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From WSJ’s Davos blog:

Standard Chartered PLC remains bullish on the major Asian economies of India and China, encouraged by the policy outlook for the two countries this year, the bank’s Asia chief executive said.

The U.K.-based lender, which focuses almost exclusively on Asia and emerging economies, also sees European rivals retreating from those markets as they are beset with challenges at home, Standard Chartered Asia Chief Executive Jaspal Bindra said in an interview on the sidelines of the World Economic Forum.

In India last year, Standard Chartered confronted a range of challenges including slowing growth, rising interest rates and a depreciating rupee. Revenue from the bank’s India unit fell by 12% in the first half of 2011 and by the “mid-teens” in the third quarter, Group Finance Director Richard Meddings said earlier.

Mr. Bindra blamed higher interest rates. “Interest rates went up almost 400 basis points in a short period, and it is very difficult, if you do wholesale business with the best clients in the country, to pass on a 400 basis point increase at any one time.”

But the central bank’s surprise move to loosen monetary policy this week has sent a “clear signal” that there will be no further rate hikes and the government is shifting its focus to promoting growth, Mr. Bindra said.

The Reserve Bank of India Tuesday held its key lending rate steady for a second straight policy meeting but cut the minimum cash reserve requirement by 0.50 percentage point to ease liquidity.

“The government has for a long time shown a huge preference to manage inflation through monetary policy,” he said. But following the RBI cut, “I think we will see a more balanced approach.”

Mr. Bindra also said that the recent “normalization” of the rupee exchange rate — it is up 6% against the dollar so far this year after declining 15.1% in 2011 — will encourage renewed foreign investment.

In China, Mr. Bindra believes authorities will be successful in guiding the economy to a “soft landing” ahead of a leadership transition at the end of the year.

“The priority for all of 2012 and beyond is going to be ‘how do we keep things stable,’ as they have this transition of power at the top,” he said, adding that not just the top political leadership, but also the leaders of major financial institutions and regulators are all due to be reshuffled. “It is quite a massive-scale change of power.”

As European banks regroup and retreat from Asia, Standard Chartered sees an opening. The trend is especially pronounced in industries including shipping and commodities and in markets like Indonesia and India where dollar liquidity is scarce, he said.

“It gives us an opportunity to scale up market share, and second, it gives us a little bit of pricing advantage.”

– Aaron Back. Follow him on Twitter @AaronBack.

In recent years, China has re-invigorated its support for leading state-owned enterprises in sectors it considers important to “economic security,” explicitly looking to foster globally competitive national champions.

In 2009, China announced that by 2020 it would reduce carbon intensity 40% from 2005 levels.

The government has also focused on foreign trade as a major vehicle for economic growth.

The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978.

The disparities between the two sectors have combined to form an economic-cultural-social gap between the rural and urban areas, which is a major division in Chinese society.

The technological level and quality standards of its industry as a whole are still fairly low, notwithstanding a marked change since 2000, spurred in part by foreign investment.

China’s increasing integration with the international economy and its growing efforts to use market forces to govern the domestic allocation of goods have exacerbated this problem.

The growth in both outbound investment from, and inbound investment to, China reflects the nation’s rising economic power and attractiveness as an investment destination.

” Although the figure is already “quite amazing,” the volume is “not large enough” considering China’s economic growth and local companies’ expanding demand for international opportunities, Shen said.

It also aims to sell more than 15 million of the most fuel-efficient vehicles in the world each year by then.

Although China is still a developing country with a relatively low per capita income, it has experienced tremendous economic growth since the late 1970s.

Since the late 1970s, China has decollectivized agriculture, yielding tremendous gains in production.

China is the world’s largest producer of rice and wheat and a major producer of sweet potatoes, sorghum, millet, barley, peanuts, corn, soybeans, and potatoes.

China ranks first in world production of red meat (including beef, veal, mutton, lamb, and pork).

Growing domestic demand beginning in the mid-1990s, however, has forced the nation to import increasing quantities of petroleum.

China’s leading export minerals are tungsten, antimony, tin, magnesium, molybdenum, mercury, manganese, barite, and salt.

Major industrial products are textiles, chemicals, fertilizers, machinery (especially for agriculture), processed foods, iron and steel, building materials, plastics, toys, and electronics.

Brick, tile, cement, and food-processing plants are found in almost every province.

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Davos: StanChart Bullish on China, India

Burma’s pro-democracy leader Aung San Suu Kyi met late Monday at her lakeside home with billionaire American philanthropist George Soros, the latest public figure to pay the Nobel Prize laureate a visit since her release a year ago from 15 years of on-and-off house arrest.

Soros, whose foundation supports grantees that provide uncensored news on Burma and activists who call public attention to abuse of power, arrives in the wake of a stream of visits, predominantly by senior foreign dignitaries.

Political Science Professor Carl Thayer of the Australian Defense Force Academy says influential business and political leaders are lining up to ride the crest of change in Burma and to reinforce reform efforts.

“As intelligent as she is, she has been relatively isolated,” he says. “And she needs, I think, the advice of people like Soros and others, the financing and foundations, and people on the ground to provide and reinforce her efforts.”

In the past month, Aung San Suu Kyi met with the U.S. Secretary of State Hillary Clinton, Thailand’s Prime Minister Yingluck Shinawatra, and foreign ministers from Indonesia and Japan. Later this week, British Foreign Secretary William Hague is expected to visit.

Hague’s visit will coincide with a general amnesty for prisoners announced Monday by Burma’s state media.

In what is typically a regular gesture to mark Burma’s Independence Day, selected prisoners will have their sentences reduced beginning Tuesday. It is not clear how many in jail will be affected by the amnesty or how many political prisoners will be included.

Burma is holding hundreds of people for their political beliefs. Clinton and other officials visiting Burma have joined Aung San Suu Kyi in calling for their immediate release.

Thitinan Pongsudhirak, Director of the Institute of Security and International Studies at Bangkok’s Chulalongkorn University, says Clinton’s visit opened the way for diplomatic engagement with Burma, also known as Myanmar.

“It is a green light for other countries to begin to lift sanctions [and] provide development assistance,” he says. “They have to be careful by not promoting the commercial interests too much too soon. There are some dissident groups that see all of this as a big kind of commercial deal.”

Burma is a major source of natural gas, gems, and timber, but trade is limited by Western countries because of economic sanctions over the military’s suppression of democracy and human rights.

Since the government of President Thein Sein took office in March, replacing overt military rule, it won praise for a series of liberal political and economic moves. President Thein Sein held direct talks with Aung San Suu Kyi after assuming office.

Thitinan says cooperation between the two is vital for the momentum of reform to be sustained. He says there are still hardliners in the government who would derail the process if it goes too fast.

“The momentum that we are seeing is just unprecedented and breathtaking,” he says. “It is going to be difficult to reverse some of it without incurring a great cost to the Myanmar rulers. Even if they want to slow it down, to reverse it, now they are in too deep. Now I think leading up to the Myanmar chairmanship of ASEAN 2014. I expect the reforms to be sustained.”

On Sunday, Burmese authorities hiked gas prices by 30 percent. A similar unannounced price jump in 2007 sparked protests that were later crushed by the military.

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In Burma, Visiting Dignitaries Line Up to Ride Crest of Change

Lèse-majesté charges are on the rise in Thailand, from a single case in 2000 to nearly 500 in 2010. Among the charged is Joe Gordon, an American who translated excerpts of a biography of the Thai King, receiving critical acclaim everywhere but Thailand. Gordon was sentenced to two and a half years in prison, but may receive a royal pardon. Observers can’t help but wonder if such accusations aren’t simply distractions from Thailand’s more pressing problems or a new means for attacking one’s opponents. Even so, the accusations underscore the government’s insecurity and add to concerns among foreign investors and would-be tourists. The king himself has said he’s not above criticism, reports Simon Roughneen for the Asia Sentinel, and a former prime minister who supports the monarchy, has warned that abusive enforcement only damages the monarchy. Meanwhile, the heir to the throne is much less popular than the aging king, which will add new wrinkles for Thai politics and lèse-majesté enforcement. – YaleGlobal Concern is rising over Thai government’s curbs on political expression – including moves to block social media comments that criticize the monarchy Simon Roughneen The Asia Sentinel , 29 December 2011 Rights:Copyright © 2005 – 2011 Asia Sentinel.

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Thailand’s Lèse-Majesté Witchhunt

Every year on Dec. 31, a number of cities stand out as being the hottest spots to ring in the New Year: New York, London, Sydney and Tokyo. Now Beijing wants to join that list too—and hopes doing so will help boost tourism to the city.

And if not many people show up to the party? Well, that’s part of the plan, too.

The city is unveiling its first-ever western New Year’s extravaganza, rolling out a digital light show surrounding one of the city’s most renowned cultural icons–the Temple of Heaven, where Chinese emperors in centuries past went to pray for good harvests.

As midnight approaches, digital lights will transform part of the temple grounds into a giant, skyward-facing analog clock. Hundreds of local students will ride stationary green bikes that have been placed facing the temple and will light up—an intended salute to the importance of environmental protection. Meanwhile, LED lights will shoot colored beams into the sky and a countdown of the final seconds left in 2011 will be projected onto the temple itself, a triple-tiered gable structure built in the early 1400’s, creating 3-D visual effects.

But there will be one major difference between Beijing’s attempt and other hyped international celebrations, such as New York’s famed ball-dropping and the ringing chimes coming from Big Ben in London.  Unlike Times Square, where one million people flock each New Year’s Eve, according to the Times Square Alliance, Beijing’s festivities won’t be open to the public.

“The park isn’t big enough to hold that many people,” said Sun Weijia, the vice chairman of Beijing Municipal Commission of Tourism Development and one of the event’s organizers. Organizers have, however, contacted travel agencies to extend invitations to more than 500 foreign tourists who will be in the city, and journalists have also received invitations, Mr. Sun said, predicting a total audience of more than 3,000 people.

The goal of the event is not to draw big crowds to one site but to serve as an advertisement to the world’s tourists, Mr. Sun said, adding that the city gained global attention in the run-up to the Olympics and that the spotlight has since faded.

“Some zones [at the event] won’t have an audience,” he said, adding, “we designed them especially for television broadcasts.”

Some might point out that China is home to one of the world’s largest public squares, a space that dwarfs Times Square and could fit many more people.

But China’s leaders have long opposed big public gatherings, especially at Tiananmen Square. The image of thousands of students rallying for democratic rights in 1989 remains a fresh threat in the minds of many officials. In this upcoming year of leadership transition, the focus will be on stability.

China’s masses will have to watch the celebration from their televisions at home. Events will be broadcast by those lucky enough to invited to the Temple of Heaven — camera crews and other media types who can broadcast the show across the nation and to the rest of the world.

Beijing’s New Year’s bash will differ from those in many cities in another respect, too: a lack of fireworks. Fireworks of the tube-launched, explosive variety are by no means rare on the streets of Beijing, and their public use can be a substantial fire hazard in the period around Chinese New Year (which will fall in late January in 2012).

But the Beijing government’s countdown won’t have any. “Beijing doesn’t allow the use of fireworks, especially in imperial parks,” Mr. Sun said.

–Laurie Burkitt and Owen Fletcher; follow Laurie at @lburkitt and follow Owen at @owenfletcher.

In recent years, China has re-invigorated its support for leading state-owned enterprises in sectors it considers important to “economic security,” explicitly looking to foster globally competitive national champions.

The Chinese government faces numerous economic development challenges, including:
(a) reducing its high domestic savings rate and correspondingly low domestic demand through increased corporate transfers and a strengthened social safety net;
(b) sustaining adequate job growth for tens of millions of migrants and new entrants to the work force; (c) reducing corruption and other economic crimes; and
(d) containing environmental damage and social strife related to the economy’s rapid transformation.

The People’s Republic of China is the world’s second largest economy after the United States by both nominal GDP ($5 trillion in 2009) and by purchasing power parity ($8.77 trillion in 2009).

Some economists believe that Chinese economic growth has been in fact understated during much of the 1990s and early 2000s, failing to fully factor in the growth driven by the private sector and that the extent at which China is dependent on exports is exaggerated.

The two most important sectors of the economy have traditionally been agriculture and industry, which together employ more than 70 percent of the labor force and produce more than 60 percent of GDP.

China has acquired some highly sophisticated production facilities through trade and also has built a number of advanced engineering plants capable of manufacturing an increasing range of sophisticated equipment, including nuclear weapons and satellites, but most of its industrial output still comes from relatively ill-equipped factories.

China’s increasing integration with the international economy and its growing efforts to use market forces to govern the domestic allocation of goods have exacerbated this problem.

China now ranks as the fifth largest global investor in outbound direct investment (ODI) with a total volume of $56.5 billion, compared to a ranking of 12th in 2008, the Ministry of Commerce said on Sunday.

Last year was the eighth consecutive year that the nation’s ODI had grown.

China is aiming to be the world’s largest new energy vehicle market by 2020 with 5 million cars.

In large part as a result of economic liberalization policies, the GDP quadrupled between 1978 and 1998, and foreign investment soared during the 1990s.

Even with these improvements, agriculture accounts for only 20% of the nation’s gross national product.

Except for the oasis farming in Xinjiang and Qinghai, some irrigated areas in Inner Mongolia and Gansu, and sheltered valleys in Tibet, agricultural production is restricted to the east.

Horses, donkeys, and mules are work animals in the north, while oxen and water buffalo are used for plowing chiefly in the south.

Coal is the most abundant mineral (China ranks first in coal production); high-quality, easily mined coal is found throughout the country, but especially in the north and northeast.

China’s leading export minerals are tungsten, antimony, tin, magnesium, molybdenum, mercury, manganese, barite, and salt.

China also has extensive hydroelectric energy potential, notably in Yunnan, W Sichuan, and E Tibet, although hydroelectric power accounts for only 5% of the country’s total energy production.

The iron and steel industry is organized around several major centers (including Anshan, one of the world’s largest), but thousands of small iron and steel plants have also been established throughout the country.

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No Crowds for China’s New Year

A list of what The Wall Street Journal’s reporters in China are reading and watching online. (NOTE: WSJ has not verified items in the ‘News’ section and doesn’t vouch for their accuracy.)

News:

* The former CCTV official blamed for a deadly and costly fire almost three years ago gets more years added to his term. (Xinhua)

* China plans new taxes on vehicles (China Daily)

* China should reduce reliance on overseas credit-rating companies by pushing its own, PBOC Gov. Zhou Xiaochuan said. (Bloomberg)

* Sudan’s unrest represents a minefield for oil-thirsty Beijing. (Washington Post)

Analysis and Commentary:

* Mao’s past mistakes show the need for an open government. (Global Times. Yes, that Global Times.)

* China is too big to support continued heady growth through exports, Gordon Chang argues. (Forbes)

* The Wukan revolt: A harbinger of things to come? (New York Times)

Just Because

Marilyn Monroe plans an appearance in Harbin. (Xinhua)

The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978.

The government vowed to continue reforming the economy and emphasized the need to increase domestic consumption in order to make China less dependent on foreign exports for GDP growth in the future.

China has emphasized raising personal income and consumption and introducing new management systems to help increase productivity.

Some economists believe that Chinese economic growth has been in fact understated during much of the 1990s and early 2000s, failing to fully factor in the growth driven by the private sector and that the extent at which China is dependent on exports is exaggerated.

Its mineral resources are probably among the richest in the world but are only partially developed.

China has acquired some highly sophisticated production facilities through trade and also has built a number of advanced engineering plants capable of manufacturing an increasing range of sophisticated equipment, including nuclear weapons and satellites, but most of its industrial output still comes from relatively ill-equipped factories.

By the early 1990s these subsidies began to be eliminated, in large part due to China’s admission into the World Trade Organization (WTO) in 2001, which carried with it requirements for further economic liberalization and deregulation.

The ministry made the announcements during a press conference held in Xiamen on the upcoming United Nations Conference on Trade and Development (UNCTAD) World Investment Forum and the 14th China International Fair for Investment and Trade.

“China is now the fifth largest investing nation worldwide, and the largest among the developing nations,” said Shen Danyang, vice-director of the ministry’s press department.

China is expected to have 200 million cars on the road by 2020, increasing pressure on energy security and the environment, government officials said yesterday.

In large part as a result of economic liberalization policies, the GDP quadrupled between 1978 and 1998, and foreign investment soared during the 1990s.

Despite initial gains in farmers’ incomes in the early 1980s, taxes and fees have increasingly made farming an unprofitable occupation, and because the state owns all land farmers have at times been easily evicted when croplands are sought by developers.

In terms of cash crops, China ranks first in cotton and tobacco and is an important producer of oilseeds, silk, tea, ramie, jute, hemp, sugarcane, and sugar beets.

Sheep, cattle, and goats are the most common types of livestock.

China is one of the world’s major mineral-producing countries.

China is among the world’s four top producers of antimony, magnesium, tin, tungsten, and zinc, and ranks second (after the United States) in the production of salt, sixth in gold, and eighth in lead ore.

The largest completed project, Gezhouba Dam, on the Chang (Yangtze) River, opened in 1981; the Three Gorges Dam, the world’s largest engineering project, on the lower Chang, is scheduled for completion in 2009.
Beginning in the late 1970s, changes in economic policy, including decentralization of control and the creation of special economic zones to attract foreign investment, led to considerable industrial growth, especially in light industries that produce consumer goods.

The iron and steel industry is organized around several major centers (including Anshan, one of the world’s largest), but thousands of small iron and steel plants have also been established throughout the country.

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China Watch: CCTV Sentence, Car Taxes Planned, Marilyn Monroe at Harbin

A recent poll has revealed that Thailand’s Prime Minister Yingluck Shinawatra scored 6.49 on her overall performance as Prime Minister. A survey shows many Thais see PM as determined in her role. Despite the mediocre rating, the  4,238 participants in the Suan Dusit Poll gave her credit for her attitude in the top job with 7.08 out of 10.

The survey was undertaken with all of Thailand’s provinces represented on various factors to gauge their opinions of the performance of the current government. According to the results, people were far more critical towards the government as a whole, with the cabinet scoring  6.44 for its intention to work, 6.33 for sincerity, 6.21 for   performance, 6.13 for not interfering in the work of permanent officials, 6.09 for unity, and 5.87 for honesty. For individual ministers, respondents gave the Defence Ministry the highest score of 6.63, Tourism and Sports 6.56, Tourism and Sports 6.44, Agriculture and Agricultural Cooperatives 6.43, Foreign Affairs 6.42, Culture 6.41, Social Development and Human Security 6.40, Education 6.37, Industry 6.36, Finance 6.33, Science and Technology 6.27, Labour 6.13, Interior 6.10, Natural Resources and Environment 6.09, Energy 6.06, Justice 6.05, Commerce 5.91, Transport 5.87, and Information and Communication Technology 5.84. Opinion of the government varied according to region, with the score for overall performance at 7.29, while the South were least supportive, providing a rating of 5.44. Related Video

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Thailand scores Yingluck a 6.49 out of 10

A list of what The Wall Street Journal’s reporters in China are reading and watching online. (NOTE: WSJ has not verified items in the ‘News’ section and doesn’t vouch for their accuracy.)

News:

* A city in western China seeks to banish the veil to “dilute religious consciousness” (Reuters)

* The first satellite photo of China’s aircraft carrier (MSNBC)

* And the world’s top financial center is… (GlobalPost)

* Strategic candor from a former ambassador (Economist)

* High hopes arrives with China’s new securities regulator (Caixin)

* Guangzhou moves to legalize street hawking (The Nanfang)

Analysis and Commentary:

* Kam Wing Chan on what geography has to say about the China infrastructure bubble (East Asia Forum)

Just Because:

* The challenges of being an olfactory discriminator in China (China Daily)

*  ”Tiger Mother” Amy Chua’s got nothing on China’s “Wolf Dad” (NPR)

In recent years, China has re-invigorated its support for leading state-owned enterprises in sectors it considers important to “economic security,” explicitly looking to foster globally competitive national champions.

The Chinese government faces numerous economic development challenges, including:
(a) reducing its high domestic savings rate and correspondingly low domestic demand through increased corporate transfers and a strengthened social safety net;
(b) sustaining adequate job growth for tens of millions of migrants and new entrants to the work force; (c) reducing corruption and other economic crimes; and
(d) containing environmental damage and social strife related to the economy’s rapid transformation.

China has emphasized raising personal income and consumption and introducing new management systems to help increase productivity.

Some economists believe that Chinese economic growth has been in fact understated during much of the 1990s and early 2000s, failing to fully factor in the growth driven by the private sector and that the extent at which China is dependent on exports is exaggerated.

The disparities between the two sectors have combined to form an economic-cultural-social gap between the rural and urban areas, which is a major division in Chinese society.

China has acquired some highly sophisticated production facilities through trade and also has built a number of advanced engineering plants capable of manufacturing an increasing range of sophisticated equipment, including nuclear weapons and satellites, but most of its industrial output still comes from relatively ill-equipped factories.

The market-oriented reforms China has implemented over the past two decades have unleashed individual initiative and entrepreneurship, whilst retaining state domination of the economy.

The growth in both outbound investment from, and inbound investment to, China reflects the nation’s rising economic power and attractiveness as an investment destination.

In 2009, global ODI volume reached $1.1 trillion, and China contributed about 5.1 percent of the total.

China reiterated the nation’s goals for the next decade – increasing market share of pure-electric and plug-in electric autos, building world-competitive auto makers and parts manufacturers in the energy-efficient auto sector as well as raising fuel-efficiency to world levels.

In large part as a result of economic liberalization policies, the GDP quadrupled between 1978 and 1998, and foreign investment soared during the 1990s.

Even with these improvements, agriculture accounts for only 20% of the nation’s gross national product.

China is the world’s largest producer of rice and wheat and a major producer of sweet potatoes, sorghum, millet, barley, peanuts, corn, soybeans, and potatoes.

Fish and pork supply most of the animal protein in the Chinese diet.

Offshore exploration has become important to meeting domestic needs; massive deposits off the coasts are believed to exceed all the world’s known oil reserves.

There are large deposits of uranium in the northwest, especially in Xinjiang; there are also mines in Jiangxi and Guangdong provs.

The largest completed project, Gezhouba Dam, on the Chang (Yangtze) River, opened in 1981; the Three Gorges Dam, the world’s largest engineering project, on the lower Chang, is scheduled for completion in 2009.
Beginning in the late 1970s, changes in economic policy, including decentralization of control and the creation of special economic zones to attract foreign investment, led to considerable industrial growth, especially in light industries that produce consumer goods.

Great inland cities include Beijing and the river ports of Nanjing, Chongqing, and Wuhan.

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China Watch: Banning the Veil, Aircraft Carrier Photographed, Meet ‘Wolf Dad’

Author: Shiro Armstrong, ANU

In President Obama’s landmark speech in Canberra last month, an over-riding theme was that the United States welcomes China’s rise so long as it plays by the global rules.

Yet those rules are dynamic, and there is a need to have China involved in setting them given the scale of China and its importance to the regional and global economy, as well as to global security.

China needs to help set the rules and agree to them so that it has buy-in — not have those rules created around it. The latter scenario may have been possible a decade ago, but not now. It is crucial, then, that a major trade policy initiative in the Asia Pacific, such as the Trans-Pacific Partnership (TPP), include China, else it will become one of the set of rules created around China, constraining not promoting one of the main trans-Pacific economic relationships.

As the major growth engine of the global economy, China’s exclusion from the TPP raises questions about the TPP’s likely success. The TPP’s purpose is to weld the region together and lock in growth of trans-Pacific economic relationships. The central strategic challenge for the TPP, therefore, relates to China’s membership.

But can China join? And should it join? The biggest risk of the TPP is political: that it might divide the region strategically between its members and the rest, with China being on the outside. The TPP has been supported by two prominent US trade policy figures, Fred Bergsten and Jeffrey Schott of the Petersen Institute of International Economics, as a way, they say, for the US to engage in East Asia as ‘China propelled the advance of Asian regionalism’. ‘These countries are well on the way toward creating an Asian bloc, a development that could “draw a line down the Pacific” by discriminating against [the US]’, they add.

Yet if the TPP proceeds on terms set by the US, it would be very difficult for China to join, and the TPP itself, according to Christopher Findlay, may ‘drive the region apart with systematic exclusion of non-members, including China’. This wedge through the middle of the Pacific will be political as well as economic. China would have to join the TPP on US terms as the TPP has now become a creature fashioned largely by Washington. Bergsten and Schott give priority to Japanese and Korean membership, envisioning the use of those strengthened alliance relationships to balance the influence of China.

The difficulty for China in joining the TPP stems from aiming for an agreement designed by, and for, countries able to digest US-moulded intellectual property rights (IPR), labour and environment standards, and other commercial settings. Many will be watching the conditions which are defined for Vietnam’s entry, the least developed country in the current TPP line-up. If the standards of entry for Vietnam are appropriate, there will need to be long phase-in periods to meet them. The benefits of US market access may dominate potential costs for Vietnam; this is not necessarily the case with China.

The US has been pushing for more regulatory discipline for state-owned enterprises (SOEs) in the negotiations around the TPP and, in particular, competitive neutrality between SOEs and private enterprises in member economies. Vietnam and Malaysia are the two economies currently involved in the TPP negotiations in which SOEs are prominent or dominant. Reform of SOEs and the privatisation process is a deeply domestic issue that will not be resolved quickly in China.

The WTO accession experience shows that locking China into reforms can only occur, especially now given its size, when it is committed to using external institutions as tools in its own interest to open up and reform its domestic economy. A TPP agenda and negotiations in which the US effectively declares itself the gatekeeper is likely to make it extremely difficult for China to commit to the TPP and join.

If China is ever to accede to the TPP, the agreement would need to be designed with open accession terms that allow China to meet its own interests. It is not that China should not be bound by TPP rules: it is that China would need to be persuaded to bind itself, consistently with its own reform agenda, in the areas covered by the TPP and on its own terms. If the TPP ends up being a set of related bilateral agreements (a bowl of noodles within a bowl of noodles), for which the US has thus far revealed a preference (see Claude Barfield), China will have to negotiate bilaterally with the US in order to join a broader TPP — no matter what the wishes of other members; and any agreement would require separate approval by the United States Congress. That is rightly viewed as a set-up.

Expansion of membership and creation of an inclusive agreement was the original aim of the TPP, and that is where its potential economic benefits lie. But easy expansion of membership is perhaps the biggest challenge. The risk is that, once an agreement is negotiated in whatever shape or form, sign-on by non-members in the region (an explicit goal) will be difficult with extra requirements for new members and individual-member veto over new membership, notably, by the US. If the agreement requires consensus from members (or incumbents) on new entrants rather than the meeting of carefully-constructed and transparent rules of entry, effective veto-power on new membership will be built into the arrangement.

A transparent and established process with clear criteria in application for membership is needed for two reasons. First, it will give members less discretion over the conditionality they can add to individual members for accession. Second, a membership bid would not have to be triggered by an invitation from members — membership that is contingent on invitation would create maximum discretion for incumbents and is not congenial to expanding membership. Automatic sign-on is not constitutionally easy for the US given that Congress will have to approve each new member separately. But that was exactly the original idea of the TPP’s predecessor, the P3 and P4 agreements with Chile, Brunei, New Zealand and Singapore.

Perhaps China should announce it wants to join negotiations right away, not to play spoiler, but so that it can engage directly in defining what the rules for much of Asia Pacific trade should be. That would be the surest strategy in ensuring that the TPP was open and dynamic, not static and exclusive. Otherwise there are likely to be one of two broad outcomes from the TPP initiative. The first is that the US succeeds quickly, as it has signalled it wants to, in locking the other 8 pliant negotiators into an early deal that is full of exceptions and has limited or negative liberalising effect but the exclusionary features of which maintain symbolic pressure on non-members like China. This might be called the just-another-trivial-FTA-outcome. The second is that the negotiators hold to more rigorous liberalising targets that will take much longer to negotiate. That is likely to entrench Chinese exclusion more deeply. Either way there is no indication that the intention is to draw China into the process. And that will not only be to China’s cost, but also to cost of China’s partners in the region and global welfare.

Shiro Armstrong is a research fellow at the Crawford School of Economics and Government at the Australian National University and is co-editor of the East Asia Forum. He is also editor of the new book The Politics and the Economics of Integration in Asia and the Pacific (Routledge, 2011). A longer version of this essay can be found here as EABER Working Paper No. 71, 9 December 2011.

1. U.S. trade policy in Asia: Going for the Trans-Pacific Partnership?
2. The Trans-Pacific Partnership
3. Trans-Pacific Partnership update

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China’s participation in the Trans-Pacific Partnership