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Future of Asia Conference 2016
The Los Angeles
World Affairs Council's inaugural “Future of Asia” conference on Sept
15th-16th revealed a continent where economic pragmatism increasingly
trumps political animosity, where Asian millennials are focused on the
promise of future growth rather than historical grievance, where private
entrepreneurs are making inroads into the state-dominated economy in China,
where an inward-looking India is starting to engage with the outside world,
where a formerly flailing Japan has found some stable political leadership...
but where air quality and food safety are suspect, and inter-state rivalries
require, more than ever, a stabilizing US presence. Asia is a continent
where the stakes are rising rapidly - both in economic promise and expansion
of individuals' horizons, but also in environmental and security challenges.
57 speakers and 414
attendees engaged in broad-ranging conversations at the Fairmont Hotel in
Santa Monica about the future of the Asia-Pacific and its relations with the
US, under the overarching theme of "Asia's Emerging Middle Class" -
predicted by the OECD to grow from 500 million in 2009 to 3 billion by
2030. Building on the success of this year's conference, next year the
Los Angeles World Affairs Council's "Future of Asia 2017"
conference will focus on "Leadership in Asia", both in the
political arena and in the business world. Videos of all the talks and
panel discussions from "Future of Asia 2016" will be posted online
in the coming weeks.
The conference
opened with 10 speakers talking for three minutes on their vision of Asia in
2030. Shivshankar Menon, former Indian National Security Adviser, said
that by 2030 "Asia will surpass the combined economic and military might
of North America and Europe - this is not that the US is declining, but that
China and India are rising." Liu Ming from the Shanghai Academy of
Social Sciences said that while China today is a significant regional power,
by 2030 it will be a global power, "more open and
self-confident." Tatsuo Yamasaki from Mitsubishi Corporation
warned of an intense competition for natural resources in the future in Asia,
and Bloomberg View's Mihir Sharma cautioned that the 500 million Indians
under 25 will grow up to be angry and aggressive if India does not become as
economically prosperous as they have been given to dream. But the
upside for the growing middle class is already showing itself in the travel
market - cruise ship passenger numbers are up by 39% in Asia, compared to 4%
growth in the rest of the world, according to Jan Swartz of Princess
Cruises. Martin Drew of Etihad said that in India, currently only 3% of
the population travels overseas - a "mere" 40 million people, while
in China just 4% of the population has passports - and Chinese tourists still
spend more money around the world than any other nation. Wait until
they reach American levels of 35%, or European levels where 70% of the
population has a passport!
Much of Asia's
growth will occur in the cities - 82% of Americans live in cities, but still
just 48% of Asians are urbanized, a figure that is changing rapidly -
"One Canada is being built every year in Asia" said Benjy Ward from
the architectural firm Gensler. But the breakneck pace of China's
urbanization has created daunting concrete megablocks, often with inadequate
basic services, including clean, running water. "The number one
threat to humanity is water scarcity, and China is facing that, from leaks
and pollution," said Neal Gordon from JM Eagle, the world's largest
plastic pipe manufacturer. "Our dream is for Chinese to turn on
their tap and have clean, healthy water."
Andy Xie, former top
China economist for Morgan Stanley, reminded the audience that China is a
"reemerging economy", not an "emerging" economy, since it
was quite prosperous in the 1920's and '30's. Today he said that
despite rapid growth it is being held back by the high level of state
investment, compared to private investment: "the nominal GDP is up by 22
times, but nobody has made money off the stock market - that is totally
nuts!" As an example of the state's overinvestment, he points out
that China builds 10,000 kms of new highway every year. The highway
system is already larger than the US - and yet China's automobile fleet is
only half of the US. "All China's problems can be traced to this
misallocation of capital."
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Dinner Keynote: Admiral Harry Harris
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Notwithstanding the
drag effects of China's state owned enterprises and India's unyielding
bureaucratic red tape, both economies are set to become powerhouses with
enormous buying power. "China and India will account for half the
Asian middle class by 2030 and one-third of the global middle class,"
said Alan Siqueira of Wells Fargo. "The numbers are staggering and
will generate significant growth opportunities for multinational
companies."
The interdependence
of Asia and the US came up repeatedly during the conference, both in terms of
the business and investment opportunities spanning the Pacific, and also in
the desire of most Asian countries for the US to continue to guarantee the
peace in the region, even as they increase their economic ties to China.
Bilahari Kausikan, ambassador-at-large from Singapore, said that South East
Asian countries "want to have the best possible relationship with both
the US and China, and do not want to have to choose between them - the US
will play a vital role in maintaining this balance." Kausikan said
that the disputes between the US and China may not be able to be solved,
"but they can be managed." Jeff Bader, who was President
Obama's top Asia advisor on the National Security Council, said that there
has been considerable progress between the US and China on climate change and
other areas, but said one dark spot was the need for more cooperation on
North Korea: "if North Korea continues on this path, we will need to
take action against them that China will not like."
Duncan Clark, who
has just written a book about Alibaba's Jack Ma, recounted the riveting rise
of Ma from tour guide to one of the wealthiest entrepreneurs on the planet
through his extraordinary ability to "lead and inspire - he is a
fantastic talker." Clark said "If you really want to
annoy anyone in Alibaba tell them they are the Amazon of China - they will
punch you - because they are really more than that." With the
world's biggest IPO of $25 bn in 2014, Alibaba is responsible for 30 million
packages being delivered daily and processes one third of all global online
payments. Now the Communist Party has to work out how to deal with such
a powerful figure in private enterprise: "The PRC is the 'pragmatic
republic of China'," said Clark. "They know they have to
adapt - we are talking about a negotiated transfer of power from the
government to the private sector." Albert Wong of Hong Kong
Science and Technology Parks said "in the next 10 to 20 years, startup
entrepreneurs will take over China and Hong Kong." And while
China's legal system is still far behind the US, Christopher Tang from UCLA
Anderson School of Management said Americans need to get used to the lack of
legal clarity: "that is the way it is - the opportunity is that you can
try new things!" Andrew Pan of East West Bank said the US needs to
continually encourage China to be an international player. China has
"opened the door" to foreign banking, but kept it at a very low
percent. And former US Trade Representative Charlene Barshefsky said
that 70% of US companies complain that China's regulations are the single
biggest barrier to investment in the country. But at the same time
Chinese companies realize they need to engage in the west. In a panel
on the future of cars moderated by Michael Dunne of Dunne Automotive, Patrick
Duan of BYD from Shenzhen said that the reason his company chose to begin
making electric cars in California and not back in China was because
"the US is a quality market, it is good for brand image. If we
made the cars in China and tried to sell here it would not be
successful."
Meanwhile as India's
growth rate has overtaken China for the past year, Bloomberg's Mihir Sharma
sought to deflate the India-China league ranking: "the comparison has
always been misleading because China has always had a more effective state -
these were not comparable countries for the past 1,000 years." But
clearly there has been progress of late, with India's economy predicted to
grow by 7.9% this year. Gunjan Bagla of Amritt said that under Prime
Minister Modi "corruption in the higher levels of India has been pretty
much eliminated." Rafiq Dossani from RAND Corporation reminded
everyone that in India, "conditions for the poor are miserable,"
but said that at the very least in democratic India "there are important
election cycles every year putting pressure on the government to
perform." But Sharma, who said "I love India - it is so
complicated!" warned that India still lags in education and social
services: "an uneducated and unhealthy workforce cannot build strength
in a 21st century economy."
On the Entertaining
Asia panel, Angela Killoren of CJ Entertainment pointed out how the Korean
dance bands of K-pop transcended borders to appeal to many different cultures
in Asia and beyond, driven by social media: "Youtube is the primary
music discovery platform across the globe." What is more, the high
production quality of K-pop videos that have spread around Asia has raised
the bar for what audiences in China and elsewhere expect in terms of
production quality from their domestically-produced TV and music products -
nobody wants to watch shoddily-produced shows any more. Man Jit Singh
from Sony Pictures said that there was a similar spreading of Bollywood dance
movies which are starting to become popular in China and Korea -
"For Indian entertainment the spread out has been bigger than the spread
in." Outside the music world, with films and TV dramas audiences
are most interested in local content. "People want stories told in
their local language with their local stars they know and love," said
Killoren. On Thursday night Jonathan Friedland of Netflix
said that to appeal to local markets in Asia - an area that Netflix has only
been operating in for less than a year - they were already making multiple
shows in Japanese and also producing shows in Hindi, Korean and even in the
Cambodian language. "Incomes are rising enormously across
Asia and there are lots of adaptations for mobile businesses," said
Friedland. "All of this benefits the consumption of
entertainment."
Despite the overall
optimism amongst most of the speakers on Asia's future prospects, there were
some challenges, and none more urgent than the nuclear threat from North
Korea, as elaborated by Admiral Harry Harris, the Hawaii-based PACOM
commander in his keynote speech on Thursday evening. Noting
that North Korea is "the only nation to have tested nuclear weapons this
century," Harris, who commands 380,000 US personnel across the
Asia-Pacific, said "I want you to stop for a minute and think about this
- combining nuclear warheads with ballistic missiles in the hands of a
volatile leader like Kim Jong-Un is a recipe for disaster." He
called on China to do more to pressure Pyongyang, and said he also
prioritized US-South Korean-Japan cooperation against North Korea.
Hyeonseo Lee, a
defector from North Korea, told the "Pyongyang-Seoul" panel
moderated by Kathy Moon from Brookings how "we woke up some days
with whole families disappearing overnight." The government's line
was that the disappearances were "the Americans' fault".
But today as more and more Chinese cell phones are being smuggled into North
Korea the regime's propaganda is less airtight. Yoon Young-kwan, former
S Korean foreign minister, said the more contact there is between the two
parts of Korea, the more likely it is there will be an internal
transformation of the Pyongyang regime, as opposed to a sudden - and
potentially dangerous - collapse.
Chung Min Lee from
Yonsei University in Seoul called Asia "the department store of security
dilemmas", and said "the big debate in Tokyo and Seoul for the next
few years is between social security versus national security." As
rising prosperity has allowed states to pour money into military resources,
Bud Cole from the National War College ticked off a long list of countries in
Asia who have begun building a submarine fleet in response to China's
submarine program - "China's actions are almost counterproductive,"
he said. But despite a widely-shared concern over North Korea's nuclear
and ballistic missile program, there was notably less anxiety amongst
conference participants over the South China Sea that has grabbed the
headlines of late. "There is a low probability of conflict
breaking out over the South China Sea," said Admiral Dennis Blair,
former PACOM commander and Director of National Intelligence. He
pointed to a long string of disputes over small island groups from northern
Asia between Russia and Japan all the way down to the equator. Adm
Blair said the region was used to managing these territorial squabbles, and
"all the maneuvering over the South China Sea islands is also bumping
and grinding its way through to a balance." Eiichi Katahara from
the National Institute of Defense Studies in Tokyo expressed paradoxical
concerns about China: "Yes, we are concerned about China's growing
[military] capacity, but we are also concerned about China collapsing.
We need China to be stable!"
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Pyongyang-Seoul Panel: Katharine Moon,
Yoon Young-kwan, Hyeonseo Lee, Chung Min Lee
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In the Asian
Healthcare panel UCLA Center for World Health's Tom Coates observed that care
in Asia is over-centralized in hospitals, and needs to spread out more.
And environmentalist Wen Bo pointed out the toll of increased cancer and
other diseases from widespread pollution in China: "think of China
as a boxer - he can be very tough and very big - but if he has cancer, he
will die."
On the Change in
Japan panel, Barrenrock's Clay Chandler pointed out that Japan is losing a
million people a year in net population shrinkage, and yet there is little
support for increasing immigration into the country. In an earlier
session on Friday Tokyo University Professor of Gerontology Hiroko
Akiyama had talked about her pilot programs designing communities for Japan's
aging society, including giving seniors"workplaces for a second
life" with part time jobs growing vegetables on roof-top gardens or
providing childcare support. But she too saw little change in the near
term on the country's immigration policy.
At least the current
government of Shinzo Abe is relatively stable, said Tsuneo Watanabe of the
Tokyo Foundation - largely thanks to the previous "bad"
administrations that nobody wants to return to. Richard McGregor of the
Financial Times pointed out the paradoxical relationship between Japan and
its large neighbor China, on whom they rely economically but whom they view
with suspicion politically:"Japan is not sure if they want China to
succeed or fail."
But when asked about
the future of Japan-Chinese relations, both Liu Ming from the Shanghai
Academy of Social Sciences and former vice finance minister in Japan Tatsuo
Yamasaki said that despite the political differences between the two
countries, they would have to learn to live together. "I think our
countries are both very smart," said Liu Ming. "We will have
half competition and half cooperation." And Yamasaki said, despite
the areas where they disagree, both countries' economies are closely
linked. "We cannot live without each other."
Speaking after breakfast on Friday, Richard Wike of the Pew Research
Center said that despite the political friction between Tokyo and Beijing, a
plurality of Japanese polled (47%) said that China's economic growth "is
a good thing" for Japan.
Talking about the "China
Dream" as enunciated by President Xi Jinping, Huang Jing of the Lee Kuan
Yew School of Public Policy said that, unlike the "American
Dream" which in centered on individuals' hopes and achievements, the "China
Dream" is a collective, national aspiration, coming from the top down.
Or as Claremont's Minxing Pei put it, "What Xi Jinping
dreams of is the survival of a one-party system." Meanwhile as for
the Chinese middle class and the desire for democracy, Huang said that
clearly Chinese citizens want more control over their lives, but "they
want evolution, not revolution".
Jeff Wasserstrom of
UC Irvine and Chu Dongmei of the Chinese Academy of Social Sciences discussed
China's "One Belt One Road" strategy of expanding investment
and development across Central Asia. Many countries in the region are
keen to have Chinese involvement to balance against Russia's power. But
Wasserstrom cautioned that by trying to build railroads in violence-prone
countries like Pakistan, China might be overstepping - "China is
venturing into dangerous territory there."
The Future of Asia
is, of course, uncertain territory - full of opportunity, but pricked with
risk and unknowable unknowns. Who could have imagined a penniless tour guide
from a small Chinese city rising to become the world's largest online seller
in the space of 15 years? As Asian countries continue to grow in
economic and political might, one of the defining questions for their future,
and for the future of the world, will be the quality of leadership in Asia -
in government, in board rooms, and in society at large. We hope you
will join us for "Future of Asia 2017" - "Looking at
Leadership."
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Sincerely, Terry McCarthy
President and CEO, Los Angeles Foreign Affairs Council
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