February 2006

Globalisation and Regionalisation in East Asia: The China Factor by Dr Yongjin Zhang.

Executive summary 

Globalisation and regionalisation are two dynamic transformative processes in the contemporary world. In the past few decades they have been major driving forces in the dramatic transformation of East Asia. The rise of China in the 21st century as a regional, and potentially a global, economic power is the defining feature of regionalisation in East Asia. Rising China’s integration into the regional and global economy in an orderly win-win manner presents challenges as well as opportunities for the ongoing transformation of the region. The China factor that shapes the current character and the future trajectory of regional economic integration in East Asia can be seen first and foremost in the mutual endorsement between China and globalisation. The changing purpose of the global political economy after the end of the Cold War makes possible the deep integration of China into the new global economic order and for its transition to becoming the largest emerging market in a truly globalised economy.

In embracing globalisation, the purpose of the Chinese state has been redefined from serving the revolution to serving the needs of economic development under the conditions of globalisation. The logic of growth-based legitimacy relocates the main source of state legitimacy to external actors and institutions and dictates China’s external policies in regard to globalisation and regionalisation.

The China factor refers secondly to the pivotal role of China, now the third largest global trader, in the rapid increase of intra-regional trade in East Asia. As the largest foreign direct investment (FDI) recipient of all developing countries, China is spearheading a new wave of trade and industrial transformation that deepens regional economic integration.

In recent years the new pattern of regionalisation has been strengthened by a plethora of bilateral and regional free trade agreements (FTAs), with China one of the principal drivers. Beijing’s pursuit of an FTA strategy has, however, been motivated and sustained mostly by broader political and strategic considerations rather than economic calculation. One notable example is its pursuit of a China-ASEAN (Association of Southeast Asian Nations) Free Trade Area.

China’s active diplomacy in promoting the new regionalism embodied in the processes of the ASEAN Plus Three (APT) constitutes the third facet of the China factor. For ASEAN, the APT serves the strategic objective of enmeshing China in a web of regional institutions. For China, participation in the APT is one pillar of its regional strategy to promote mutual trust with ASEAN and to institutionalise political and economic cooperation. China’s active promotion of the APT is one stimulus for Japan’s close involvement in this regional process.

The recent East Asia Summit (EAS) has initiated an ambitious political as well as economic project for constructing an East Asian Community (EAC). While the inclusion of New Zealand, Australia and India helps keep the EAS open and inclusive and defuses the United States’ (US) concern about China’s dominance, membership of the envisioned EAC remains contentious. With or without the US as a formal member, the construction of this new regional community will always be under the shadow of the American power and the strategic competition between the US and China. How the EAS positions itself vis-à-vis APEC (Asia Pacific
Economic Cooperation) and the ASEAN Regional Forum remains a vital question yet to be answered.

China’s rise has significantly transformed the regional geo-economic landscape and is generating new strategic dynamics in a region of ultimate policy concern for New Zealand. To capitalise on the opportunities presented by such transformation, policy makers and corporate leaders need to formulate creative policy  responses and corporate strategies.

Three specific and immediate challenges confront New Zealand. First, as China’s FTA strategy is driven largely by political and strategic considerations, a clear mismatch exists between the political logic and the economic rationale in the current New Zealand-China FTA negotiations. Overcoming such a mismatch needs wisdom and imagination to ensure that the outcome serves New Zealand’s national interests and promotes global norms and principles of trade liberalisation and multilateralism.

Second, as a small liberal democracy and a developed economy with no stringent military alliance with the US, New Zealand has a unique
contribution to make in playing a constructive role to bridge two potential divides in the inaugural EAS: that between East and West and that between
developed and developing economies.

Finally, New Zealand’s close involvement in the EAS raises tricky questions about its national identity. In what sense is New Zealand ‘East Asian’? What role do values, belief systems, common interests and identity play in the conception and formation of a regional community? These questions challenge politics. They are not subject to any political solution.



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