have been expressed before by various officials, but newness does not seem to be the point.  Rather, the importance of the document rests in gathering all the United States’ goals for cyber in one place, signaling to both adversaries and friends what Washington is expecting from them and what it will do itself.

The strategy states that the United States will “work to promote an open, interoperable, secure, and reliable information and communications infrastructure.”  As Jason Healey at The Atlantic Council notes, the phrasing of these goals is important.  The strategy does not promise absolute security or reliability, which are unattainable, but says communications systems should be secure and reliable “enough” to ensure that users continue to have trust in them.  Diplomacy, defense, and development are to be the tools through which the United States pursues these four goals, and U.S. officials will be concentrating their efforts in eight areas: international standards and open markets; network defense; law enforcement and extending the reach of the Budapest Convention; military alliance and cooperative security; Internet governance; international development and capacity building; and the support of Internet freedom and privacy.

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Security and U.S.-Sino Scientific Collaboration

by Adam Segal

Space shuttle Discovery lifts off from the Kennedy Space Center in Cape Canaveral, Florida on February 24, 2011. Six astronauts were aboard on a mission to the International Space Station. (Pierre Ducharme/Courtesy Reuters)

This does not look like a great idea.  According to Science (behind paywall), Representative Frank Wolf (R–VA) inserted two sentences in the bill that averted the federal government shutdown prohibiting “any joint scientific activity between the two nations involving NASA or the White House Office of Science and Technology Policy (OSTP).” It is not clear how sweeping the provision is, and it only extends until the end of fiscal 2011, but the article quotes Wolf as saying he would like to shut down all collaboration: “We don’t want to give [China] the opportunity to take advantage of our technology, and we have nothing to gain from dealing with them.”

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American Innovation and the Asian Challenge

by Adam Segal

Earlier this month, I sat down with Harry Kreisler of UC Berkeley’s Institute of International Studies to talk about my new book,  Advantage.  Watch as we discuss the state of innovation in the U.S. and Asia, as well as how we can play to our strengths in what I call the “software” of innovation in order to maintain our lead in the global economy.

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The Budget and Innovation

by Adam Segal
Budget and Innovation

The U.S. 2012 fiscal year budget is unveiled in Washington on February 14, 2012. (Jason Reed/courtesy Reuters)

A little house keeping. I was on the road last week, speaking about Advantage in Berkeley and Seattle.  About ten days ago, Foreign Policy published my response to the State of the Union, “The Great Invention Race,” and just posted some of my thoughts on the budget and innovation—increased spending is definitely good news (if it does not eventually get slashed in the battle to reduce the budget deficit), but it is not enough.

One of the most interesting exchanges I had on the West Coast involved a serial entrepreneur who was trying to commercialize a dual-use technology but kept running into government bureaucracy. Venture capital was scared away from making an early investment, and hiring foreign-born workers was near impossible because of deemed export control laws—a Chinese engineer, for example, who works with technology that is controlled for export is “deemed” an export, and the company must obtain a license for that worker to use the technology in the lab.

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Two Cheers for Technology and the Hu Visit?

by Adam Segal

U.S. President Barack Obama shakes hands with Chinese President Hu Jintao after a joint news conference in the East Room at the White House in Washington, January 19, 2011. (Jim Young/Courtesy Reuters)

I have to admit that I did not have very high expectations for concrete deliverables from President Hu Jintao’s visit to Washington.  Yes, the Chinese would bring their checkbook—and here they did not disappoint, announcing a $45 billion trade deal—but they would be vague and noncommittal on just about everything else that Washington wanted: more transparency on military issues, increased pressure on North Korea, and revaluation of the renminbi.  Reports suggest that there was plenty of evasiveness at Wednesday’s press conference.  President Obama, for example, talked about universal values; President Hu responded with the need for “mutual respect.”

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Calculus in the Snow

by Adam Segal
Chinese Doctors Walking in Snow

Military doctors make their way across snow to see patients trapped by heavy snowfall on the outskirts of Altay Prefecture, Xinjiang Uigur Autonomous Region, January 27, 2010. (China Daily/Courtesy Reuters)

What almost always goes hand in hand with worry about the United States is a tendency to overstate how great things are going in China or India.  So not only does the postponement of the Eagles game after a blizzard reflect the “wussification of America,” in Governor Edward Rendell’s memorable phrase, but this could never happen in Beijing or Shanghai.  The Chinese would march to the stadium “doing calculus on the way down” (the winter storms of 2008 that stranded thousands of travelers in central and southern China and resulted in the death of over 100 people must have slipped the governor’s mind).

I have been guilty of this myself.  Soon after I published “Is America Losing Its Edge?” in Foreign Affairs, I went to India expecting to hear a great deal about America’s decline.  While there was huge and justifiable excitement and confidence about the rise of India’s software industry, there was also significant worry about how sustainable it was and how innovative India truly was.  And almost every Indian CEO, scientist, and entrepreneur I spoke with cautioned me not to underestimate the resilience of the United States.  As C.N.R Rao, Chair of the Prime Minister’s Scientific Advisory Council, put it at a 2008 conference: “America—whether you like it or not, however much you complain, howl and cry—continues to be the centre of science and innovation.”

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Reviving American Innovation

by Adam Segal
US Flag in Front of Cooling Towers

A U.S. flag flutters in front of cooling towers at the Limerick Generating Station in Pottstown, Pennsylvania. (Kevin Lamarque/Courtesy Reuters)

It is only the fourth day of the new year and I suspect we are at the beginning of what will be a mini-boom in articles on the future of American power.  As you can imagine, the picture painted by most does not look bright.  The United States is overspent and overstretched.  Domestically, policymakers cannot seem to get anything done, and they seem particularly paralyzed when it comes to making difficult decisions necessary for immigration or tax reform.  To be fair,  despite the presence of “decline” in their article titles, Paul Kennedy in the New Republic and Gideon Rachman in Foreign Policy are really talking about relative power; a return to a more “normal” time when the United States, though still very powerful, must confront real limits to its own resources and the rise of new powers, China in particular.

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