Speech by Deputy Prime Minister and Minister for Finance at The 25th International Conference on The Future of Asia - Seeking a New Global Order - Overcoming the Chaos on 30 May 201930 May 2019
Nikkei Chairman and Group CEO
Ladies and gentlemen,
1. Thank you for the invitation.
a. Let me start by extending my congratulations to Nikkei on holding the International Conference on the Future of Asia for the 25th year.
b. Since its inception, the Nikkei Conference has been a valuable platform for political, economic and academic leaders to exchange views on pertinent issues concerning the region.2. The theme of this year’s conference is timely.
a. The current global order, which has underpinned Asia’s stability and growth, is under threat.3. But this is not the first time history has witnessed a transition in the global order.
a. There was the Concert of Europe before the First World War.
i. It was a Western-dominated world order, led by an assembly of colonial powers.
b. After the Second World War, a bipolar world order emerged,
i. Led by the US and the former Soviet Union.
c. To contain the Soviet Union, the US invested political and economic capital to build a broad alliance.
i. It created a world order based on the ideals of multilateralism, the rule of law, market economy, and free trade.
a) The United Nations and other multilateral institutions were established.
b) The General Agreement on Tariffs and Trade (GATT) was also formed to reduce barriers to international trade.
i. This eventually led to the creation of the World Trade Organisation (WTO) as an international organisation to negotiate global trade rules.
ii. The US provided global security and generous aid packages to countries willing to play by the rules of the new system
a) The Marshall Plan was a bold and generous initiative, which even benefitted former enemies, like Italy and the then West Germany.
b) In Asia, Japan too received American assistance.
c) Europe and Asia thus quickly recovered from the devastation of war. In turn, these countries accepted US leadership.
iii. This strategy succeeded brilliantly.
a) The nations in the US-led alliance managed to provide a better life for their peoples. This eventually led to the fall of the Soviet Union.
b) And by providing international public goods, the US managed to create a remarkably stable global order.
d. But now, the US is having misgivings about the system that it created,
i. And support for globalisation is eroding in many countries.Rising US-China tensions
4. The rapid rise of China over the last decade is also causing a shift in the global power balance
a. Competition between the two powers is inevitable, but relations have entered an especially fraught period with no resolution in sight.5. I visited both countries recently, and learnt first-hand their concerns and frustration.
a. In the US,
i. Americans feel that they have given China a free pass for too long.
a) This sense of grievance is felt across both sides of Congress and among the intelligentsia.
b) Many American workers believe that China has been taking their jobs, their technology, and is jeopardising their future and that of their children.
c) While the focus is now on trade, that is not the only issue that is roiling relations between the US and China.
ii. US companies are concerned about
a) The lack of intellectual property protection in China, and what they regard as the forced transfer of technology to Chinese firms.
b) They feel aggrieved that their companies have not been able to gain the same access to the Chinese market, while Chinese firms have enjoyed generally open access to the US market.
c) Consequently, even corporate leaders, who had previously supported the entry of China into the WTO, are now critical of China.
iii. Americans also
a) Suspect that China’s initiatives, such as the Belt & Road Initiative and ‘Made in China 2025’, are designed to supplant US’ leadership.
b) There are also concerns about the Chinese governance system. The success of the Chinese system in improving the lives of its people, is seen as a challenge to the US’ system of democracy and values.
b. In China,
i. The recent US moves coincide with rising nationalistic fervor as China commemorated the centennial of the May Fourth Movement.
a) This was a demonstration against the Western powers’ unfair treatment of the Chinese a century ago
ii. The Chinese are now preparing themselves for a new “Long March”.
a) It is a rallying call for their people to weather and eventually come on top of this difficult period.
iii. The Chinese leaders I met told me that they were prepared to negotiate,
a) So long as the US treated them as equal partners and their sovereignty was not compromised.
b) But they have also made clear that if the US wanted a trade war, China would not shy away from defending itself.6. We are now entering into a new period of great power rivalry.
a. The outcome is unclear, but it is critical that we stabilise the system.
b. History has shown us that while changes in the international order are inevitable, conflict and upheaval are not.
i. We have enjoyed more than seven decades of relative global stability and peace since the end of the Second World War.
ii. This achievement is the result of effective leadership and collective wisdom.
iii. As the organisers for today’s conference put it – we can “overcome the chaos”.7. I believe we can arrive at yet another stable global order.
a. First, the US and China will need to work out a new model of constructive cooperation.
b. Second, the rest of Asia must also take on greater responsibility in shaping the global order.
c. Third, Asia and the international community must continue to work together to tackle global issues confronting us.8. Let me elaborate on each of these three points.
US and China
9. First, the US and China will need to work out a model of constructive cooperation.
a. This is the most important bilateral relationship, and is the key determinant of continued peace and prosperity in Asia and the world.
b. It is still possible for both sides to resolve their differences.10. A trade war is to no one’s benefit.
a. The International Monetary Fund downgraded global economic growth three times within a year.
b. Financial markets are jittery.
i. A crisis of confidence can trigger a sharp correction.
c. Investors are also cautious, holding back new investments.
i. The drop in investment will inevitably affect economic growth and development in the years to come.11. As both the US and China harden their positions, there are fears that the global order will end up in another Cold War. However, the context of US-China tensions is fundamentally different from the Cold War.
a. Back then, the US and the Soviet Union hardly had any trade across the Iron Curtain.
b. Today, trade flows between the US and China are significant, and global value chains are highly integrated.
i. Take the iPhone for example. Designed in the US, assembled in China, but with display screen from Korea, camera from Japan, processors from Taiwan, and circuit board components from the US, UK and Germany. Like so many other products, the iPhone is really “Made in the World”.
c. Unravelling such an integrated supply chain will be costly.
i. Jobs will be displaced, costs will go up, and the ripple effects on the global economy will be severe.12. The relationship between the US and China is complex and also highly interdependent.
a. US-Japan trade tensions in the 1980s were severe, but their close security alliance was a stabilizing factor.
b. China competes with the US for strategic and economic space, but is also the US’ largest trading partner and largest creditor.13. It is therefore in the interest of both the US and China to work out a new model of constructive cooperation. The starting point is to accept new realities.
a. The US needs to adjust to China’s emergence as a major global player.
i. China is now a significant global player,
a) With the second largest economy, and
b) The largest population in the world.
ii. The US needs to recognize that while China is a competitor, it is also a valuable partner, which can share the responsibility of providing international public goods.
iii. More fundamentally, the US has to accept that it has no better option but to work with China, because trying to contain it will result in worse outcomes.
iv. Thus the US should strive for a new equilibrium with China.
a) A new global balance that brings together the legitimate interests of both powers.
b) One that continues to embrace a rules-based multilateral system so that all countries, big and small, will have their voices heard and their sovereignty respected.
b. On China’s part,
i. While it is still a developing country, China is an advanced one in many ways.
a) Some of its actions, particularly in the maritime domain, have raised questions about its intentions.
b) China needs to accept that its increased strategic and economic weight comes with greater international responsibility.
i. China’s Belt & Road Initiative is a positive step in this direction.
ii. China has said that it will continue to open up. It now needs to convince sceptics it will do so.
a) By accelerating economic liberalisation,
b) By levelling the playing field for foreign businesses, and
c) By continuing to participate constructively in efforts to improve the multilateral trading system.
iii. China needs to demonstrate that its peaceful rise will indeed benefit the rest of the world, including the US.
a) And be prepared to shoulder additional international responsibilities.14. Fundamentally, the US and China will need to rebuild trust in their relationship.
a. For any relationship to be sustainable, there has to be some give-and-take from both sides.
b. Both sides must make an effort to avoid escalation by managing their domestic politics.
c. Each party needs to understand the domestic constraints and red-lines of the other side for negotiations to be constructive.
d. Both sides should also recognise that their present differences go beyond trade.
i. I have highlighted some of these potential areas earlier.
ii. It would be helpful to identify and unbundle the trade issues from other concerns.
iii. And address each issue in a meaningful but separate way, rather than allow trade and non-trade issues to complicate each other.15. We hope that the US and China will reach a new model of constructive cooperation.
a. Asian countries – indeed, almost all countries around the world -- do not want to have to choose sides.
b. We want to be able to openly trade, exchange technology, invest in or receive investment from all countries.
c. This is an important foundation in a rules-based multilateral system.Rest of Asia taking greater responsibility
16. I have spoken on how the US and China need to work out a new model of constructive cooperation.
17. The second way to build a more stable global order is for the rest of Asia to take on greater responsibility in shaping the international order, while the US and China work out this new model.
18. We are still far from seeing an Asian century.
a. Despite the region’s economic growth, more than 300 million people are still living below the poverty line.
b. If we use a broader measure of poverty, such as health, education and living standards, this number would be more than 600 million.19. But Asia’s strategic weight is growing.
a. Asian economies’ share of global GDP is projected to double,
i. From 26% in 2000, to 50% by 2050.
b. For the first time in the history of industrial revolutions,
i. The Fourth Industrial Revolution is not just happening to Asia, it is happening in Asia.
ii. Innovations created by Asian companies are shaping the economic and technological landscapes.20. This is an opportunity for Asia to shape an international order in a way that will support the development and stability of Asia and the world.
a. Recently, eleven countries concluded the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
i. This is a significant achievement, as the participating countries remain committed to maintain the rules-based multilateral trading system, even when sentiments were shifting away from free trade and globalisation.
b. The doors are also open for the US, China, and other interested countries to join.21. The region is also working towards the Regional Comprehensive Economic Partnership (RCEP).
a. The RCEP will bring together sixteen countries, representing half of the world’s population and one-third of the world’s GDP.
b. This will be the first free trade agreement involving
i. The two countries with the biggest populations, India and China,
ii. The two biggest economies in Asia, China and Japan, and
iii. The ten member states of ASEAN.22. Both the CPTPP and RCEP are initiatives that will bring the region closer.
a. I thank Japan for its critical role in rallying the remaining countries to conclude the CPTPP, after the US pulled out.
b. We look forward to Japan exercising the same leadership to bring the RCEP to fruition.
i. While we have the CPTPP, the RCEP is just as vital,
a) Given its composition of key countries, including Australia, China, India and Japan.
ii. Japan is a close ally of the US. It also wants good relations with China.
a) It is thus in the interests of Japan, and other RCEP countries, to keep the partnership open.23. In fact, I see more room for Japan, the third largest economy in the world, to play a bigger role in deepening regional development and integration.
a. Japan has undertaken difficult but much needed economic reforms.
i. I am glad that Abenomics is starting to bear fruit.
ii. A rejuvenated Japan will add to the region’s dynamism.
b. Japan has also continued to invest in Asia over the years.
i. The economic, social and infrastructural needs of developing Asia are tremendous.
ii. Japan has invested in excess of US$400 billion in Asia to date.
iii. With this experience, and Japan’s huge gross external assets of more than US$9 trillion, Japanese investors can seek out greater opportunities to invest productively.
i. This will help the region grow, and
ii. Build closer cooperation among countries.24. ASEAN is also doing its part to keep the regional architecture rules-based, open, inclusive and ASEAN-centric.
a. Our consensus-building model has allowed for the diverse views of member states to be accommodated, thus making it one of the most stable groupings in the region.
b. Under the three pillars of the ASEAN Community – namely economic, political-security, and socio-cultural – ASEAN is pursuing closer integration among member states, and deeper cooperation with like-minded partners.
c. It has come up with multilateral platforms, such as the East Asia Summit and the ASEAN Regional Forum, to bring key players such as the US, China, Russia and India together.
d. Besides existing Free Trade Agreements (FTAs) with the six RCEP participating countries, ASEAN is also working on possible FTAs with the EU and Canada.25. These cooperation efforts are not perfect, but nevertheless add to the networks of constructive engagements.
a. They help keep the international order open, multi-layered and inclusive.International community working together to tackle global issues
26. I have spoken on the need for the rest of Asia to take on greater responsibility, while the US and China work out a new model of constructive engagement.
27. The third way for us to build a stable global order is for the international community to come together to tackle the many global issues confronting all of us.
a. These include
i. Tackling global warming and climate change,
ii. Improving food security and access to clean water,
iii. Reducing poverty and the risk of pandemics, and
iv. Preventing nuclear proliferation and terrorism.
b. Multilateralism is even more important than before in binding countries’ interest together, and giving every country a stake in the global world order.
i. Economic growth is the critical foundation for development.
a) Growth allows us to generate the necessary resources for development,
b) Especially, quality growth, where we pay attention to sustainable development.28. In 2015, all member states of the United Nations signed up to the 2030 Agenda for Sustainable Development.
a. This sets out a shared blueprint for improving lives and conserving the planet, now and into the future.
b. But we are still far from achieving the 17 Sustainable Development Goals.
c. We can succeed in achieving these goals only if countries work in global partnership and take concrete steps together.29. The rapid advancements in science and innovation, in particular, have opened up many new possibilities to pursue sustainable development. For example
a. High-yield urban agricultural solutions can potentially yield many times more crops than conventional methods in the same land area, helping reduce hunger.
b. New membrane technologies can potentially produce water much more cost effectively and with lower overall energy needs, providing new options for clean water for under-served areas.
c. Electric vehicles and renewable energy sources can be scaled-up in a large way, reducing carbon emissions.
d. Carbon capture and storage technology can further reduce the emission of carbon dioxide into the atmosphere, by capturing them at source and storing them underground.30. Asia and the rest of the international community must work together to harness these new possibilities to improve the lives of our people.
a. By promoting the exchange of ideas among individuals, industries and research institutions from different countries.
b. By investing and channelling public and private capital to turn good ideas into reality.
c. By ensuring that the disadvantaged from around the world can access and benefit from these innovations.31. Our goal for all countries to work together can only be realised if we are part of one globalised system.
a. This is precisely why the US and China have to work together.
b. This will not work if the world is fragmented into two blocs,
i. With separate systems, technologies and economies.
c. Every country – big or small, developed or developing – needs to come together and play its part.
i. Only then, can we be more than the sum of our parts.Conclusion
32. In conclusion, the world is at an inflexion point.
a. The US and China have to come to terms with new realities and their global responsibilities to
i. Rebuild trust in their relationship, and
ii. Bring stability to the world order.
b. Asia will have to redouble its efforts to strengthen the rules-based, multilateral trading system that has underpinned its growth.
c. We, in Asia, must also continue to work in partnership with the global community to uphold the multilateral system, so as to tackle the global issues confronting us.33. At a time when the global order is in a period of transition, it is critical that we focus on a positive agenda to achieve a better and more sustainable future for all. Through our collective effort, we can build a new and stable global world order.
34. Let me conclude with the poem from the Manyoshu, where the Reiwa era derived its name
In this auspicious month of early spring,
The weather is fine and the wind gentle.
The plum blossoms open like powder before a mirror
While the orchids give off the sweet scent of a sachet.
a. Let us all work together to overcome our challenges and collaborate on new opportunities in this new era.
 US Treasury, March 2019
 UN, Asian Development Bank (ADB) and UN Development Programme (UNDP), Eradicating Poverty and Promoting Prosperity in a Changing Asia-Pacific, 2017
 Multidimensional Poverty Index (MPI) 2018
 ADB, Asia 2050: Realizing the Asian Century, 2011 IMF, 2017
 Japan External Trade Organisation (JETRO), 2017 Ministry of Finance, Japan, 2018