Why Asia's leaders are choosing growth

As the Ukraine crisis boils, jihadis build armies in Iraq and Syria, and Ebola spreads unabated, it’s clear that we have entered an exceptionally turbulent era in global politics. Western governments are scrambling to put out the fires. But outside these crises and the uneven responses, there is a region of unlikely promise.

Strong leadership in China, Japan, and India—the three most important markets in the most important region for the future of the global economy—offers a rare good news international story.

China’s Xi Jinping, Japan’s Shinzo Abe, and India’s Narendra Modi have each staked their careers on transformational domestic reforms that are long overdue. Remarkably, none of these leaders is forced toward action by crisis. All three are moving forward to avoid future turmoil.

In December 2012, Shinzo Abe was elected prime minister with a stronger mandate than any Japanese leader has enjoyed in at least a decade, and he used his political capital to push quickly ahead with Abenomics, a bold plan to use monetary, fiscal, and structural economic reform to jumpstart his country’s economy after two decades of stagnation. In 2013, Xi Jinping assumed power in China and set in motion economic reforms engineered to transform China’s export-driven economy into a more sustainable consumer-driven model. In May, Narendra Modi’s landslide victory made clear strong public support for a national campaign to restore economic growth in India to levels not seen in years.

In all three countries, expectations are high, and the stakes are higher still. All three leaders face resistance from powerbrokers who stand to lose from these changes and complex economies that will not yield easily to various forms of liberalization. Americans and Europeans can’t look for these leaders to offer much help in the Middle East, West Africa, or Eastern Europe, but their efforts to restore growth in their countries and to bring a new measure of stability in East and South Asia are even more valuable.

We can still expect alarming headlines from this region. China and its neighbors will continue to fire the occasional rhetorical flare at one another. China’s tensions with Vietnam and the Philippines in the South China Sea will raise alert levels.

But the leaders of China, Japan, and India now appear to recognize that each has an investment in the stability and success of the others. In September, Narendra Modi left Japan with pledges of some $35 billion in Japanese investment in Indian infrastructure. Not long after, even as recent Chinese-Indian border disputes in the Himalayas made headlines, Modi welcomed Xi Jinping to India, where an announcement of some $20 billion of Chinese investment in infrastructure and industrial parks created a new commercial bond between traditional rivals.

Historical animosity between China and Japan ensures that an occasional surge in tensions can never be discounted. In a spring 2014 poll rom Pew Research, only 7% of Japanese held a favorable view of China; just 8% of Chinese viewed Japan favorably. In November 2013, tensions between Japan and China soared, as Beijing declared an Air Defense Identification Zone (ADIZ), requiring all aircraft over contested territory to follow instructions issued by Chinese authorities. The next month, Shinzo Abe visited the Yasukuni Shrine, a site associated with Japanese militarism.

Yet both parties sought to avoid more dangerous escalation. Japan has 23,000 companies operating in China, with 10 million Chinese workers on their payrolls. That gives both governments ample reason to keep tensions under control. In July, Japan enjoyed its all-time record month for incoming tourists, largely on the back of the Chinese visitors doubling from the year before. We’ve seen higher level government-to-government meetings, and Shinzo Abe’s United Nations speech was extremely conciliatory.

The pullback in tensions between Japan and China has coincided with their domestic reform processes reaching more challenging phases. As Shinzo Abe has shifted gears to the most difficult of his ‘three arrows’ of reform—creating a comprehensive growth strategy—he can much less afford to distract or financially frustrate his political constituents with geopolitical tensions. Xi Jinping has made strong enough strides with his anti-corruption crackdown and proposed economic changes that influential Chinese with deep-rooted vested interests in the current system are beginning to question his agenda. By design, more success will generate more pushback from disenfranchised Chinese leaders.

Xi, Abe, and Modi are enjoying early successes; as they focus on overcoming obstacles to their domestic reforms, they have much less interest in generating geopolitical instability. The danger will rise only if reforms go dangerously wrong.

The likelihood that reforms teeter or face serious pushback is by a long margin most likely in China. The combustible crisis in Hong Kong demonstrates the far-flung risks to Xi’s agenda. If Beijing responds with too much force, it could bring down international opprobrium and crater this period of serenity. But if Beijing concedes anything to the protestors—even the resignation of Hong Kong’s chief executive—it would create a dangerous precedent, replicable in other Chinese cities. Beijing would rather crackdown than countenance an alternative political voice—and many such voices will emerge as Xi pushes forward with reforms.

For now, however, three of the world’s most important economies want to keep their neighborhood geopolitically benign. In a world of greater turmoil, Western powers should welcome this respite for as long as it lasts.

Photo credit: APEC 2013 / Flickr