“Asia’s Economic Challenges” is supported by the Centers and Institutes Facilitating Fund (CIFF) of the George Washington University. This project consists of four research topics:
Resource Nationalism: Energy Security and Competition for Resources
The International Energy Agency estimates that incremental growth in demand for crude oil and natural gas is dominated by the newly emerging states in Asia. Yet these states are resource-poor. Their domestic resource base is limited or lacking entirely, forcing them to venture abroad to obtain energy, and raising energy security issues. This has important implications for economic and political relations among the rising states, as well as between these states and established powers of the Asia-Pacific, including Russia and the United States. It also has implications for the relations of East and South Asian states with the Middle East and Central Asia. This interplay of economics, energy, security and geopolitics on a grand scale has been termed resource nationalism, or resource mercantilism. It presents new challenges and opportunities to scholars as well as policymakers.
China’s Economic and Financial Policies and External Impact
Responding to the current financial crisis, China's monetary authority, following the United States, has taken a very aggressively loose monetary policy to stimulate the economy. This has aroused concerns of asset price bubble and inflation. China's housing price increased dramatically from 2009, unlike the U.S. housing market which has yet to recover. Moreover, the valuation of the Chinese currency has become a resurgent issue in recent years and is a focal point for U.S.-China economic and even political relations. China's financial stability will have significant impact on the global and American economy. At the same time, China has stepped up its efforts for regional integration with neighboring economies, for example, putting into effect a free trade agreement with the Association of Southeast Asian Nations in early 2010. One of the driving forces is to diversify China's trade from too much reliance on current partners, especially the United States. Meanwhile, China's rapid economic growth has created internal imbalances in several respects, such as regional imbalances, income and wealth gap, and urban-rural disparities.
India’s Global Investment Policies
India's global investment strategy has recently become increasingly activist in an attempt to gain greater global economic and political clout. One important component is the Bilateral Investment Treaty (BIT), agreements that have proliferated in the late 20th century, especially among developed countries, that give extensive rights and protection to foreign investors. Since 2009, the possibility of a BIT between the United States and India has grown significantly. Following its first BIT in 1995, India has negotiated 75 such treaties with both developed and developing countries across the globe, and has one of the largest BIT programs among developed countries. By reducing political and institutional risk an investor would face, a BIT is expected to promote Foreign Direct Investment. Yet there is limited evidence for this conjecture; further a BIT could impose "sovereignty costs" for the host country.
Economic Interdependence and Strategic Implications
The enormous surge in economic relations between China and India over the last ten years has stimulated concern as well as optimism. Many national and external analysts view China and India as natural competitors, with consistently strained relations since the 1962 Sino-Indian war. They have a long simmering border conflict in a strategically sensitive area for India that has yet to be resolved. Yet within a relatively short period of time, China has become India's largest trading partner, replacing the United States in 2009. China's exports to India have been rising at a galloping rate ranging from 20 to 60 percent per year since 2000. There is however a huge trade imbalance in China's favor: in 2008, India's exports to China were $9.26 billion, whereas imports from China amounted to $31.33 billion. The so-called "hot economics, cold politics" phenomenon is exemplified elsewhere in Asia as well, particularly in Sino-Japanese relations.