December 18, 2013 3:34 pm

From Xi’s rise to Abenomics, six events that shook Asia

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As one nation strives to revive its economy, others struggle with poverty and calamity
©Bloomberg

What are the six most significant things to have happened in Asia this year? The question is entirely arbitrary. Why six? What counts as significant? And, while we’re at it, what on earth do we mean by Asia, a term that has been used to refer to the “lands east of Europe” since Herodotus? But it’s nearly Christmas, so let’s press on. We’ll define Asia in the way the Financial Times does, broadly the region from the Indian subcontinent to Australia. That is a set of nations containing almost 4bn people, more than half the world’s population. “Significant” for our purposes means something that will affect a large number of people for many years, a definition that excludes interesting developments in small countries.

This year had its share of tragedy. Typhoon Haiyan killed more than 6,000 people in the Philippines alone. Then there was the fallout from the grotesque rape and murder of a 23-year-old student in India, which trained a spotlight on the long-ignored issue of violence against women. In an altogether different realm, the assertion by Kevin Rudd, then Australian prime minister, that the commodities boom was over, crystallised concern that the China-fuelled supercycle had run its course. Other possible contenders were Alibaba’s abandonment of its $60bn-plus initial public offering after Hong Kong authorities refused to bend rules on corporate boards; a renewed outbreak of turmoil in Thailand (déjà vu); and the first civilian transfer of power in Pakistan, albeit only to make Nawaz Sharif prime minister for a third time (déjà vu again).

So, drum roll please, the six most important events are:

Xi Jinping’s consolidation of power. Until this year, the Chinese leadership was becoming ever more collective. China’s new president has reversed all that. He launched an anti-corruption drive that has dismayed luxury brand makers, terrified party cadres and affected previous “untouchables”, including Zhou Yongkang, a former member of the standing committee. Mr Xi is shaping up to be the most powerful Chinese leader since Deng Xiaoping. That makes him secure enough to undertake radical reform aimed at addressing severe inefficiencies in China’s economy, mainly by allowing market forces a bigger role. Abroad, Mr Xi seems much less reticent about asserting China’s power.

Senkaku/Diaoyu. One sign of that is growing tension over disputed islands in the East China Sea. Beijing is testing the resolve of both Tokyo and Washington to defend Japan’s administrative control. Barack Obama’s non-appearance at the Asia Pacific Economic Co-operation forum in Bali, due to the government shutdown, only reinforced the idea of fading US commitment. (Strong US support for the Philippines after Haiyan helped counter that impression.) China’s declaration of an “air defence identification zone” including airspace over the disputed islands has alarmed the region and exposed cracks in the US-Japan alliance.

Abenomics. Part of Japan’s response to the “China threat” has been an attempt by Shinzo Abe, the hawkish prime minister, to revitalise its economy. The main policy tool has been massive monetary expansion aimed at banishing 15 years of deflation. This has breathed fresh life into the economy, though sceptics expect the effect to wear off. Even if Japan succeeds in re-anchoring inflation at 2 per cent, it will be left with an ageing and shrinking population. Still, succeed or not, Abenomics will have big ramifications for Japan’s economy and for international money flows.

Modi mania. The prospect of Narendra Modi becoming India’s prime minister after elections next May has energised and dismayed in equal measure. Advocates hope that Mr Modi, chief minister of Gujarat state and prime ministerial candidate for the Hindu nationalist Bharatiya Janata party, can replicate Gujarat’s economic success at a national level. Detractors fear Mr Modi is anti-Muslim. They also say he has taken too much credit for success in Gujarat, which has largely failed to translate growth into improving conditions for the poor.

Taper talk. The taper did not happen in Asia. Strictly speaking it didn’t happen at all. But the mere prospect of the US Federal Reserve reducing the amount of bonds it buys was enough to send some Asian markets, notably India and Indonesia, into a spasm. When the taper starts in earnest, Asian economies that are vulnerable to capital outflows could suffer.

Rana Plaza. The collapse of a building in Bangladesh, killing 1,129 people, brought worldwide attention to the miserable conditions in which millions of textile workers toil in the cause of cheap clothes. In some ways, Bangladesh’s textile boom has been a boon, especially for women for whom even a sweatshop is a step up. The deaths at Rana Plaza resulted from both local corruption and the willingness of brand-name western companies to turn a blind eye. Rana Plaza will only be significant if it results in change that can balance economic aspiration with minimum standards of safety and dignity. It is included as much in hope as in expectation.

david.pilling@ft.com

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