Japan's Economic Role in Northeast Asia
This short monograph, part of The Asia Society's Asian Agenda Reports, is the best analysis of Japan's economic relations with Northeast Asia yet available. There are stimulating chapters on Japanese economic relations with the United States, China, the Soviet Union and the two Koreas. The author concludes that Japan must deal with two critical issues-it must be willing to shift its own growth away from export toward domestic demand, and it must continue to lower barriers to its markets in order to contain criticism from abroad.
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Washington need not worry about China's economic boom, much less respond with protectionism. Although China controls more of the world's exports than ever before, its high-return high-tech industries are dominated by foreign companies. And Chinese firms will not displace them any time soon: Beijing's one-party politics have bred a timid business culture that prevents domestic firms from developing key technologies and keeps them dependent on the West.
A single-minded focus on the U.S. trade deficit with China ignores a new reality: since the early 1990s, the ground beneath U.S.-China relations has been shifting. Shallow links based on trade have given way to deeper ties characterized by rising U.S. foreign direct investment and sales by U.S. foreign affiliates in China.
China's reform policies have created economic opportunities, but they have also unleashed political tensions. Some U.S. strategists advocate a containment strategy, yet such a strategy is both undesirable and infeasible. America's fortunes in Asia depend on the evolution of a China that is secure, cohesive, reform-oriented, and open to the world. Failed reform could easily lead to a nationalistic, obstructionist China. In recent years, Washington, while trying to engage the People's Republic, has driven it into a corner over human rights. America must develop a long-term strategy to integrate China into the world community and avert serious damage to this crucial bilateral relationship. And it must begin to do so now.

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