Assessing East Asia for
RealClearWorld, George Friedman observes first Japan, then South Korea, and now China lost confidence in their ability to keep moving forward.
Recall the Japanese purchase of American real estate in the late 1980s or Korean purchases of business in the 1990s. These were not particularly successful, nor were they meant to be. They were designed to reduce the Japanese and Koreans' exposure at home.
The same can be said with China's current propensity for foreign investment. It is driven, at least in part, by a lack of confidence among those within China who really understand the country's situation. Much of it is state capital flowing out. Some is state capital flowing outward and becoming private capital. Other funds are private capital. The types and patterns vary, but the flow has continued.
East Asia is transitioning from a period in which it - or each of its major components in sequence - played a critical role in the global system. Each has now climaxed, and both Japan and China are now playing a much more normal role in the system. This is the result of success and not failure, but it is also the result of the fact that while their previous economic models could exist for decades, at a certain point a shift is necessary.
China has not yet demonstrated that it can make the transition without internal fragmentation or intense repression. History would seem to argue that either is more likely than a return to the past decades.
Friedman concludes:
The internal evolution of China is, in fact, the key to the region. China has moved from limited liberality to increasingly intense authoritarianism. The evolution of this government is at the heart of the East Asian dynamic. North Korean nukes, Chinese aggressiveness at sea and American threats are all secondary.
