Valdai Paper #30: The Prospects of International Economic Order in Asia Pacific: Japan’s Perspective

The 30th Valdai Paper covers the Japanese outlook on the prospects of the international order in the Asia-Pacific region. The author analyzes the prospects of the economic order in the APAC through the prism of structural problems of the region's leading economies – China and Japan.

He corroborates that the "Age of Asia" – the period when the region will become a full-fledged center of the world economy and leave the US behind – has not come yet. It is a result of underdeveloped financial markets and instruments of Asian states, limitations of the export-oriented development model and the unresolved problem of conversion of savings into long-term investments. Should the problems be left without a solution today, the author warns, China may suffer the same economic fate as Japan (a long stagnation), global economic misbalances would not be overcome, the US dollar would remain the dominant currency in Asia and the rest of the world, extending the "American", but not the "Asian", century.

In this regard, the author draws what may seem a paradoxical conclusion at first sight: although the Trans-Pacific Partnership was engineered as a means of forming an economic order favouring and tied to the US in the APAC. Strategically, this is the very project capable of unlocking the economic potential of Asia to the maximum. It poses a much higher demand for structural economic reforms amongst its members than the alternative project RCEP.

Unlocking the economic potential of Asia, the author notes, demands gradual adhesion of all key Asian economies to the TPP, starting with South Korea and Taiwan and ending with China and India. The process is very long, so the TPP and the RCEP will co-exist simultaneously for a certain period. However, the strategic vector is aimed at their unification. That prospect, the author emphasizes, is the most suitable for the interests of Japan, who wants to conduct structural reforms of the TPP, but whose key trade partners are RCEP members.

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