Opportunities and risks from economic recovery

Former prime minister of Japan Yukio Hatoyama, chairman of the IFF Advisory Committee, welcomes the shift in China’s direction towards sustained growth through structural reforms
Gouqi Island, East China Sea, looking towards Japan

The policies of the US and China have a profound impact on the state of the global economy. In the US, robust domestic economic growth is expected to continue for the time being, which should drive personal consumption and an increase in disposable income. Declining crude oil prices are also good news for American consumers. In China, President Xi Jinping has noted the economy is entering a ‘new normal', with less emphasis on the specific rate of growth. Economic structural adjustment will be treated as a vital priority, with further reforms and opening up planned.

I heartily welcome such a shift in China's direction away from the high growth rates stressed in the past – pursuing, in its place, sustained growth through structural reforms. The establishment of the Asian Infrastructure Investment Bank (AIIB), the One Belt, One Road vision and other efforts are also important. It will, however, take a certain amount of time for such institutions and ideas to function. In that sense, I look forward to the introduction of policies, such as the creation of new jobs through online shopping, mobilisation of the stock market and other areas in which China offers dynamic potential, to infuse even greater vigour into the nation's economy.

The Association of Southeast Asian Nations (Asean), meanwhile – soon to celebrate its fiftieth anniversary - is acclaimed as the world's most successful regional cooperation association of developing nations. In December 2015, the Asean Economic Community was launched. In addition, the expanding ranks of the middle-class, along with redoubled innovation, promise to pave the way to further high added value for the Asian economy at large.

At the same time, there are also areas in which the future remains uncertain. They include issues inherent to the economies of the US and China themselves, the international monetary system and other sectors. Questions remain, for example, of how the crisis in Greece will eventually be resolved and what the future holds for the eurozone. There are also serious political issues, capable of heavily impacting global economic endeavour. The tense situation in Ukraine, the Iran nuclear development issue, the Syrian refugee crisis, the deadly threat of the so-called Islamic State of Iraq and the Levant, and many other dilemmas far too numerous to mention in full here.

Managing the transition

Over the long term, future progress depends upon effective management of transitional periods for the international economic and monetary system, the transformation of Bretton Woods system in the post-World War era, realigning peaceful and constructive settlements with newly rising powers, and other demands.

From that point of view, the position of China, which this year launched the AIIB and advocates the One Belt, One Road vision, is extremely important. Reforms in the renminbi currency will become a pressing issue, and the responsibilities for Chinese leaders will certainly grow increasingly more demanding from here on.

It is essential, therefore, to expand the opportunities presented by economic recovery on multiple levels, while concurrently moving in directions capable of avoiding deadly risk. In such terms, the roles to be played by both Japan and China will certainly become more significant. This refers to the critical need to expand Asia's middle-class; through trade investment, as well as cooperation on the monetary front.

yukio-hatoyamaYukio Hatoyama

Naturally, we cannot overlook the importance of the Regional Comprehensive Economic Partnership, essentially a free-trade agreement between Japan, China and the Republic of Korea. We must likewise recognise that the Trans-Pacific Partnership (TPP), a goal now reportedly actively pursued by China as well, harbours the potential to buoy the economic foundation of the entire region – essentially as a 21st century-format free trade agreement.

A brief word of warning with regard to TPP: by placing the ultimate priority on economic activity, there can be risks for human health and life. Under TPP, for example, there are serious concerns over the possible importing of genetically modified crops, and similar worries.

Considering such factors, the East Asian Community holds the greatest potential for optimising the roles and collaboration of Japan, China, the Republic of Korea and Asean, in spearheading further growth and progress throughout Asia.

Fostering mutual confidence

From the perception of the general public, I believe it can be said that genuine prosperity will never be realised without stable and working materialistic and psychological harmony. The same holds true for the ties between individual nations. As such, I find it self-evident that the road to true economic progress does not lie in excessive outlays for conflicts, deterrents and other behaviour rooted in lack of trust. Rather, by advancing the utmost efforts to foster mutual confidence and understanding, and forging win-win relationships, it will be possible to bear far greater economic fruits in the long run.

Such an enlightened stance is imperative when we consider that, much like the environmental crisis, we face issues clearly impossible for any one nation to resolve on its own. By their very nature, if not effectively addressed, such challenges threaten to produce massive economic losses on a global scale.

Today, we stand at the threshold of the road to a bright and progressive future. In my mind, the way to realise ideas often prone to be dismissed as vague utopian visions lies in one vital area – mobilising greater numbers of people who believe in and are willing to journey down such pathways.

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