Reactions to Warnings of a New Economic Threat From the "East"

John de Boer (Research Associate, GLOCOM; Japan Fellow, Stanford University)

As the U.S. continues to struggle with unemployment and a stagnant economy the media is quickly making China an issue. The prevailing analysis, if you want to call it that, is that China is a threat to the U.S. economy and way of life just as Japan was pumped up to be in the 1980s. With its cheap labor and rising technical proficiency, the allegation is that while China is stealing jobs and money today, tomorrow it will destabilize global financial markets. The same argument is often echoed in Japan as well where there is a permanent fear that China will overtake Japan as number one in Asia. These debates started in earnest at the height of Japan's so-called kudoka, or hollowing-out, as increasing numbers of Japanese factories shifted production to China. Being an election year in the U.S. it is likely that we will hear more of this discourse.

The New York Times featured one such article on the cover of its 2 March 2004 issue. There, Keith Bradsher loudly declared, "Like Japan in the 1980's, China Poses A big Economic Challenge". Perhaps reflecting Japan's lost clout and noting the fact that warnings about Japan in the 1980's did not materialize, Bradsher tried all the more harder to convince his readers that the true threat comes from China, "Japan's heir as Asia's rising star". His argument was that China "could do what Japan did, but do it bigger and better for a long period of time" because of its cheap labor, vast population and military muscle. The main thrust of his thesis was that, unlike Japan, which is dependent on the U.S. for its military security, America has very little leverage over China. He quoted officials saying that, "Washington is concerned about China setting its own agenda" and claiming that "the Japanese were more friendly".

The New York Times featured Bradsher's article on the front page because it attracts a wide audience and taps into deeply rooted conventions surrounding the structures of authority. Most American readers, like their Japanese counterparts, see something fundamentally wrong and alarming with what they perceive as an inferior Asian country destabilizing and potentially overturning the established hierarchical world order. U.S. fears are based on racist and orientalist notions of how things are supposed to be, namely with the White "West" on top. Japan continues to employ its own hierarchical nature of things that situates itself as the leader in the "East".

U.S. officials think Japan was more "friendly" only because, despite Japan's global expansion, the U.S. was eventually able to control and pressure Japan into doing what it wanted it to do. That entailed pushing it towards market deregulation, currency manipulation or getting it to abandon the idea of an Asian Monetary Fund. In that sense, Japan operated by the rules of the game.

There is only one game in town and that is to work within the established (American) model of capitalism. Japan was portrayed as a threat only when it was positioned to challenge the dominant model in the 1980's with its own system (some called it developmentalist others social capitalism). In ten or twenty years, many predict that China, with its own centrally controlled economy, will try to unseat the prevailing system. This goes a long way to explain why the "West" was so insistent that China join the WTO.

Ironically, Business Week International published an article on 1 March 2004 claiming that, "instead of a nemesis, China is looking more like a savior". According to Brian Bremmer and Hiroko Tashiro who wrote the piece, Japan has China to thank for its recent economic recovery. Exports to mainland China in 2003 shot up 44% while dropping 10% in the U.S. Their sources argue that China will probably be the "key driver of Japanese expansion".

However, what started out as being an article that was "friendly" to China's economic development, soon switched back to the same old rhetoric. Bremmer and Tashiro went on to conclude that although "China smells more like an opportunity than a threat" this "beautiful friendship" will only last until China starts to rival Japan in the fields of engineering and marketing smarts. China's growing economic influence is once again being couched in threatening terms, the ultimate reaction to which is both aggressive and defensive.

An alternative way of looking at these developments would be to position China's development as a gain for humanity. That a country with one-fifth of the world's population has more income should mean that fewer people are in need. This should also imply that Japan could eventually use ODA currently destined for China in other areas. Unfortunately, this does not seem to be the case. China continues to be a poor and hungry nation. According to the New York Times article referred to above, even those "lucky" few who have factory jobs with foreign multinationals or their Chinese subsidiaries only make between $60-$75 per month, at best. That is anywhere between two-three dollars a day, sometimes working ten or twelve hours in sub-standard conditions.

However dearly the Chinese government and non-governmental organizations want to improve this situation the prevailing system will continue to resist. Although economic development that translates into higher wages and better living standards is what most Chinese want, this will scare away investment. Cheap labor, which implies both low wages and low maintenance, is why most multinationals are in China. Once costs start rising, there is the threat that multinationals will pull out and go elsewhere leaving hundreds of thousands jobless and costing the Chinese government billions in terms of investment. Japan was allowed to rise out of this hole in the 1960's because the U.S. maintained considerable leverage over the country and America's control over Japan meant that Japan's economic development was not perceived as a threat to the prevailing system. When America's control over Japan loosened, the U.S. merely launched more demands and strengthened its grip. However, China has much more independence than Japan had and this Communist country it is perceived as a threat to the established order. As a result, we will likely see The New York Times and other papers that have benefited from the established order publish more alarming articles about China. After all, although it may be in the interest of most of humanity to see China prosper, this is not viewed as beneficial to the American and Japanese elite.