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Prepared for the Planning Workshop held at the Fernand Braudel Center, State University of New York at Binghamton, December 6-7, 1996.
The rise of East Asia to most dynamic region of the global economy and center of accumulation in the final decades of the twentieth century poses major challenges to our understanding of the modern world. Theories of national development and modernization are challenged by successful developmental experiences that do not fit established dichotomies such as "market versus plan" (Wade 1992; Dore 1994), and that appear to be regional rather than national in scope (Cumings 1987; Rozman 1991; Bernard & Ravenhill 1995; Arrighi 1996; Hamashita 1994; Selden 1996). The regional character of the phenomenon challenges also world-system theories that rely too heavily on the tripartite division of the world-economy into core, periphery, and semiperiphery (cf. Arrighi, Ikeda & Irwan 1993). Theories of regional integration, mainly derived from contemporary European experience, in turn, are challenged by the success of informal, mostly non-governmental networks in connecting East Asian sub-regions to one another, in almost complete absence of the kind of intergovernmental arrangements that characterize the European Union and the North American Free Trade Association (Katzenstein 1996; Katzenstein and Shiraishi 1996).
At the root of all these challenges there lies the peculiar trajectory and significance of East Asia for the past and the future of world history. As Gilbert Rozman (1991: 6) has put it,
East Asia is a great region of the past, having been in the forefront of world development for at least two thousand years, until the sixteenth, seventeenth, or even the eighteenth century, after which it suffered a relatively brief but deeply felt eclipse. Projecting recent patterns of achievement by countries in the region and by transplanted persons whose families have moved abroad, most observers now agree that East Asia promises to be a great region of the future.
As this passage implies, three distinct time-frames or temporalities define the relationship of East Asia to world development. There is, first of all, the "short run" of recent patterns of achievement by countries and territories in the region and by the region overall. The relevant time-frame for the description and explanation of these patterns is the fifty-year period that separates us from the defeat of Japan in the Second World War, the establishment of a Communist regime in China, and the division of East Asia and the world into two antagonistic blocs dominated respectively by the United States and the Soviet Union. These events thoroughly reorganized the region in its internal and external relations, and created conditions for the subsequent economic expansion of Japan followed by the Newly Industrializing Economies and eventually virtually the entire region (Cumings 1987; Selden 1996).
As Bruce Cumings (1987: 46) has underscored, however, the understanding of the economic achievements of Japan and its former colonies requires also that we pay due attention to "the fundamental unity and integrity of the regional effort in this century." For the reorganization of substantial parts of East Asia under U.S. hegemony after the Second World War was premised upon the great social and political upheavals that shook the region in response to the challenges posed by Western power since the nineteenth century including both Japan's abortive attempt to replace China as the hegemonic power in the region in the first half of the twentieth century and the great national and social revolutions that rose out of the disintegration of the old order. This is the second temporality implicit in Rozman's characterization of East Asia--the "long" century that separates us from the "relatively brief but deeply felt eclipse" of the prestige and power of the region in the wake of the defeat of China in the Opium Wars, the subsequent disintegration of the Chinese empire, and the unequal U.S.-Japanese Treaty of Kanagawa.
The events that most decisively shaped the region in this "long" century began with the advance of Western power in the region in the form of colonial and semi-colonial regimes, giving rise to the Meiji Restoration of 1868, Japan's industrialization and subjugation of substantial parts of East Asia, successive Chinese revolutions from the 1860s to 1911, 1924-27 to 1949-?, the recurrent wars that set Japan against China throughout the first half of the twentieth century, Japanese efforts to displace China as the regional hegemon and to reorganize the region on new Japancentric foundations. However, the events and trends that shaped East Asia in this period can be understood fully only in the context of a longer temporality. Neither the present achievements of East Asian countries and the region as a whole nor earlier responses to the challenges posed by the intrusion of Western power occurred in a historical vacuum; nor did they wipe clean the historical slate. While substantial literatures pivoting on concepts of incorporation, colonialism, modernization and "response to the West" tend to imply the displacing of the East Asian historical heritage, processes of cross-fertilization, many of them begun over the preceding centuries during which Western economic and military power constituted no significant challenge to East Asia, were in fact at work in which elements of that regional heritage reasserted themselves to shape new regional and international political structures, commercial patterns and ultimately to transform the region.
Important as this historical heritage now appears to an increasing number of scholars, its use in explaining present and recent trends in East Asia is fraught with difficulties
The concept of heritage--even more so for a region than for a country--poses difficulties of interpretation. It threatens to be vague and all-encompassing. Any overview must somehow chart a course through multisided, multidisciplinary, multicountry, and multiperiod demands of scholars with an interest in heritage (Rozman 1991: 22)
Rozman has sought a way out of these difficulties by focusing on the Confucian intellectual tradition--a tradition, which has developed over two and half millennia. We seek a different, hopefully more conclusive, way out by exploring the legacy of the East Asian tribute-trade system particularly as it took shape in the sixteenth through the nineteenth centuries. As Takeshi Hamashita and Heita Kawakatsu have pointed out in different but complementary ways, the political, economic, social, and cultural configuration of East Asia in the twentieth century is a legacy of the tribute-trade system that regulated relations among the various political jurisdictions of the region over the centuries during which European trading nations sought entry into Asian markets prior to Western military-industrial ascendance. Colonial and semi-colonial rule in the nineteenth century shook regional patterns to their roots, but they could not erase shared understandings of interstate relations, business practices and human relations that have deep roots in the geography and history that had shaped much of the region. These shared understandings, tempered and transformed through the tumultuous experiences of the last century, have exercised, and are likely to continue to exercise, a profound influence on the ways in which interstate and intraregional relations operate in East Asia and on the ways in which these structure inter-regional relationships in an epoch of manifestly growing Asian strength (for an overview of Hamashita's and Kawakatsu's contributions, see Ikeda 1996).
The legacy of the East Asian tribute-trade system shaped not only intergovernmental relations, but the nature of business practice and settlement patterns as well. For tribute was inseparable from Asia-wide commercial networks which, over time, became increasingly autonomous from the dispatch of tribute missions. The main expression of this autonomy was the growth of large interstitial business communities, notably an overseas Chinese business diaspora, that dominated local commerce and finance throughout much of East Asia and connected the local economies of the region to one another in complementarity and, increasingly, in competition with official tribute missions (Hamashita 1994: 97-103; 1995: 12, 15-16). These communities, moreover, eventually embraced farmers, artisans, miners and a host of other workers.
The withering away of the regional tribute system under the impact of endogenous nationalism and exogenous incorporation in the expanding Eurocentric interstate system did not destroy the vitality of these interstitial business communities. On the contrary, it created new opportunities for their consolidation and expansion, thereby turning them into an "invisible" but nonetheless powerful connector of the East Asian regional economy including its ties to the world-economy throughout the nineteenth and twentieth centuries. As Alvin So and Stephen Chiu (1995: ch. 11) have shown, it is precisely this "invisible" connector that since the 1980s has become the main non-governmental agency for the reintegration of mainland China in the circuits of the regional and global economy.
In short, we propose an analysis of the East Asian regional political economy along three distinct temporal dimensions, embedded within one another in Russian-doll fashion. The long perspective, for our purposes, is defined by the legacy of the East Asia tribute-trade system in intergovernmental, interenterprise, demographic and labor patterns from the sixteenth century. The intermediate perspective is defined by the transformation of East Asia in the face of the nineteenth and twentieth century challenge of colonial powers that may also be understood as the clash of the East Asian tribute-trade world-economy and the Eurocentric capitalist world-economy. The shortest dimension is defined by the reorganization of East Asia in the postwar era beginning with regional bifurcation that was principally a product of U.S.-Soviet hegemonic rivalry and the victories of national liberation movements in the postwar epoch. For all three periods we consider the respective claims of China and Japan to reginal hegemony or, stated differently, the nature of intra-regional hierarchy and division of labor.
These three temporal dimensions define successive stages in the formation of the East Asian regional political economy. They define also three successive stages in the interaction between the regional East Asia tribute-trade system and the once regional, but increasingly global European interstate system. As we move from the longer view toward the present, a relationship of interdependence between the European and East Asian world-systems is transformed into one of increasingly deeper interpenetration. This changing relationship between the Asiacentric and Eurocentric systems is therefore an integral component of our investigation.
We shall begin in Section II by sketching the main features of the East Asia tribute-trade system as instituted prior to its formal and substantive incorporation in the Eurocentric interstate system in the wake of the Opium Wars of 1839-42 and 1856-58 and Japan's Meiji Restoration. In Section III, we shall turn to the main transformations undergone by the East Asian system in response to its clash/encounter with the Eurocentric system in the century following the Opium Wars. Section IV will examine developments in the region during the postwar era of Soviet-American conflict from regional bifurcation toward new forms of integration. And Section V will raise some questions concerning possible future scenarios.
The East Asia tribute-trade system that regulated intra-regional political and economic relations prior to the formal incorporation of the region within the networks of power and accumulation of the Eurocentric interstate system in the late nineteenth century had deep roots in the geography of the region. The territories and cities located along the perimeter of the several sea zones connected by straits that stretch from Northeast to East Asia and from Southeast Asia as far South as Oceania, are close enough to influence one another, but too far apart to be assimilated into a larger entity. Thus while China extended territorially North, South and West across the Asian land mass in the course of two millenia, the tributary-trade system and not territorial incorporation provided the vehicle for the extension and contraction of Chinese leverage throughout the areas of Northeast and Southeast Asia. The East Asian tribute-trade system, with its focal points spanning maritime Asia, provided these territorial entities with a political-economic and geo-strategic framework of integration that nonetheless endowed its peripheral components with considerable autonomy vis-a-vis the Chinese center. As Hamashita (1996: 192-93) has pointed out, "Maritime Asia is far larger, at least as complex, and much more diverse than the Mediterranean," and this paper probes particularly the diversity and differentiation that have been and remain regional hallmarks .
The tributary system has generally been understood as investiture of a king in each vassal state in order to assure Chinese suzerainty. "The system, however, understood more broadly, was the external expression of hierarchical domestic relations of control, extending downward and outward from the imperial center. In other words, the tributary system was an organic network of relations between the center and the periphery, which includes the provinces and dependencies of the empire, the rulers of native cities and districts, tributary states, and even trading partners" (Hamashita 1996: 189-90). In short, the tributary-trade framework allows us to break through the dichotomy of internal-external or domestic-international relations to explore a global vision of a hierarchical political economy that was the basis for ordering relations from the capital to the farthest outposts of imperial reach (not limited to the formal boundaries of the Chinese state), and whose workings involved not only the official representatives of the Chinese state and their counterparts throughout the region, but associated business networks and diaspora populations.
Within this system, tribute missions, among multiple important functions, performed an "imperial title-awarding" function that was hierarchical, multifocal and competitive. Thus, Korea, Japan, the Ryukyus, Vietnam and Laos, among others, all sent tribute missions to China. But the Ryukyus and Korea also sent missions to Japan and Vietnam exacted tribute from Laos. Moreover, the Okinawan tributary relationship with the power to the north in the nineteenth century was less with "Japan" than with Satsuma, a powerful Kyushu locality. These examples reveal that Japan and Vietnam, both peripheral members of the Chinese tribute-trade system, simultaneously competed with China in the exercise of title-awarding functions and in structuring intra-regional political, economic and cultural relations through tributary-trade mechanisms (Hamashita 1994: 92).
The system of tribute missions was intertwined and grew in symbiosis, and at times in conflict, with extensive trading networks. In fact, the relationship between trade and tribute was so close that it is quite legitimate to view tribute exchange as a commercial transaction within a unified currency zone with price coherence keyed primarily to Chinese prices
Even the Chinese court acted as a party to business transactions. Its mode of payment was often Chinese currency, whether paper money or silver. In economic terms, tribute was thus managed as an exchange between seller and buyer, with the prices of commodities fixed. According to Shigeo Sakuma,"price standards were determined, albeit loosely, by market prices in Peking." Given the nature of this trans- action, it can be argued that the entire tribute-trade formation was determined by the price structure of China and that the tribute trade zone formed an integrated `silver zone' in which silver was used as the medium of trade settlement. The key to the functioning of the tribute trade as a system was the difference between the prices inside China and those outside China." (Hamashita 1996:205)
European expansion in Asia eventually led to the formal dissolution of the East Asian tribute-trade system through the subordinate incorporation of its members into the Eurocentric interstate system as colonies, semi-sovereign and peripheral or semiperipheral sovereign states. But from at least the sixteenth to the early nineteenth centuries, European powers participated in the historically constituted, Sinocentric regional order without reorganizing, let alone destroying it. That is, for Europeans to secure trade in lucrative Asian markets, they had to tap into tributary networks both private and official. "[T]he tributary system in fact constituted a multilateral trading network capable of absorbing commodities from outside itself." (Hamashita 1996, 201). Even in the era of imperialism, structures and norms of the East Asian tribute-trade system continued to shape and influence East Asian outcomes including relations between Asian countries and Western powers.
The formation of national and subregional identities among East Asian countries long preceded the European impact and was based on their own understanding of and response to the East Asian tribute-trade system (Hamashita 1994: 94; 1995: 6, 8-9, 13). Through its seclusion policy in the Edo period (1600-1867), for example, "Japan was trying to become a mini-China both ideologi- cally and materially." And even after the Meiji Restoration, Japanese industrialization "was not so much a process of catching up with the West, but more a result of centuries-long competition within Asia" (Kawakatsu 1995, 6-7; see also Hamashita 1988). Stated differently, the birth of Asian nationalism was closely bound up with efforts to redefine the nature of the tributary-trade system both prior to and subsequent to the onslaught of western colonialism in the nineteenth century (Hamashita 1996: 207-09).
Three main queries arise concerning the approach advanced here:
1) Is the most fruitful conception of East Asia, historically, that of a region dominated by China through the tributary-trade system or, rather, as a region in which Chinese domination alternated with long periods of interregnum in which states and regions enjoyed high levels of autonomy and little or no ritual, political or trade ties with China? If the latter, did these cycles also parallel cycles in the primacy of agrarian versus commercial, seaborne versus landbased, and closed versus open borders?
2) What periodization best captures the thrust of the longue dur‚e of the East Asian tribute-trade system: from Han times c. 2,000 years, from the Song, circa 800 years, from the late Ming-early Qing (500 years)? Stated differently, what differences distinguish regionwide ordering principles in the three eras? And what measures best permit us to grasp the changing nature of intra-regional hierarchies.
3) This discussion has focused on economic and demographic dimensions of the tribute-trade system. How would a focus on geostrategic dimensions of regionality shift our framework of understanding?
The subordination of East Asia within the structures of the Eurocentric world system in the final decades of the nineteenth century transformed in fundamental ways the East Asian regional system. Four changes have been of particular importance in determining subsequent developments. First, China lost its position as the dominant regional power with the collapse of the empire, the discrediting of ritual norms of legitimacy and the disintegration of the state together with the division of China's territory among the colonial powers. Second, a rising Japan replaced China as the dominant regional power seeking to impose by force a Japancentric definition of a Greater East Asia as heir to the East Asian tribute-trade system and a means of countering Western imperialism. Third, Chinese business networks continued to expand throughout Asia as one source of linkages underlying the regional economy. Finally, the rise of Chinese Communism, together with anti-colonial movements throughout the region, offered new bases for a revolutionary reorganization of the Asia region, one that would confront first Japan and the colonial powers and subsequently the rising U.S. whose global power would receive its most powerful challenge in Asia.
The Consolidation and Expansion of the Chinese Mercantile Diaspora
Even after British gunboats had battered down the wall of governmental regulations that enclosed the Chinese domestic economy, the leading branches of the so-called first industrial revolution had difficulty in outcompeting Chinese commodities. In 1850, cotton goods accounted for a mere 6 percent of British exports to China and in 1875 for just 8 percent (Woodruff 1966, 309). As late as 1894, China's indigenous handicraft industry still supplied 86 percent of the Chinese market for cotton cloth (Moulder 1979: 102-3; Wu 1987: 148). By then, foreign imports were rapidly displacing handicraft spinning of cotton yarn, which suffered an estimated 50 percent contraction between 1871-80 and 1901-10. But the use of cheaper, machine-produced foreign yarn gave new impetus to the domestic weaving industry, which not only managed to hold its own but even to expand (Feuerwerker 1970: 371-5; 1969: 18-19).
The competitiveness of Western firms that set up production in China was even less impressive. Thus, in the silk industry foreign ventures incurred major losses, while local business prospered--the number, workers employed and exports of modern, Chinese-owned filatures increasing by a factor of 10 between the 1880s and 1890s. "Foreigners"--lamented a British consul in Canton--"had little left to them other than the export trade" (So 1986: 103-116; So and Chiu 1995: 47). Western products and businesses did triumph in a few industries. But the triumph was limited to such products as cigarettes, which did not compete with any indigenous product, and kerosene, which replaced local vegetable oil. Generally speaking, however, it is hard to dispute Andrew Nathan's observation that "the China market spelled frustration for foreign merchants. Foreign goods made but a superficial mark in Chinese markets" (1972: 5).
Opium, of course, was the great exception, leaving as it did a deep and long-lasting mark. But while the predominance of opium among Chinese imports throughout the nineteenth century may be taken as a measure of the continuing lack of competitiveness of most other foreign goods in the Chinese market, even the opium trade spelled frustration for foreign merchants. Access to the final consumers of the drug in China and throughout East Asia could be gained only through Chinese intermediaries organized in groups and networks on the basis of language, native place, kinship and political patronage. The "squeeze" that these intermediaries exercized on foreign merchants was the subject of recurrent complaints. Self-serving as these complaints undoubtedly were, it was nonetheless the case that Chinese middlemen in all trades, even when formally employed by foreign merchants, often made more money than their Western principals; that they were quick to learn what there was to be learned of Western business techniques; and that in competing with foreign firms they had the great advantage of much lower overhead and of not being "squeezed" by a middleman. Above all, they had the social networks and linguistic skills required to market at the local level (Hui 1995: 91, 96-8; Hao 1970: 110-11; Murphey 1977: 192-3). Moreover, if Western enterprises dominated China's opium imports in the nineteenth century, by the early twentieth century domestic producers deprived importers of the lion's share of this lucrative market.
The result was that from the late nineteenth century there was an expansion of the Chinese business networks and communities that over the centuries had formed in the coastal regions of China and in the interstices of the East Asian tribute-trade system (Hamashita 1994: 97-103; 1995: 12, 15-16). Chinese merchants had long figured prominently among these interstitial business communities (Chang 1991: 23-4). But at no time had the conditions of their expansion been more favorable than in the nineteenth century, as a direct result of the Western onslaught on the organizational structures of the tribute-trade system. With the declining capacity of the Qing government to control channels between the Chinese domestic economy and the world, opportunities increased for Chinese merchants operating around the perimeter of the empire.
Many of these merchants made their "first tank of gold" in the opium trade. But the greatest expansion of the Chinese business diaspora that connected China to the rest of the region occurred in the "coolie trade," the procurement and transshipment of indentured labor for service overseas. First promoted by the Portuguese in the sixteenth century, the Chinese coolie trade experienced explosive growth in the second half of the nineteenth century just as the banning of slavery increased pressures for new labor supplies in the industrial nations and their colonies. Between 1851 and 1900, more than two million Chinese "contract laborers" were sent abroad, two-thirds of them to Southeast Asia. The transformation of much of the "periphery" of the East Asia system into a major source of raw materials for the metropolitan centers of the Eurocentric system created a sudden expansion in the demand for cheap labor that Chinese coolies came to provide. With China's own economy in decline, the product of dynastic collapse, population pressure and massive rebellion, and with powerful external pressues from the 1860s, the Qing lifted its ban on emigration opening the way to the flow of millions of Chinese workers to Southeast Asia and North America (Hui 1995: 108-9, 115, 138-41).
The ensuing boom in the coolie trade boosted the expansion of the Overseas Chinese business diaspora in several related ways. Although transportation was in the hands of European shipping companies, most other branches of the trade were controlled by Chinese networks, particularly secret societies in the major ports of China and Southeast Asia. Profits were high and became the foundation of many new fortunes among Chinese merchants. Besides enriching individual merchants, the coolie trade also made the fortunes of the port-cities of Singapore, Hong Kong, Penang and Macau, all of which became major seats and "containers" of the wealth and power of the Chinese business diaspora. Equally important, the coolie trade left a legacy of Chinese settlement throughout Southeast Asia. It is this legacy that, right up to the present, has provided the Overseas Chinese with abundant opportunities to profit from commercial and financial intermediation within and across jurisdictions in the East Asian region (Hui 1995: 127-38, 142-5, 149-53).
The consolidation and expansion of a Chinese mercantile diaspora as the main intermediary and beneficiary of trade and emigration between Mainland China and the outer world left a deep and long-lasting mark on the political economy of East Asia. Neither Japanese industrialization and that nation's emergence as a regional power, nor successive Chinese Revolutions, nor indeed the present dynamism of the Chinese and Asian regional economies can be fully understood except in the light of this nineteenth-century development and its earlier foundations in the historic tribute-trade system. Japan's industrialization after the opening of its ports was in significant part a response to Chinese commercial supremacy in the East Asian region. As Hamashita and other Japanese researchers have documented, the production for export to China of textiles--the major component of early Japanese industrialization--was primarily aimed at breaking the hold of Overseas Chinese merchants on Japan's foreign trade (Hamashita 1996). But Sino-Japanese commercial rivalries and the launching of modernization both in Japan and China must none the less be put in the context of a competition that was not just commercial but political as well, and must be comprehended within the changing dynamics of a region in which military predominance lay in the hands of competing Western powers. This brings us to the second major change that occurred in the East Asia world system as a result of its subordinate incorporation in the Eurocentric world system--the adoption of Western military technologies by both China and Japan and the transformation of the latter into a full-fledged imperialist power seeking to replace China as the regional hegemon.
The Rise and Demise of the Japanese Empire.
The Opium Wars awoke East Asian states to the imperatives of modernization much faster and more effectively than cheap Western commodities could have ever done. Already during the First Opium War, Lin Zexu-the Viceroy of Hunan and Hubei who had been put in charge of supressing opium smuggling-had realized that the military equipment at his disposal was no match for that of the British. While trying to buy foreign equipment, he also commissioned the translation of foreign texts, and later passed on the material he had collected to the scholar-official Wei Yuan. Wei used the material to compile An Illustrated Gazetteer of the Maritime Countries, which developed the old idea of using the barbarians to control the barbarians into the new idea of using barbarian armaments to control the barbarians. The importance of the new idea was not lost on Japanese scholars, who later translated the book to push forward their own reform movement (Tsiang 1967: 144).
In China itself the idea became central to the Self-Strengthening Movement that took off after the Second Opium War and the defeat of the Taiping Rebellion. In justifying to Beijing the establishment of arsenals to make guns and gunboats and of a machine factory, a provincial leader of the movement argued that the foreigners' domination of China was based on the superiority of their weapons and that China could strengthen itself only by learning to use Western machinery (Fairbank 1983: 197-8; So and Chiu 1995: 49-50). A few years later the Meiji Restoration (1868) propelled Japan along the same path of rapid modernization aimed at using barbarian armaments (and machines) to control the barbarians. The armaments race that had long been a feature of the Eurocentric system would now extend to East Asia.
Launched under the same slogan taken from the ancient text the Rites of Zhou, "Enrich the country, strengthen the army" (Lin 1959), the parallel efforts of China and Japan in military-related industries gave priority to the establishment of industrial enterprises in mining, heavy industries, transport and communications. In both countries, these modern industries were governmental undertakings at the national or regional level. In China, government supervision was combined from the start with the capital and management of Chinese merchants with experience in foreign business. In Japan, government enterprises recruited technicians of various nationalities (Dutch, French, English, German, American among others) as managers, assistants and instructors, and once the enterprises had been put on a sound footing, they were turned over to Japanese merchants at bargain prices. Both countries actively discouraged foreign investment and control in the new industries (Moulder 1979: 180-9; Thomas 1984: 17, 64, 81; Norman 1975: 233-4; Hsu 1983: 279; So and Chiu 1995: 49-53, 74-5).
In the final decades of the nineteenth century, these industrialization efforts yielded comparable economic results. On the eve of the Sino-Japanese War of 1894, in Albert Feuerwerker's assessment, "the disparity between the degree of modern economic development in the two countries was not yet flagrant" (1958: 53). Nevertheless, Japan's victory in the First Sino-Japanese War was symptomatic of a fundamental difference in the impact of the modernization drive on the social and political cohesiveness of the two countries and on their respective capabilities to wage war. In China, the main agents of the modernization drive were provincial authorities, whose power vis-a-vis a declining central government had increased considerably in the course of the repression of the rebellions of the 1850s, and who used modernization to consolidate their autonomy in competition with one another and with the center. In Japan, in contrast, the modernization drive was an integral aspect of the Meiji Restoration that centralized power in the hands of the national government and disempowered regional and local authorities (So and Chiu 1995: 53, 68-72).
The advantages that Japan came to enjoy vis-a-vis China as a result of these opposite domestic thrusts of their respective modernization efforts were compounded by the geopolitics of the situation, most notably, by Japan's smaller size, insularity, and poverty of resources, all of which oriented Japanese modernization toward overseas expansion at the expense of China and its tributaries. From the start, control over Korea--"a dagger to the heart of Japan," a "tributary" state of China--was the main goal of this outward thrust of Japanese modernization. By 1876, Japan had already succeeded in opening up Korea to its trade through an unequal treaty, which was immediately followed by similar treaties obtained by the Western powers by virtue of the most-favored-nation clause. Within a few years, Japanese purchases of rice raised prices beyond what ordinary Koreans could afford, precipitating a major rebellion aimed not just at stopping the export of rice but at reconstituting power in Korea on new social foundations. Unable to quell the rebellion, in 1894 the Korean government turned to China for help. But when China stepped in, Japanese warships intercepted and destroyed the Chinese fleet (Borthwick 1992: 145-9; Kim 1980).
The Japanese victory in the short war that followed turned the underlying divergence in the trajectories of Japanese and Chinese modernization into a chasm. On the one hand, defeat in the war weakened further national cohesion in China, leading to half a century of political chaos marked by further restrictions on national sovereignty, the final collapse of the Qing regime, the territorial division of China among foreign powers, the transformation of provincial and local strong men into semi-sovereign warlords, Japanese invasion, and recurrent civil wars among warlords and between the forces of Nationalism and Communism. On the other hand, victory in the war strengthened further national cohesion in Japan, leading over the same half century to the renegotiation and eventual supersession of the unequal treaties with Western powers and Japan's emergence as the paramount economic power and leading imperialist power in East Asia until its defeat in the Second World War.
Japan's victories in the First Sino-Japanese War of 1895, followed by its stunning victory in the Russo-Japanese War of 1905, the first military victory by a nation of the periphery over a European industrial power, established Japan--to paraphrase Akira Iriye (1970: 552)--as "a respectable participant in the game of imperialist politics." It also redefined the relative position of China and Japan within the framework of the East Asian order. Economically, victory over China gave a major boost to the resources that Japan could mobilize in the expansion of its military-industrial apparatus. The acquisition of Chinese territory, most notably, Taiwan, as well as China's recognition of Japanese suzerainty over Korea, endowed Japan, not just with valuable outposts from which to launch future attacks on China, as well as with secure overseas supplies of cheap food. At the same time, Chinese indemnities, amounting to more than one-third of Japan's GNP, helped finance the further expansion of Japan's heavy industries and to put its currency on the gold standard. This, in turn, improved Japan's credit rating in London and, therefore, its capacity to tap additional financial resources for its industrial expansion at home and imperialist expansion overseas (Duus 1984: 143, 161-2; Feis 1965).
Politically, victory over China turned Japan into a respectable participant in the imperialist game but only after a minor setback. Shortly after the signing of the 1895 Treaty of Shimonoseki, France, Germany and Russia demanded that Japan return to China Port Arthur and the Liaodong Peninsula, which the treaty had assigned to Japan along with Taiwan and the Pescadores Islands. Japan complied only to see the Western powers reap the fruits of its victory through the scramble for exclusive spheres of influence over Chinese territory--Russia leasing Port Arthur and establishing control over the Liaodong Peninsula; Germany leasing Kiachow Bay and establishing control over the Shandong Peninsula; France leasing Guangzhou Bay and extending control from northern Indochina to Henan; and Britain leasing Weihaiwei and establishing control over the Yangzi Valley (Borthwick 1992: 149-50; Thomas 1984).
Russia's growing activism and influence was nonetheless as upsetting for Britain's balance-of-power policy as it was for Japan's imperialist ambitions. Perceiving Japan as being strong enough to be a useful ally in countering Russian ambitions in the Far East but not strong enough to challenge British dominance in the region, Britain renegotiated their unequal commercial treaty-- thereby opening the way to analogous renegotiations with the other Western powers--and entered into a formal Anglo-Japanese Alliance (1902). Emboldened by Britain's commitment to discourage any other power from siding with Russia, in February 1904 Japan launched a surprise attack on the Russian fleet at Port Arthur, sunk the entire squadron at anchor, and went on to win the war that ensued.
As Geoffrey Barraclough (1967: 108) observes, in allying with Japan, Britain seemed to have "pulled off a clever manoeuvre against Russia, but in reality it had called in a force it could not control." The Treaty of Portsmouth (1905) brokered by US President Theodore Roosevelt gave Japan control over the Liaodong peninsula, Port Arthur, the southern half of Sakhalin Island, the southern part of the railway built by the Russians in Manchuria and, most important of all, a free hand in Korea, which Japan formally annexed as a colony five years later. The "dagger to the heart of Japan" was thus transformed into a springboard to further expansion in China and into a major source of cheap food with which to support Japan's rapidly increasing industrial population (So and Chiu 1995: 91, 94; Ho 1984: 348-50).
These gains were consolidated and increased further during the First World War. Having joined the war on Britain's side, Japan seized German concessions in China and German possessions in the Northern Pacific. It then took advantage of the fact that Britain and Russia were tied down in Europe to seek a sort of Japanese protectorate over China with the aggressive 21 Demands of 1915. The attempt was not successful, but "the effects of the war on the power situation in the Far East--particularly when the Russian revolution in 1917 gave Japan further possibilities of building up its ascendancy--were no less revolutionary than those in Europe. By 1918, even before the end of the European War, Wilson was already girding himself to challenge in earnest the expansion of Japan" (Barraclough 1967: 108-9, 116-17).
By and large, from Versailles, through the Washington Conference of 1920-1, right up to the Crash of 1929, Japan yielded to US pressure to accept a war fleet significantly smaller than those of Britain and the US and to restrain its expansionist ambitions in China. This enabled Japan to place a growing share of its exports in the US and in the British empire and to raise money both in London and New York for its own commercial and financial ventures overseas, from loans to Chinese warlord governments to the establishment of the South Manchurian Railway Company and the Oriental Development Corporation (Iriye 1974: 24x-x; Duus 1984: 161-2). But when the Crash of 1929 unplugged Japan from core financial and commodity markets, imperialist tendencies reemerged with a vengeance. In 1930, Japan demanded parity in warships with the US and Britain, and when parity was denied, it abrogated all previous agreements controlling the size of fleet. Japan embarked on a collision course not only with a rising tide of Chinese nationalism but with the major colonial powers whose Asian territories were threatened. In 1931-2, Japan took control of the whole of Manchuria under the guise of the puppet state Manchuguo and withdrew from the League of Nations. In 1934-35 Japan enlarged its sphere of influence in northern China. In 1937, Japanese aggression in north China provoked the Second Sino-Japanese War and by late 1938 Japan occupied a vast swath along China'a coast. In 1940, Japan advanced into French Indochina and signed a treaty of alliance with Germany and Italy (Borthwick 1992: 203-5, 209-10; So and Chiu 1995: 105-8). In a fifteen year period Japan had become the dominant regional power in Asia as a result of its aggressive military expansion, on foundations of growing economic strength, and had embarked on a collision course with Britain and the United States.
The United States, which took little action in response to Japan's attack on and territorial expansion in China in the decade after 1931, in 1941 responded vigorously when Japan extended her bid for regional supremacy to Southeast Asia by tightening trade restrictions, freezing Japanese assets in the US, and imposing a total embargo on petroleum products. Japan responded with the attacks on Pearl Harbor. While Japan's advances in military technology and performance had been spectacular in the 36 years since its destruction of the Russian fleet which signaled its arrival as a respectable military power, they were not sufficient to keep up with the further military technological advances and productive power of the rising hegemonic power of the West. And yet, precisely at the time when Japan's military challenge to Western dominance in East Asia went up in smoke, a new challenge was emerging in the region in the form of a nationalist revolution and a Sinified version of Marxism-Leninism.
Marxism-Leninism and the Restoration of China's Territorial Integrity.
The proximate origins of this new challenge can be traced to the same bifurcation in the trajectories of Chinese and Japanese modernization that occurred in the wake of the Sino-Japanese War of 1894-95 and propelled Japan on the road to Pearl Harbor and Hiroshima. Besides imposing a crushing indemnity of 230 million taels on Chinese finances, the Treaty of Shimonoseki forced China to open up several more ports not just to trade but also to "industries and manufactures"--a concession to Japan, which by virtue of the most-favored-nation clause was extended ipso facto to thirteen Western powers. Moreover, as previously noted, Chinese recognition of Japanese suzerainty over Korea and the cession of Chinese territories to Japan triggered a scramble among the Western powers for exclusive spheres of influence over large chunks of Chinese territories. The centrifugal forces that had already characterized Chinese modernization before the war were thus given a tremendous impulse by the war and its aftermath.
Attempts by opposite factions at the Qing court to counter the tendency toward the territorial disintegration of the empire only made things worse. The humiliation of defeat by a former tributary state and the scramble for exclusive spheres of influence that ensued, prompted the young and nominal Emperor Guangxu to issue in the Summer of 1898 no less than forty decrees aimed at the modernization of the Chinese state. The result, however, was a military coup staged by Empress Dowager Cixi. The recovery of Qing fortunes, which Guangxu had sought through a speed-up of modernization, Cixi sought through patronage of the anti-foreign Boxer Rebellion in which China fought all the Western powers combined (Esherick 1987; Fairbank 1992: 228-32).
The new indemnity of a staggering 450 million taels and the restrictions on Chinese sovereignty imposed by the Boxer Protocol of 1901 set the stage for the demise of dynastic rule in the Revolution of 1911 and the subsequent breakdown of all semblance of centralized government in the warlord era from 1916 to 1927. Economically, the Boxer protocol compounded the effects of the Treaty of Shimonoseki in compromising China's modernization efforts for decades to come. Loans contracted to pay the Boxer indemnity more than doubled the annual payments owed on loans contracted to pay the Japanese indemnity of 1895. By 1902, these payments absorbed over 40 percent of the central government revenue (Thomas 1984: 113).
Between 1895 and 1911, the combined costs of the two indemnities were more than twice the total initial capitalization of all manufacturing enterprises established in China by nationals or foreigners between 1895 and 1913. The further restrictions imposed on Chinese sovereignty did result in a rapid increase in foreign investment, which more than doubled between 1902 and 1914, and again between 1914 and 1931. But over the entire period 1902-30, 75 percent more capital left China as repatriated profit than was invested in China from abroad (Esherick 1972, 13).
Politically, the Qing government--in Joseph Esherick's words- -was reduced to little more than a despised tax-collecting agency for the foreign powers" (1972: 14). Prevented by the unequal treaties from raising tariffs, the Qing government was forced to raise internal taxes and cut down support for the "self-strengthening enterprises." Worse still, constitutional reforms aimed at introducing some measure of representative government and at winning the support of the landed upper classes for the tottering regime through the establishment of provincial assemblies backfired. Provincial interests and authorities quickly turned the assemblies into instruments of consolidation and legitimation of their autonomy from Beijing. And as soon as the occasion arose, the assemblies declared their independence from the central government precipitating the Revolution of 1911 (So and Chiu 1995: 115, 117-18; Skocpol 1979: 79-80).
In sum, the Sino-Japanese war had opposite legacies for China and Japan. Victory in the war propelled Japan onto the path to full sovereignty and respectability in the Western game of imperialist politics. Defeat deepened China's disintegration and paved the way for further foreign domination.
Just before the Boxer movement collapsed, a well informed Western observer, Henri Borel, ventured a prediction that still haunts the West
The revolutionary party is likely to do just what the Japanese have done: rid the country of all foreign influences and turn it into an independent power in the East. If the movement succeeds, the West is as good as finished and the future belongs to China and Japan, to the East. (Quoted in Romein 1978: 50)
The movement did not succeed, and the future would belong to the West for another century. But as Jan Romein remarks after quoting Borel, fifty years after hitting the bottom of national humiliation, China began to reemerge as a power in its own right. "Behind the rebellious Boxers with their primitive swords, there loomed as in a Chinese shadow play, the gigantic figure of Sun Yat-sen, behind him that of Marshal Chiang Kai-shek, and behind the Marshal that of Mao Tse-tung" (1978: 50).
To this we should add that behind the two main transitions of this Chinese shadow play--from the Boxers to Sun Zhongshan and from Jiang Jieshi to Mao Zedong--the shadow of Japan loomed much larger than that of any Western power. Behind the rise of Sun Zhongshan there loomed the shadow of Japan's victory against Russia in 1905--the same year in which Sun became the head of the Revolutionary Alliance at a meeting of Chinese students in Tokyo. Behind the rise of Mao Zedong there loomed the shadow of Japan's takeover of Manchuria in 1931-2, the expansion of its sphere of influence in northern China in 1934, and its takeover of the coastal regions of China in 1937-8. In the period between the rise of Sun and the rise of Mao, there lay the warlord era in China (1916-27) and the transformation of Japan from the main foreign supporter of Chinese nationalism-as it still was on the eve of the Revolution of 1911-into its main foe.
The changing relationship between China and Japan under the impact of Western dominance thus set the stage for the evolution of China's national liberation movement. Nevertheless, the evolution itself--that is, the nature of the movement's responses to the challenges posed by the rise of Japanese imperialism and the effectiveness of those responses in attaining the movement's goals- -was determined primarily by the relationship of the movement to Chinese society on the one side, and to world politics on the other side. For what concerns the movement's relationship to world politics, the most important influence was exercised by Marxism-Leninism as instituted by the Russian Revolution of 1917.
In its original, Soviet form, Marxism-Leninism was probably more important in reviving the fortunes of Sun's Guomindang in the 1920s than in assisting the subsequent rise to power of Mao's CCP.
The GMD had got no farther than regional warlordism at Guangzhou until in 1923 it allied with the Soviet Union, reorganized itself on Soviet lines, created an indoctrinated Party army, and formed a United Front with the CCP. The four years of Soviet aid and CCP collaboration together with the patriotic Marxist-Leninist animus against the warlords' domestic "feudalism" and the foreign powers' "imperialism" helped the GMD to power. (Fairbank 1992: 285)
On Sun's death in 1925, leadership of the GMD passed to the military commander Jiang Jieshi. Under Jiang, the GMD never fully shed the Leninist form of organization but, as soon as it had seized control of the Shangai-Nanjing region, it reversed Sun's policy and destroyed the Communist Party and the labor and peasant movements that had thrived during the united front. This reversal of Sun's United Front policy led to the imperialist powers' recognition of Jiang's Nanjing government in 1928.
Japan's offensive in the 1930s provided the coup de grace for the GMD. But before the CCP could effectively displace the GMD at the head of the movement of national liberation, its ideology and organization had to become an organic expression of revolutionary forces within Chinese society itself. This is the transformation that produced a distinct Chinese brand of Marxism-Leninism and eventually led the CCP to power. It began with the formation of the Red Army and its turn to guerrilla warfare shortly after Jiang's 1927 break with the CCP. But it came to fruition only after Japan seized China's coastal regions.
The transformation had two closely related aspects. First, while the Leninist principle of the vanguard party was retained, the insurrectional thrust of Leninist theory was abandoned. In the deeply fragmented statal structure of warlord-GMD China, there was no "Winter Palace" to be stormed. Eschewing the insurrectional aspects of Leninist theory, Mao forged a strategy of people's war featuring the creation of rural base areas and armies trained in guerrilla warfare. In the rural base areas, the communists carried forward a reformist program that won broad popular support by building on a rising nationalism linked to the reduction of rent and interest and tax reform. The result was "a two-way socialization process," whereby the party-army molded the subaltern strata of Chinese rural society into a powerful revolutionary force, and was in turn shaped by the aspirations and values of these strata (Selden 1995: 37-8).
The war with Japan gave a powerful impulse to this two-way socialization process, turning the CCP from a force of merely local significance into a force of world significance. By the time of Japan's 1945 surrender, Mao's party-army held sway over almost 100 million people mainly in North, Northeast, and North Central China and was poised to win nationwide victory in the subsequent civil war that ended in Guomindang defeat and establishment of the People's Republic.
The challenge to Western dominance in the East Asian region that emerged from the double victory of the CCP against Japan and the GMD was fundamentally different from the Japanese military challenge that had just been terminated by US strategic and nuclear bombing. The Japanese challenge was based on Wei Yuan's idea of using Western military technology to control the West. As previously noted, it failed primarily because Japanese advances in Western military technology could not keep up with the West's own further advances. But it failed also because it called forth in the East Asian region countervailing forces of nationalism and social revolution that were as firmly opposed to Japanese as to Western imperialism. Once the Japanese challenge collapsed, these countervailing forces remained in place to check the restoration of Western dominance in the region.
This new challenge was not based primarily on Wei Yuan's idea of using Western military technology to control the West. Although minimal proficiency in the use of such technologies was essential to its success, the new challenge was based primarily on the Taipings' idea of using Western ideology to control the West. The Taipings' charismatic leader, Hong Xiuquan, had tried with a sinified version of Christianity and had failed. Mao, following in the footsteps of Sun, tried with a sinified version of Marxism-Leninism and succeeded in reunifying China and driving the imperialist powers from China. In between Hong's rebellion and Mao's rise to power there lies a century in the course of which the West laid siege to the old center of the East Asian world system, forced upon it a major reorganization, but never succeeded in becoming hegemonic, except in the limited and contradictory sense of drawing Japan onto the path of industrialized warfare and China onto the path of socialist revolution.
In the intensification of competition that ensued from Japan's strides in the acquisition of Western military technology, the declining Western hegemon lost regional ascendency. By the 1930s Japan had for all practical purposes eclipsed Britain as the dominant power in East Asia. In the intensification of competition that ensued from China's strides in the acquisition of Western revolutionary ideology, it was Japan itself that went under. That left the new hegemonic power of the West, the U.S., facing a new China in a struggle for centrality in East Asia, which once again reshaped the political economy of the region. If China was a poverty-stricken agrarian nation just emerging from a century of subjugation, civil war and foreign invasion, it would prove surprisingly resourceful in challenging the U.S. in Asia in subsequent years.
Two main questions arise from the foregoing account of the Western Impact on the East Asian world-system:
1) Can Japan be seen as replicating its historic role in all three periods, that is, accepting military-political subordination to a dominant power (China, Britain, the U.S.) as the price for maintaining autonomy, territorial integrity and economic expansion? Stated differently: to what extent can the policies of the Western powers explain China's regional decline and Japan's rise?
2) The main thrust of our account has been that the networks of the overseas Chinese diaspora gained in reach and penetration through the opium and "coolie" trades and, more generally, through the weakening of the bureaucratic control of the Chinese imperial center on regional trade. Would it be more plausible to argue that the protracted disintegration and weakness of Imperial China actually weakened rather than strengthen the diaspora? Is there any indicator that would enable us to gauge whether the reach and penetration of the diaspora's networks increased or decreased at different stages of the European intrusion?
The trajectories of the Chinese and Japanese political economies and their interrelationships in the years 1945-70 were profoundly influenced by the outcomes of the Second World War and the U.S.-Soviet conflict which was refracted with particular intensity in East Asia. This, coinciding with the victory of anti-colonial national independence and national liberation movements, transformed the political economy of much of East Asia. Cold War and postrevolutionary structures provided the basis for the bifurcated regional political economy characterized by deep political-strategic divisions, by trade blocs originating in the U.S.-led blockade and isolation of China, and the creation of a Soviet bloc. The results included conflicting approaches to development and the world economy within the two antagonistic zones that comprised the East Asia region in the initial postwar decades. This bipolar Asia constituted a break from the two previous attempts at regional integration: the East Asia tribute-trade system, with China at the center over much of the preceding millenium, and the ambitious but abortive Japanese attempt in the first half of the twentieth century to displace both Chinese primacy and Western colonial domination and create a Japan-centered Greater East Asia.
Bipolarity and the Bifurcation of Developmental Trajectories.
The United States emerged from World War II as the dominant regional and global power. Yet the limits of power were nowhere clearer than in East Asia. From 1947, U.S. regional policy crystallized around two goals: the reconstruction of Japan as the economic and financial linchpin of Asia within the framework of U.S. strategic and economic-financial supremacy and the creation of a pan-Asian structure of U.S. bases and alliances deployed to counter Soviet and Chinese regional power and prevent the spread of revolution. Having quickly concluded that the central challenge to U.S. primacy in Asia would come from the Soviet Union and China, the U.S. encouraged the reconstitution of the zaibatsu it had earlier set out to dismantle; it fostered reindustrialization and technological advance and opened the U.S. market to Japanese exports; it commmitted U.S. forces to relieve Japan of the necessity for military spending (and to preclude autonomous actions); it encouraged the restoration of Japan's trade and financial ties with Asian nations within the U.S. orbit; and it provided economic aid and loans followed by the bonanza of procurement contracts in the Korea and Indochina Wars (Borden 1984; Dower 1993). In subsequent decades, this package would spur the growth of Japan in concert with the East Asian NIEs within the U.S. zone of a polarized Asia.
As it had throughout the earlier tribute-trade system and again in the early decades of the twentieth century, postwar Japan accepted subordination to a dominant power as a basis for the end of U.S. occupation, economic security and growth. That was the price for U.S. support for Japan's postwar economic resurgence, a prospect that U.S. planners viewed as essential for the goals of containing Chinese and Soviet might in Asia and globally, and as they key for economic stability in the U.S. zone in Asia.
U.S. and Japanese policymakers recognized the importance of the fact that Asian colonies and spheres of influence had provided 35 percent of prewar Japan's raw materials and absorbed 40 percent of Japan's exports. Restoration of these links with other Asian nations in the orbit of U.S. power was critical to a Japanese economic recovery consistent with the U.S. attempt to create regional mechanisms that could help to isolate China. The Korean War heightened the urgency for U.S. policymakers of restoration of Japan's economic ties with Taiwan and (South) Korea, as well as with the nations of Southeast Asia, particularly as a means to reduce pressures for expanded economic relations with China. Japan was the dominant regional economic power in the U.S. zone of a polarized East Asia and the primary U.S. prop in U.S.-Soviet and U.S.-Chinese conflicts in Asia.
China's postwar industrial advance, like Japan's, took place within the framework of U.S.-Soviet bipolarity which impeded the restoration of East Asian regional ties transcending the two blocs. The shift in China's primary economic and trade ties from the industrialized capitalist nations to the Soviet bloc in the early 1950s, the processes of collectivization, nationalization, and heavy industry-led development, and China's relative decline as a trading nation, were in part responses to the strategic politics played out in the era of the Korean War, U.S. blockade, and Sino-Soviet alliance.
China's rapid industrialization from the 1950s forward employed a mobilizational variant of the Soviet model of anti-market collectivism and heavy industry-led growth. This was a developmental trajectory that emphasized China's vast agrarian land mass and, in the face of U.S.-led blockade, turned its back on the sea and commerce, a twentieth century variant of the Ming dynasty's inward-looking policies half a millennium earlier.
In the 1950s, Soviet technology transfer, training, blueprints, limited medium-term loans, and planning approaches helped lay the foundations for China's state-centered heavy industry. In contrast to Japan, between 1949 and 1978, industrial growth produced no significant gains in per capita GDP, particularly for China's vast rural population. State- and collective-enforced high rates of accumulation and suppressed incomes did, however, providethe basis for industrial and agricultural growth and the wherewithal to guarantee security at low income levels in a distinctive Chinese pattern of privimitive accumulation (Selden 1993).
The preceding discussion has highlighted important differences in the development trajectories of the two zones. Yet we note that 1945-70 was one of unprecedentedly rapid state-promoted industrialization throughout much of East Asia from Japan to the NIEs to China. Only in the U.S.-Japan zone, including the NIEs from the 1960s, however, did industrialization translate into the beginnings of the ascent in the value-added hierarchy of the world economy as measured by GNP per capita. By the end of the 1960s, Japan had joined the upper-middle-income group of countries and South Korea and Taiwan had begun their advance towards the middle- income group (Arrighi 1996: 10-13).
With the bifurcation of East Asia into two antagonistic blocs in the aftermath of World War II, diverse development trajectories emerged, consistent with subordinate affiliation with one or the other super power: Japan and most of her former colonies and dependencies in the U.S. orbit; China, North Korea and Vietnam in the Soviet orbit. A striking feature of intra-regional relationships in the 1950s was, on the one side, the strength of the economic, political, social and cultural ties between each of the semi-sovereign states and its superpower and, on the other side, the comparative weakness of direct relations among the semi- sovereign states. Within the U.S. zone, weak ties between Japan and other Asian states were in part a legacy of lingering bitterness toward Japan in its former colonies, in part a product of the fact that the regional division constituted a barrier to the effective flow of capital and goods between Chinese abroad and China. In the Soviet zone, economic and security relations with China were important for North Vietnam and North Korea, yet these remained largely at the level of state to state interaction with little flourishing of market relations given the agro-industrial and collectivist priorities of all three countries.
The blocs were, however, neither completely autonomous nor frozen in character. Indeed, by the early 1960s Japan replaced the Soviet Union as China's leading trade partner as Chinese-Soviet conflict came to displace China-U.S. conflict as the primary external preoccupation of the Chinese state. Moreover, certain common qualities in developmental approaches spanning the divide help to clarify both the economic dynamic of the region and the speed with which the bipolar rupture could be healed once strategic conditions ripened:
1) The nostrums of neo-classical economists to the contrary notwithstanding, China, Japan and the NIEs all adopted strong state-centered approaches geared toward accelerated development despite radically different policies defining the role of markets (Johnson, 1982; Amsden 1989; Wade, 1990).
2) In both zones we observe political-strategic weakness, or what Peter Katzenstein has termed the semi-sovereign state: divided nations, as in the case of China, Korea and Vietnam (pre-1975); strategically subordinated and restricted by the presence of foreign troops on its soil, as in the case of Japan, South Korea, Hong Kong and Taiwan; or dependent on others for a nuclear umbrella and advanced military technology and more generally on the dominant military presence in the region to guarantee security as in the case of Vietnam, the two Koreas and the two Vietnams.
3) Japan, the NIEs, China, North Korea and North Vietnam in the early postwar years all resisted foreign control of the commanding heights of their economies, notably by sharply restricting direct foreign investment and tightly controlling trade.
4) China, Japan, Taiwan, North and South Korea, and North and South Vietnam all carried out far-reaching agrarian reforms which broke the grip of the landlord elite, facilitated state penetration of the countryside, and stimulated agriculture.
5) A legacy of pre-war or wartime Japanese-directed economic development, including infrastructure, education, and training, was shared among the NIEs and parts of China.
6) A new wave of overseas migration of Chinese took place in the wake of revolution, notably the movement of coastal commercial and industrial interests to Hong Kong, Taiwan, Southeast Asia and North America which, when political-strategic conditions ripened, could contribute to the economic unification of the region.
In sum, the postwar trajectories of all of the states and regions of East Asia, shaped by U.S. and Soviet policies and conflicts, as well as in reaction to early Japanese-led approaches to unification, gave rise to economic and strategic bifurcation. Strategic shifts and the relative weakening of the two superpowers vis-a-vis the nations of the region opened the way toward greater autonomy, regional unification, integrative regional growth and redefinition of the position of both superpowers in the region. Already in the late 1960s, important premises of the bipolar postwar order in Asia had been undermined. Protracted wars in Korea and Indochina, together with the costs of maintaining a farflung network of bases, weakened the dollar and the fiscal foundations of U.S. hegemony. Japan's economic resurgence, followed by that of the NIEs and subsequently China and the nations of Southeast Asia, together with the fierce conflict between China and the Soviet Union, increased pressures to bridge the polarized economic and strategic order in Asia.
The Crisis of US Hegemony and the Economic Integration of the East Asian Region.
In the early 1970s, the conjuncture of global and regional events precipitated a transition in the nature of hegemonic politics opening the way to the formation of a unified regional economy in East Asia. The seminal events were:
1) the collapse of the U.S. dollar and the end of its convertibility into gold signaling the weakening of U.S. economic and financial power (1970);
2) the Nixon Doctrine, accepting the U.S. military defeat and the necessity to withdraw its forces from Indochina (1969) and the scaling back of American strategic and financial commitments in mainland Asia;
3) the U.S.-China diplomatic breakthrough (1971) which transformed the lines of global and regional power, paving the way for China's full reentry in the United Nations and its advance into the world economy, heralding its future market transition, institutional transformation, emergence as a major trading nation and recipient of foreign capital and technology;
4) the beginning of significant Japanese overseas manufacturing investment in Asia, particularly in the NIEs (early 1970s);
5) the origins of China's foreign trade drive (1970)leading the way toward that nation's regional and global integration in the world economy;
6) the growing strength and reach of Chinese diaspora capital and business networks throughout the region and globally.
The relative decline of U.S. and Soviet power and the end of regional bifurcation signaled by U.S.-China rapprochement, the end of the Indochina War, Japan's growing economic might and unparalleled trade surplus, and China's spiraling international trade paved the way for the formation of an Asian regional political economy. Its salient features include the growing economic integration of Japan, China, the NIEs, the ASEAN nations, and the United States within a dynamic market and investment region, the emergence of overseas Chinese economic power throughout the region and beyond, and new hierarchies and divisions of labor with burgeoning movements of capital, industry, technology and labor throughout the region. Emblematic of one set of changes is China's growing strength in both the regional and the global political economy and an expanded regionwide role for overseas Chinese enterprise including that in Taiwan, Hong Kong, Singapore, throughout Southeast Asia and extending to North America and Europe. Regional integration, involves new hierarchies of trade, investment and financial and technological interlocks, and new intra-regional and global division of labor in key industries, all central to the emergence of East Asia as the premier growth region and the primary zone of world accumulation, investment and trade in the final decades of the twentieth century.
East Asia has sustained uniquely rapid growth and technological transformation as intra-regional trade, investment, GDP and per capita income have continued to soar in times of general stagnation in the global economy. Over the last thirty years, real GNP multiplied twelve times in the NIEs, eleven times in Japan, and six times in China as well as in ASEAN. By comparison, the U.S. economy expanded 2.5 times and the world economy three times (Kwan 1994:11). In the years 1980-93 China's GNP per capita increased at the rate of 8.2 percent annually compared with 0.1 percent for all low income countries excluding China and India and 2.2 percent for high income countries. In these years, Japan's per capita GNP rose at the annual rate of 3.4 percent and the U.S.'s at 1.7 percent (World Bank 1995: 162-63).
It is not, however, growth per se but increasing regional economic integration that is the focus of our discussion. Prior to the mid-1980s, foreign trade in East Asia was dominated by trans-Pacific trade centered on the United States. Between 1986 and 1992, however, the share of Asian exports destined for other Asian countries rose from 32 to 44 percent while those destined for the U.S. dropped from 37 to a still hefty 24 percent (Kwan 1994: 108). In contrast to the years 1931-45 when Japan emerged briefly as regional hegemon, the strengthening of intra-regional trade ties since the 1970s, far from constituting a move toward autarky, has simultaneously intensified both regional and global ties. Between 1978 and 1992, for example, U.S.-China trade increased thirtyfold from $1.1 billion to $33.1 billion while U.S. trade deficits with the region also soared. Yet it is the growth of intra-regional trade that has been most striking. By 1990, intra-East Asian trade accounted for 4 percent of world trade compared with just 0.5 percent in Latin America, and East Asian trade and investment intensification has continued its rapid growth throughout the 1990s (Kagami 1995: 6; Kwan 1994: 108).
Among the factors spurring intensified regionalization was the 1985 Plaza Accord driven by Japan's enormous trade surpluses with the U.S. and other nations including many Asian nations (Howe 1996: xvii). The accord, which strengthened not only the yen but also the currencies of Taiwan and South Korea, improved the export competitiveness of several other Asian countries. It also generated a surge of Japanese, Taiwanese, South Korean and Overseas Chinese investment in Asia that fueled intraregional industrialization and trade as well as a shift in manufactured exports to the U.S. away from Japan and the NIEs and toward China and ASEAN nations. From 1985 a larger share of Japanese and NIE exports was directed to Asia, including machinery, equipment and semi-processed goods for processing and assembly in newly opened plants (Ozawa 1993: 142; Kwan 1994: 4, 14-15, 100-01).
East Asian trade surged not only in absolute terms but as a percentage of world trade. While the U.S. and European shares of world trade edged up slightly between 1980 and 1992 (from 12.4 to 13.5 percent and from 38.1 to 40.0 percent respectively), East Asia's share jumped from 14.6 percent to 22.3 percent with exports leading the way in advancing from 14.4 percent to 24.0 percent of world totals. By 1992 Japan accounted for 7.7 percent, the Asian NIEs for 9.3 percent, ASEAN for 3.2 percent and China 2.1 percent of world trade. In 1993 Hong Kong became the world's eighth largest trader, with China in tenth place and Taiwan 14th (Kojima 1994: 18; Kagami 1995: 29-30). China has been an important source of growth over two decades during which its export dependence (exports/GNP) rose from just two percent in 1970 to 20 percent in 1992. This is twice the level of Japan's export dependence, though far below the dependence levels of the NIEs and the ASEAN countries (Kwan 1994: 10,12, 101, 171). Since 1986, the value of U.S. exports to Asia has surpassed that of its exports to Europe. In sum, over a quarter century of spiraling East Asian trade, intra-Asian trade networks experienced the most rapid growth, the focal point of U.S. trade shifted from Europe to Asia, Japan's share of Asia's exports declined as a percentage both of intra-Asian trade and of Asia's more diversified exports to the U.S., China and the NIEs all expanded their shares in regional trade, and the U.S. balance of trade deficit with Asia spiraled despite the upward valuation of the currencies of Japan, Taiwan and South Korea and the decline of the dollar against strong currencies.
As China's market transition advanced both domestically and internationally, Japan, China's primary economic partner, in trade, aid, technology transfer, loans, and foreign investment from 1960 to the 1980s, faced a powerful competitor, and from the late 1980s was surpassed in important respects by Hong Kong. Hong Kong emerged as a driving force in fostering regional ties and internationalization of the Chinese economy centered on rapidly growing economic linkages between coastal (particularly central and southern) China, Hong Kong, Taiwan and Overseas Chinese capital from other parts of Asia and globally (Hui 1995).
Chinese Capital and East Asian Regionality
The growing importance of Chinese capital and business enterprise within and beyond China's borders is central to the post-1970 rise of East Asia as a cohesive economic region. In 1993, the $613 billion combined exports and imports of China, Hong Kong and Taiwan surpassed Japan's total trade of $569 billion for the first time. Between 1978 and 1992, the ratio of intra-regional exports to total exports increased from 26 to 45 percent for China, from 3 to 38 percent for Hong Kong, and from 7 to 19 percent for Taiwan (Kojima 1993). In 1991 Japan's $103 billion in exports to Asia, led by exports to the NIEs followed by ASEAN and China, for the first time surpassed those to the U.S., which nevertheless remained Japan's leading trade partner while China climbed to number two (Kwan 1994: 4-10). Japan, long China's top trade partner, was surpassed by Hong Kong in 1985, and the margin of Hong Kong's advantage has grown since (Ash and Kueh 1993; Chen and Ho, 1994: 15; Kwan 1994: 128).
By 1993 Taiwan and China were each other's fourth largest trade partner with China exporting $1.5 billion and importing $17.6 billion, a figure fueled by the flow of machinery, equipment, and partially finished goods to Taiwan-owned enterprises on the mainland (Leng 1996; Kojima 1994:21). China's Taiwan trade has grown rapidly since the 1980s, reaching $5.8 billion in 1991 and $8.6 billion in 1993 ($7.5 billion of the total representing Taiwan exports). For the years 1979 to 1993 Taiwan's China trade grew at annual rates of 40 percent. And this was simply the legal trade directed through Hong Kong (Kojima 1994: 19; Charng 1994: 243-48). These figures, moreover, conceal the immense and rapidly growing Overseas Chinese trade and investment emanating from other countries. In trade, in technology transfer and above all in the provision of capital, the contributions of diaspora Chinese in Asia and beyond have played critical roles in China's and East Asias's surge since the 1970s, a pattern that is a direct legacy of the historic East Asia tributary-trade system.
Central to the flourishing of Chinese capital and to the character of the East Asia region is the deepening of intra-regional trade and investment concentrated on the China coast, initially notably the Hong Kong-Guangdong region followed by coastal Fujian dominated by Taiwan investors, but in the mid-1990s extending to the Jiangsu-Shanghai region further North. Hong Kong, Taiwan, and Overseas Chinese capital in the 1990s surpassed Japan as the dominant source of trade, capital, and investment in China. For three decades Japan provided important financial and technological inputs into the Chinese economy, yet only a very small fraction of Japanese FDI has been directed toward China, and little of that has been in manufacturing. This contrasts sharply with Hong Kong and Taiwan whose investment in China centers in manufacturing, a central facet of the growing integration of those economies with China.
An important byproduct of East Asia's surging trade is the concentration of foreign exchange reserves in the region. By 1992, China, Hong Kong and Taiwan had accumulated $165 billion in foreign reserves, approaching the $180 billion combined total for the U.S., Japan and Germany that year (Kwan 1994: 24-25). Stated differently, China, Japan and the NIEs in the mid-1990s control the lion's share of world currency reserves. This is a direct consequence of their enormous positive trade balances, particularly with the U.S.
Terutomo Ozawa (1994: 138-39) has observed that "the more geographically concentrated a hierarchy of economies in close proximity to each other and the greater the diversity of economic conditions in the hierarchy, the larger the economies of concatenation because of lower transaction costs. . . . The point, therefore, is that industrial dynamism in the Asian Pacific derives from this highly dense concatenation of economies along the ladder of industrialization." With the elimination of major strategic, political and ideological barriers to China's participation in the regional economy, no world area, with the possible exception of the US-Mexican border on a much smaller scale, offers a comparable combination of Ozawa's two conditions for regional development: hierarchy of industrial positions and proximity that are the bases for economies of concatenation. The contrast between East Asia and Europe is striking: in East Asia we find far greater differences among countries and even within regions of a single country like China in key development indicators such as per capita GDP, levels of technology, and capital and labor productivity.
The character of regional integration has been shaped by significant capital flows including loans, aid and foreign investment that have been most heavily concentrated in coastal China. For example, a significant part of China's growing trade surplus with both Japan and the U.S. in the late 1980s and early 1990s was a function of the transfer of Hong Kong's export-oriented industry to Guangdong. Japan and Taiwan have engaged in similar activities on a smaller scale in Guangdong, Fujian and elsewhere (Chin 1994: 237; Chen 1994: 73-79). In the 1990s, moreover, China has stepped up its own already extensive cross-border investments in Hong Kong and Macau, including those in banking, real estate, and infrastructure, on the eve of China's recovery of both areas. Indeed, DFI in Asia, which not long ago was limited to Japanese, North American, and European investors, in the 1990s crosshatches the region with all of the NIEs as well as Thailand and China engaging in substantial intra-regional investment. In many parts of East and Southeast Asia, including China, Thailand, Malaysia and Vietnam, the NIEs, particularly Taiwan and Hong Kong, have emerged as the first or second largest investors with Overseas Chinese investors particularly active and frequently dominating local commerce.
In the early 1990s, DFI became China's single largest source of external capital as total new foreign investment surged from $4.7 billion (implemented value) in 1991 to $11.2 bilion in 1992. Hong Kong, long the leader in investment in China, accounted for seventy percent of China's DFI total, with Taiwan advancing rapidly to challenge Japan for the second position despite the fact that much Taiwan investment is disguised as Hong Kong investment. By 1992, 34,200 firms employed 4.8 million Chinese workers and generated substantial export revenues. New DFI in China rose to $25.8 billion in 1993. Since the early 1990s China has been by far the leader among low-income countries in attracting foreign investment. China's cumulative DFI in the years 1979-93 was $60 billion (implemented), with $220 billion contracted (Leng 1996; Lardy 1994: 63-64; World Bank 1995: 204-05).
An important factor defining China's regional position is the character of its coastal and border areas as hinterlands for investment. While Japan has held back from direct investment in Chinese manufacturing, Hong Kong and Taiwan have led the way. Between the early 1980s and 1991, the number of factory workers in Hong Kong fell from 900,000 to 650,000 and the share of manufacturing fell from 42 percent in 1980 to 28 percent in 1990 as the service sector expanded. By the mid 1990s, the bulk of Hong Kong manufacturing had moved across the border, leaving only the most highly skilled manufacturing and marketing, investment and financial sectors in Hong Kong. In short, at the center of regional integration has been the expansive reunification of China, Hong Kong, Macau and Taiwan together with overseas Chinese capital. Primary factors for regional investors eying China include the search for cheap, disciplined, low cost labor, competitively priced land and utilities, and locations that permit the transfer of smokestack industries. Stated differently, the complementarity of the economies of Japan, the NIEs, the ASEAN countries and China, with Overseas Chinese capital playing a leading role, is central to processes of integration that have transformed the regional economy. The attractions of industrial relocation across the Hong Kong border can be summed up in factor cost comparisons. For example, in 1989, wages in Shenzhen were one-seventh those of Hong Kong and the price of land was one-eighth that of Hong Kong with differentials much higher in other parts of Guangdong (Chen and Ho 1994: 39). But rising labor, land and infrastructure costs in Guangdong have already contributed to the shift of capital toward Jiangsu and Shanghai as well as further North to Shandong, Liaoning and other dynamic coastal regions.
Taiwan, with the largest capital reserves in the region in the 1990s, and facing mounting labor and land costs, rampant environmental destruction, and other externalities that restrict domestic industrial investment, has invested heavily in Guangdong, Fujian and Zhejiang, as well as in several ASEAN nations. In the late 1980s, just prior to the start of its investment in China, Taiwan enterprises were making annual investments of over $2 billion annually in Southeast Asia. By 1993, according to one well-informed source, Taiwan investment in China had soared to an annual level of $8.5 billion (including disguised investment through Hong Kong) and China had replaced Southeast Asia as the primary site of Taiwan's FDI (Leng 1996). With its vast trade surplus, regionwide foreign investment profile, and ties to overseas Chinese networks, Taiwan has emerged as a major regional economic and financial power.
Since the 1980s, the export boom in China's coastal areas has been spurred by both Chinese and foreign investment and capital inputs. Guangdong's share of China's foreign trade grew from 6.6 to 23 percent in the years 1979 to 1991 as the province's export value increased sixfold. Fujian's share grew from 0.9 to 3 percent, driven by a twelvefold increase in exports (Chen 1994: 89; Jun 1994:157) In contrast to the inward-looking 1950s and 1960s in which both provinces languished, the coastal areas have boomed since the 1970s. One source of dynamism has been foreign capital investment. Between 1980 and 1985, the share of China's total exports produced by firms with foreign investment increased from 1 to 12.5 percent and by 1993, with investments of more than $25 billion, they accounted for 27.5 percent of China's total exports. At the same time, by 1993, China's imports of machinery and transportation equipment rose to nearly 90 percent of the value of imports, much of it directed to foreign-funded enterprises. Substantial and growing portions of China's imports and exports, 17 and 18 percent by 1991, took the form of industrial processing of goods and raw materials provided by foreign enterprises. In sum, in sharp contrast to the early stages of import substituting growth in China, Japan, South Korea and Taiwan, high levels of foreign investment and injection of loans and capital have been instrumental in fueling China's export drive since the 1970s (Lardy 1994: 71-72, 108, 112-13).
Throughout the 1970s and 1980s, the amount of aid and loan capital consistently surpassed direct investment in fueling the rapid growth of Chinese local enterprises that have transformed the most dynamic coastal and some inland regions. For the decade 1979-1989, China's foreign loans, totaling $78.6 billion, amounted to twice the contracted total of DFI ($37.3 billion) and four times the implemented value of $18.4 billion (Kueh 1992: 682-83; Yabuki 1995: 172; Chin 1994: 218). Hong Kong alone provided loans directly or as a syndicate center amounting to $9.4 billion. By the late 1980s, Hong Kong was responsible for providing or syndicating one-fourth of all loans to China and more than half the commercial loans (Chen and Ho 1994: 55). Loans and foreign investment have concentrated heavily in what the Asian Development Bank calls the Southern China Growth Triangle, particularly in Guangdong's Pearl River delta and in coastal Fujian, the zones that have experienced the most rapid trade expansion and the areas in which ancestral ties among overseas Chinese are strongest.
Japan was among the first to provide both loans and FDI to China in the mid-1980s. Nevertheless, despite substantial trade, loans, and technology transfers, Japanese investors have held back from direct investment in China. By 1990 Japan had invested $2.5 billion in 691 projects. However, only 17 percent of this investment was in manufacturing, far below the 38 percent of Japanese investment in Asia as a whole (Chen 1992: 258-61). Hong Kong and other sources of Chinese capital far surpass Japan's DFI in China as Japanese investors prefer to foster trade relations or provide loans and technology in selected areas such as steel and oil, but not cutting-edge technology in microelectronics or biotechnology. In FY 1990, for example, 72.9 percent of Japan's FDI was in North America and Europe. Of the 12.4 percent in Asia, the largest amounts were invested in the NIEs and ASEAN. These patterns have held to the mid 1990s.
1) In the 1980s and 1990s, China's reintegration in the East Asian regional political economy as a major recipient of capital and DFI and an industrializing nation carrying out institutional transformations conducive to further integration, has been pivotal in the restructuring of a regional economy intertwined with other nodes in the global economy. Can the framework of two phases in China's postwar development, one inner directed, agro-industrial and anticommercial, the other outward looking, emphasizing the role of market, foreign trade and investment and the regional and global economies be effectively located in the long dur‚e of the East Asia tribute-trade system?
2) In contrast with Europe, and even with North America in the NAFTA era, Asian economic integration has been little noted because it has occurred in a region with weak formal political, security and economic institutions while informal networks have played indispensable roles. These networks, particularly those centering on China, involving the Chinese diaspora and cutting across borders in ways indicative of the growth of a cohesive regional economy, suggest resonances with East Asia's historic tribute-trade system and its associated business networks. Can we interpret present tensions between the Chinese government on the one side, and other governements and business interests (including the US government and business interests) on the other, as a continuation under new forms and circumstances of the historic tension between the political-ritual concerns of imperial power in Beijing and the drive for autonomy of other states and for profit of business interests? And if so, how can we account for this continuity?
3) The rapid advance of an integrated East Asian economy with Japan and China at its centers has coincided with the decline of US hegemony. And yet, the integration of recent decades has taken place within a milieu framed by U.S. security, political and economic initiatives, both multilateral and bilateral. US-centered security arrangements, from bases to bombers, continue to undergird regional cohesion, while the US domestic economy remains the primary source of the region's overall trade surplus and advanced technology. Is this a temporary situation that enables East Asian countries--as Johnson and Keehn (1995: 105) have put it--"to continue building their regional capabilities in preparation for the day when the United States can no longer support--financially, politically, or both--its flawed regional vision"? Or should we interpret East Asian reliance on US military capabilities, trade deficits, and technology as the sign of a permanent loss of autonomy from a larger Pacific and global dynamic that extend far beyond the reach of regional trade under the old tribute-trade system?
4) Although Japan and Japanese enterprises face growing competition, particularly from Chinese interests, including those of the Chinese diaspora, they continue to dominate the most lucrative sectors of the regional economy. In 1985 Japanese banks surpassed the share of international assets held by U.S. banks. By 1990 Japan held 36 percent of international assets while the U.S. share fell to just 12 percent. In spite of the collapse of the "bubble economy" in the early 1990s, in early 1995 the world's eight largest, and eleven of the top sixteen banks, were Japanese. Similarly, Japan's total foreign investment of $67 billion in 1989 and $57 billion in 1990 easily surpassed the U.S. with a 1989 total of $41 billion and they continued to grow in the early 1990s by approximately $15 billion annually (Der Spiegel 14, 1995: 22). Through large trading companies and financial institutions linked as keiretsu, Japanese firms dominate much of East Asia's intra- and inter-regional trade and compete vigorously at the highest levels of the global economy. This is also a new major departure from the old tribute-trade system, in which Japanese trade networks were peripheral in relation to Chinese neworks. Should we interpret this as a temporary situation that will wane with the further waxing of Chinese economic power? Or should we interpret it as a sign that the emergent regional system will have two or more centers instead of the single center of the Sinocentric tribute-trade system?
5) For all the strengths of the U.S. and Japan, the 1990s have been most notable for the regional surge of China, strengthened by the imminent recovery of Hong Kong and Macau and growing if fractious Taiwan-China links. In the 1990s China for the first time in this century can begin to challenge Japan's regional economic and political supremacy in East Asia. The growing strength of China pivots on powerful links with Hong Kong, Macau, Taiwan and diaspora Chinese capital and the increasing regional presence of all of the above with their capacity for informal local, regional, and global networking. This resurgence of the Chinese nation and Chinese regional and global enterprise is at the heart of the political-strategic realignment of Asia in which, for the first time in the twentieth century, the U.S. finds itself in conflict simultaneously with both China and Japan, and in which China-Japan tensions, and tensions between China and many parts of East and Southeast Asia, have risen sharply.
If China does indeed continue its ascent well into the twenty first century to assume its historic position at the center of East Asia, can we view the long twentieth century of subjugation, disintegration and domination by the colonial powers including Japan as but a repetition of the cycle of centralization and decentralization, power and weakness, conqueror and conquered, and outward- and inward-looking strategies that have characterized China's long history? And if so, how has the cycle been affected by the profound technological and social changes of the last 150 years and by the new relationship between the East Asian region and the global political economy?
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