Starting change from home is how India bests South Korea, China and Japan
The leaders of Asia’s four biggest economies have been plenty busy of late. China’s Xi Jinping is flirting with India’s Narendra Modi. Japan’s Shinzo Abe is engaged in a long game of diplomacy with South Korea’s Moon Jae-in, as well as with Xi and Modi.
Fascinating theatre all around. Important, too. The more this region’s four most powerful leaders cooperate, the better it is for humankind.
But real change happens at home. And what makes Xi, Abe, Modi and Moon so fascinating is that each pledged to revolutionise their domestic economies. While Donald Trump’s chaos in Washington hogs headlines, the most important dynamic is that Asia’s main growth engines, home to nearly 3 billion people, are in the hands of self-described reformers.
Each promised, to varying degrees, to attack vested interests, reduce red tape and shake up protected industries to compete in a globalised economy and reduce imbalances. Who’s succeeding and who’s failing?
Here’s my report card, from least successful to most.
Japan’s Shinzo Abe:
With majorities in both houses of parliament and a reform programme the public broadly supports, Prime Minister Abe should’ve been able to achieve so much more than milquetoast moves to tighten corporate governance. He failed to loosen labour markets, enliven entrepreneurship, boost productivity and empower women. “Abenomics,” let’s face it, has been 60 per cent monetary easing, 30 per cent global recovery and perhaps 10 per cent structural reform. Abe, meantime, bet terribly on Trump, believing Tokyo could work with the bellicose US president. The failure to unleash supply-side shocks on Japan’s fossilised industries explains why wages aren’t rising and public debt is. For promising the world and delivering little, Abe gets a C-.
China’s Xi Jinping:
Over the last five years, President Xi confounded the naysayers, avoiding the debt reckoning of which short-sellers warned. China can’t grow 6 per cent to 7 per cent year after year? We’ll see about that. Beijing can’t grow rapidly while censoring the press and the internet? Sure it can. Yet the strongest Chinese leader in generations has been surprisingly timid in one vital regard: refusing to scrap annual gross domestic product targets. This arbitrary goal warps incentives and focuses national and local leaders more on the quantity of growth than the quality. Any bold effort to rein in debt and credit bubbles means markedly slower GDP. For keeping everyone’s eyes on meeting 6.5 per cent this year instead, Xi gets a “C+”.
South Korea’s Moon Jae-in:
Since May 2017, President Moon’s team has been juggling two precarious challenges: Kim Jong-un’s bluster up North and Trump’s trade antics. The former is having a moment of triumph following Friday’s historic Moon-Kim summit at the demilitarised zone dividing the Koreas. But lost in the geopolitical swirl is the mandate with which Moon was elected: righting a listing economic ship. Moon has been glacial and uncreative about lowering an 11 per cent-plus youth unemployment rate and record household debt amid stagnant wage growth. There’s still time for Moon to find his reformist mojo. But for now, he gets a B-.
India’s Narendra Modi:
Since May 2014, the prime minister has certainly had his share of missteps. Exhibit A: Modi’s botched 2016 anti-corruption ploy to take large bills accounting for 86 per cent of India’s currency out of circulation backfired. But Modi also changed the narrative from endemic poverty and dysfunction to a “New India” reform push raising the nation’s status. Increasing the national tax base, cutting red tape, increasing accountability and opening insurance, defence and other key sectors are paying dividends. A work in progress, yes.
But, relative to fellow Asian reformers, Modi’s audacity earns a “B” in a region where the quantity of growth too often trumps the quality.