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.
The Trump administration had demonstrated a willingness to return to the negotiating table with North Korea. Pyongyang, however, continues to test the American commitment to a deal that would require complete denuclearization. In October, a technical negotiation between the two sides ended without progress. The North Korean strategy may be to wait to see if President Trump is reelected or to pressure the U.S. side into accepting a deal on less demanding terms.
For seven decades after World War II, Japan was comfortably ensconced in a geopolitical framework that seemed both stable and predictable. With the rise of China and, more recently, new responses from the United States to economic and geopolitical challenges, this framework is evolving. More than ever in the postwar era, Japan is called upon to enhance its military capabilities and strengthen its security – not only within its territory and territorial waters, but far beyond in the Indo-Pacific region.
China is facing rising labor costs, relatively low productivity growth and competition from other developing countries. While the trade dispute with the U.S. provides Beijing with a scapegoat, the true causes of the dilemma lie in the past policy. If Chinese consumers lose confidence in their economy, a crisis could rapidly arise.
By imposing economic sanctions on South Korea, Japan establishes a dangerous precedent. At times when countries neighboring North Korea should be strengthening their ties and establishing transnational security cooperation, the conflict between Tokyo and Seoul could ultimately weaken the region and provoke North Korean adventurism.