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Asia's unstable rise will get tougher in 2011

Updated On: Dec 29, 2010

Many herald Asia's rise in the wake of the financial crisis. Compared to the United States and Europe, prospects in the region do look good. Events both recent and over the year, however, warn us not to assume the phenomenon is irresistible. While rising, the region is exposed to continuing sources of instability.

The current turmoil on the Korean peninsula demonstrates this vividly.

An unresolved relic of the Cold War, Pyongyang's nuclear ambitions have been difficult and prolonged despite the diplomatic efforts of the six-party talks. But it was not nuclear warheads that have created the current turmoil.

A torpedo sank the Cheonan in March and in November, artillery shells pummelled South Korean military and civilian installations on the disputed island of Yeongpyeong.

Old-fashioned weapons are more than enough to create a new sense of uncertainty. Nothing done since March has rebuilt stability.

Never mind that South Korea is a major economy and hosted the recent G-20 summit, the first held in Asia. Economic growth in the country, as in much of Asia, is built on tenuous foundations of peace. Unable to manage the situation, Seoul has reinvigorated its old alliance with the US.

Ties with China are inevitably affected. Like most Asians, South Korea has looked to the Chinese economy to drive growth. Indeed, it is one of the few countries in Asia to enjoy a trade surplus with China. There was earlier talk about a free trade agreement with Beijing, either bilaterally or including Japan as a third partner. Such economic diplomacy now looks less likely.

China is the only country believed to be able to influence Pyongyang. But what Beijing has done since Cheonan in March is judged by many in South Korea as being less than helpful.

This highlights a second question about the rise of Asia: The role and attitude of China. There is no single Asia. Much - perhaps too much - depends on this giant country that is changing as it rises.

Economically, China is the magnet for the region's future growth. Interdependence in trade and investment with South Korea, Japan, Asean and even Taiwan - especially after their free trade agreement - is real and growing. The picture in South Asia is similar, with China now India's No 1 trade partner.

Politically, however, Beijing has been much less attractive in 2010.

Events on the Korean peninsula come on top of controversies with Asean members in the South China Sea as well as disputes with Japan over the Senkaku Islands.

These developments were surprising as China has, for over a decade, sought to befriend and charm Asean neighbours. The current Tokyo leaders had wanted better ties with Beijing.

Visiting India in December, for the first time in five years, Chinese Premier Wen Jiabao signed business deals worth US$16 billion. But the underlying competition between the two Asian giants continues to simmer.

There is strategic competition over sea power as well as distant points in the Himalayas and political influence, as India vies for a seat on the United Nations Security Council where China is the only current Asian permanent representative.

That the Chinese leader went on to visit Pakistan also did not escape notice. Many in New Delhi believe Beijing continues to support their old rival in order to preoccupy India. Even in economic relations, trade tensions belie the increase in flows and India has slapped tariffs on a range of Chinese imports including the telecoms sector.

The nature of China and its diplomacy are being tested, and how Beijing has acted and will act in the coming months will be judged as showing its character as it grows. Some already ascribe ambition and arrogance to China, while others will wait and see.

Perceptions will shape how other Asians react. How the Chinese leadership approach the US-China Summit to be held next month will be looked at carefully not only by Americans but also by other Asians.

It is to Asia's credit that through the financial crisis and 2010, the region has continued to rise. But challenges in 2011 continue and, indeed, may be even tougher, not only in economics but the under-lying politics. Growth will be tested but even fundamental peace and stability will come under stress.

Asia may be the only region expected to show strong growth but that does not mean Asia is ready to be alone.