Asian Economies: Myths And Realities

Do you think of the 21st century as the "Asian century" — that the "rising tiger" economies of China and India will take over the world? Think again, says Minxin Pei, in the cover story for Foreign Policy. He debunks myths about the inevitability of Asia's rise with host Guy Raz.

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GUY RAZ, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Guy Raz.

The U.S. and China will launch what they're calling a strategic and economic dialogue here in Washington tomorrow.

Secretary of State Hillary Clinton and the Treasury secretary, Timothy Geithner, will host the gathering with their Chinese counterparts. Clinton has made China, and the rest of Asia, a top foreign policy priority, in part, because China's got leverage.

This month, China reported it now holds $2 trillion in U.S. debt. Still, an article in Foreign Policy magazine is skeptical about the dawn of an Asian century and the decline of America.

I spoke with its author Minxin Pei, and asked him if U.S. influence in Asia is on the wane.

Professor MINXIN PEI (Political Scientist; Director, Keck Center for International and Strategic Studies, Claremont McKenna College): No, America influencing Asia is not decreasing, despite the rise of Chinese power and Indian power for a very simple reason: Asian countries want to hedge. Asian countries don't want their big brothers in the neighborhood to become too powerful and dominate them.

The U.S. is counted on as a balancer against regional powers. So that's why Southeast Asian countries all want the U.S. to stay and stay there in a very strong way so that China, India and Russia will not be able to bully their way around.

RAZ: Is Asia's economic rise, and we're not just talking about China or India but Vietnam, Malaysia, even the Philippines, is their economic rise unstoppable?

Prof. PEI: No. China and India and all the Southeast Asian countries face many significant hurdles ahead: global warming, energy supply constraints, changing demographics. China will soon become an aging society. When a country becomes an aging society, you will spend a lot of money on retirement, on health care, and that will mean less money for investment, and economic growth will decline.

Japan is already in that stage, and soon China will become a country that has an older demographic profile than the U.S.

RAZ: Minxin Pei, how much of a test is this current global economic crisis a test for whether the Asian economic model is sustainable?

Prof. PEI: It's an excellent test. So far, most of the Asians will say the Americans have failed. The Asians have passed. I would say maybe it is too early to laugh.

The bubble, of course, took place in the U.S. and burst in the U.S. Asian was not affected financially, but Asia has been significantly affected in terms of its exports because Asian countries depend on the U.S. for its export market.

Going forward, you will have to see whether Asian economies will take advantage of this crisis and build up the strength they used to lack, such as in research and development and innovation.

RAZ: And you write that innovation will still mainly come from America and the West rather than Asia for the foreseeable future, but when I think of innovation, I'm thinking of things like the Nano car from the Indian company Tata car, that sells for about $2,500. That's pretty innovative.

Prof. PEI: Well, it's innovative in terms of cost reduction, but it's not innovative in terms of technology. If you look at where the best technology is being invented, where the best fundamental ideas are being created, these things take place in the U.S., and specifically in U.S. universities. Of the 20 top universities in the world, only one is in Asia, and that's in Japan.

RAZ: Professor Pei, it seems as if the title, the notion of superpower is up for grabs all of the sudden because of the financial crisis, the global crisis. Nobody seems very strong. Who is going to take it?

Prof. PEI: Well, this is a fascinating moment. Frankly, I do not know, but if I have to bet, I would say the U.S. will recover and regain its lost international prestige and power status because the U.S. system is fundamentally a very dynamic, self-correcting system, and this crisis gives the U.S. an opportunity to prove that it is such a system.

This does not mean that the American century will continue. We're going to see the 21st century, not the Asian century, not the American century but the post-American century.

RAZ: Minxin Pei is a China specialist who teaches at Claremont McKenna College in Southern California.

Professor Pei, thanks very much.

Prof. PEI: Thank you.

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