Promise in trio of strong leaders

This article was first published on Oct 11, 2014

As the Ukraine crisis boils, militants build armies in Iraq and Syria, and Ebola spreads unabated, it's clear that we have entered an exceptionally turbulent era in global politics. Western governments are scrambling to put out the fires. But outside these crises and the uneven responses, there is a region of unlikely promise.

Strong leadership in China, Japan and India - the three most important markets in the most important region for the future of the global economy - offers a rare good-news international story. China's Xi Jinping, Japan's Shinzo Abe and India's Narendra Modi have each staked their careers on transformational domestic reforms that are long overdue. Remarkably, none of these leaders is forced towards action by crisis. All three are moving forward to avoid future turmoil.

In December 2012, Mr Abe was elected Prime Minister, with a stronger mandate than any Japanese leader has enjoyed in at least a decade, and he used his political capital to push quickly ahead with Abenomics, a bold plan to use monetary, fiscal and structural economic reform to jump-start his country's economy after two decades of stagnation.

Last year, Mr Xi assumed power in China and set in motion economic reforms engineered to transform China's export-driven economy into a more sustainable consumer-driven model.

In May, Mr Modi's landslide victory made clear strong public support for a national campaign to restore economic growth in India to levels not seen in years.

In all three countries, expectations are high and the stakes are higher still. All three leaders face resistance from power brokers who stand to lose from these changes and complex economies that will not yield easily to various forms of liberalisation.

Americans and Europeans can't look for these leaders to offer much help in the Middle East, West Africa or Eastern Europe, but their efforts to restore growth in their countries and to bring a new measure of stability in East and South Asia are even more valuable.

We can still expect alarming headlines from this region. China and its neighbours will continue to fire the occasional rhetorical flare at one another. China's tensions with Vietnam and the Philippines in the South China Sea will raise alert levels. But the leaders of China, Japan and India now appear to recognise that each has an investment in the stability and success of the others.

Last month, Mr Modi left Japan with pledges of some US$35 billion (S$45 billion) in Japanese investment in Indian infrastructure. Not long after, even as recent Chinese-Indian border disputes in the Himalayas made headlines, Mr Modi welcomed Mr Xi to India, where an announcement of some US$20 billion of Chinese investment in infrastructure and industrial parks created a new commercial bond between traditional rivals.

Historical animosity between China and Japan ensures that an occasional surge in tensions can never be discounted.

In a poll this spring from Pew Research, only 7 per cent of Japanese held a favourable view of China; just 8 per cent of Chinese viewed Japan favourably. Last November, tensions between Japan and China soared as Beijing declared an air defence identification zone, requiring all aircraft over contested territory to follow instructions issued by the Chinese authorities. The next month, Mr Abe visited the Yasukuni Shrine, a site associated with Japanese militarism. Yet, both parties sought to avoid more dangerous escalation. Japan has 23,000 companies operating in China, with 10 million Chinese workers on their payrolls. That gives both governments ample reason to keep tensions under control.

In July, Japan enjoyed its all-time record month for incoming tourists, largely on the back of the Chinese visitors doubling from the year before. We've seen higher level government-to-government meetings, and Mr Abe's United Nations speech was extremely conciliatory.

The pullback in tensions between Japan and China has coincided with their domestic reform processes reaching more challenging phases. As Mr Abe has shifted gears to the most difficult of his "three arrows" of reform - creating a comprehensive growth strategy - he can much less afford to distract or financially frustrate his political constituents with geopolitical tensions.

Mr Xi has made strong enough strides with his anti-corruption crackdown and proposed economic changes that influential Chinese with deep-rooted vested interests in the current system are beginning to question his agenda. By design, more success will generate more pushback from disenfranchised Chinese leaders.

Mr Xi, Mr Abe and Mr Modi are enjoying early successes; as they focus on overcoming obstacles to their domestic reforms, they have much less interest in generating geopolitical instability. The danger will rise only if reforms go dangerously wrong.

The likelihood that reforms teeter or face serious pushback is by a long margin most likely in China. The combustible crisis in Hong Kong demonstrates the far-flung risks to Mr Xi's agenda. If Beijing responds with too much force, it could bring down international opprobrium and crater this period of serenity.

But if Beijing concedes anything to the protesters - even the resignation of Hong Kong's chief executive - it would create a dangerous precedent, replicable in other Chinese cities.

Beijing would rather crack down than countenance an alternative political voice - and many such voices will emerge as Mr Xi pushes forward with reforms.

For now, however, three of the world's most important economies want to keep their neighbourhood geopolitically benign. In a world of greater turmoil, Western powers should welcome this respite for as long as it lasts.

The writer is president of the Eurasia Group and a global research professor at New York University.