and second-largest economy (after the United States, provided the European Union is not counted as a single economic unit).
China was built on Confucian principles. For millennia, it has considered itself a hegemonic power and the center of the world. The country suffered a drastic decline in the 19th and early 20th centuries, when it was humiliated repeatedly by Western powers, especially the British Empire. Its civil war (1927-1950) ended with the Communists under Mao Zedong dominating the country, except for the island of Taiwan. Mao’s regime, which ended when he died in 1976, was responsible for the deaths of an estimated 80 million people.
The Communist Party has remained in power because it realized that China would succeed and prosper only if entrepreneurship, property rights and market rules were allowed. The strategy has worked – the country experienced rapid economic development. However, the state’s grip on Chinese enterprises remains very strong. State intervention in the economy and disrespect for foreign intellectual property rights have caused tensions with other countries and frequent trade disputes.
The one-child policy imposed under Mao has created some daunting challenges for China, including far-reaching economic and social consequences. The issue of how China will support its aging population is a problematic one, and represents a demographic time-bomb even worse than Europe’s.
China has become politically and militarily assertive as it tries to establish its hegemony throughout the Pacific Rim. This strategy manifests itself in excessive territorial claims in the South and East China Seas. Through its Belt and Road Initiative, a continent-wide infrastructure construction program, Beijing is attempting to secure China’s access to markets and resources in Europe and Africa. At the same time, it is trying to strengthen its influence in the countries taking part in the initiative.
Japan began adopting Western-style economic and military systems in the mid-19th century and became the strongest power in the Asia-Pacific region at the beginning of the 20th century. After its defeat in World War II, Japan concentrated on business and surprised the world with its success. The postwar peace treaty set limits on Japan’s military capabilities.
Internally, Japan is now struggling with the problems of an aging population and a high sovereign debt. Due to China’s assertiveness, Japan – a U.S. ally – also finds itself under pressure to strengthen its military capabilities.
The Korean Peninsula is divided into two states that are technically still at war. North Korea has developed nuclear capabilities and has threatened South Korea, Japan and even the U.S. Economically and socially, the North is impoverished because of its principalist socialist system with no property rights or room for market rules, while the South is an economic powerhouse.
With his focus on the trade dispute with China and several other fronts opened, U.S. President Donald Trump has been lenient in his criticism of Japan’s mercantilism. If he wins a second term in office, however, he may change tack and slap tariffs on, for example, Japanese cars – a move long demanded by U.S. carmakers whose own sales in Japan are minuscule. Opening Japan’s domestic market to foreign competitors would require a cultural transformation in the island nation, but the Japanese are discovering new reasons to move in that direction.
One of the world’s most renowned quantum physicists, Stanford University Professor Zhang Shoucheng, committed suicide in December 2018. The prize-winning academic career of this Chinese-born scientist, along with his extensive business interests and sudden death, have much to tell us about China’s long-term strategy to overtake and surpass the West in disruptive technologies.
In only six years, China’s Belt and Road Initiative has had broad impact across Asia and beyond. Up to $1 trillion has been committed to hundreds of projects, with the goals of bridging economies, opening Chinese companies to foreign markets and changing the landscape of international development finance. Going forward, outside criticism and dynamics at home will likely change the nature of new projects, but the core features of the BRI will remain the same.
As trade tensions with the U.S. intensify, Chinese President Xi Jinping is reverting to the leadership style of Mao Zedong. Initially concerned to accommodate U.S. demands, Mr. Xi is now more worried about domestic critics and gearing up for a protracted struggle. Many see the U.S. as having the upper hand, but the Chinese government could have more staying power.