Over two decades, Americans have come to expect dynamic economic growth and relative political stability in East Asia. Until recently, China was the perennial exception, and the Soviets had no regional role to speak of. Today, these judgments are being reexamined. The region is not necessarily in trouble, but it is in ferment, and the future is less sure—for itself and for American interests—than it seemed even a short while ago. Furthermore, the economic and political stirrings are not of a short-term nature; they involve generational and systemic transitions within the region and shifting roles for external actors, including the United States and, now, the Soviet Union.
The year’s most dramatic development in Asia was the introduction of truly revolutionary social and economic reforms in China. The ultimate success of this undertaking by Deng Xiaoping is of historic significance and will have a major impact on the rest of Asia and on the United States. But while Deng scored some major victories in 1985, these were not unambiguous, and future challenges seem sure to arise.
Of more immediate concern to most countries in the region was the general downturn in their own economic performance. With few exceptions, annual real growth of seven to eight percent over the past two decades had led observers to tout East Asia as a region of "economic miracles" and a model for others. This past year, as growth dropped to five percent or lower, the question arose whether this was not far more than a cyclical downturn—whether, indeed, a new era had not dawned, one of considerably slower growth with potentially significant social and political consequences.
Individual economies suffered from individual problems: a high-wage policy and inappropriate investments in Singapore; questionable industrialization policies in Malaysia and Indonesia; a crisis of confidence in government and an inadequate financial and regulatory structure in Taiwan; and a host of problems in the Philippines. With time, and proper decisions, these can be overcome. More worrisome is the
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