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Illusions of a New Bipolarity

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There is a certain foreign political dimension to the COVID-19 pandemic that is beginning to rear its head with increasing frequency and can thus explain the current behaviour of states on the international stage. Coronavirus plays two largely contradictory roles – it accelerates some processes while at the same time putting the brakes on, or even halting, others. The former include, among other things, the geopolitical plans of a number of states, while the latter includes finding solutions to global socioeconomic problems and domestic political processes. One area in which events are accelerating is the rivalry between the United States and China, which has prompted many to start talking about a “new bipolarity.” Are we really seeing a revival of bipolarity, but in a modern form? That is, in the true definition of the word – is the world being split into two antagonistic systems?

It has become the norm in the mainstream media, especially those media outlets that push the liberal political agenda, to separate the world into two camps. “China is on the way up and, thanks to Trump’s trade war,” CNN tells us, “the world is heading for an us-versus-them universe […] There will be two camps, pro-America; pro-China […]” Let us be clear, we are not talking about escalating tensions between two states here, but rather between two “camps.”

And now let us not forget that the only bipolarity that we have ever experienced was in the form of the U.S.–Soviet confrontation during the Cold Warю It was marked by a gradual stabilization of international relations that culminated in the Helsinki Final Act of 1975. In other words, the logic of bipolarity entailed not only rivalry between the two global centres of power, but also their joint activities to eliminate the threat of a major armed confrontation. However, relations between Washington and Beijing appear to be heading in a completely different direction. According to Graham Allison “[W]ar between the U.S. and China in the decades ahead is not just possible, but much more likely than currently recognized.” [3] It thus follows that interaction between China and the United States will lead to loosening, rather than a stabilization, of international relations.

There is a more optimistic scenario, too, which would involve Washington agreeing to coexist with Beijing in a “competition without catastrophe” [4]. The problem with this scenario is that any large-scale “rebalancing” will have to be carried out on conditions set by the United States [5]. However, given the current circumstances, such a rebalancing can only be achieved in a climate of equality or, what is more likely, under conditions that suit China. In order for this to happen, American foreign policy needs to return to some semblance of realism. But that’s another story.

Are there any favourable “external conditions” for a bipolar world to take shape? Is there anything in the current international climate that would convince us to place our trust in China and the United States as the countries that are expected to lead these new poles? We should keep in mind that, during the Cold War, East and West continued to develop actively. Today, both China and the United States are shoulder deep in globalization. But just look at what is happening to globalization. Economic, informational, technological and other forms of competition are only growing, and what used to be a self-regulating economic process is turning into a political instrument for suppressing business competitors, with unreasonable restrictions, the extraterritorial application of national laws and actions in circumvention of the WTO rules in the name of “national security” becoming the norm. Many of the problems that led to the global financial crisis in 2008–2009 have not been properly addressed. And the coronavirus pandemic promises even harder times. It turns out that that, in its current manifestation, globalization is not a process that Washington or Beijing are able to steer, rather, it is a phenomenon that makes it increasingly difficult for China and the United States to pursue their respective goals.

Some proponents of a new bipolarity might concede that deglobalization processes are indeed taking place right now, but in no way does this prove that the world is not being split in two and becoming bipolar in nature once again. The answer to this would be that none of the world’s most respected economists would challenge the idea that globalization is a representation of the interdependence of the modern world. We are talking about the specific ultra-liberal form of globalization that has dominated for the last 30 or 40 years exhausting its usefulness. There is no objective reason to expect a return to the old kind of bipolarity, which functioned as two parts of the world that existed almost in complete isolation from each other socially and economically under the leadership of the United States and the Soviet Union. Despite all the current trade, financial and sanctions wars, the global nature of the market cannot be dismantled and returned to the Council for Mutual Economic Assistance and the European Economic Community, for example, which in any case had little to do with one another.

It thus follows that China and the United States are destined to have close economic ties, yet at the same time are sliding towards confrontation. And neither the first nor the second circumstance was characteristic of the confrontation between the United States and the Soviet Union. It turns out that the United States and China cannot exist in economic isolation from one another, nor can they build a kind of economic interdependence that would suit both sides, which has led to a kind of acute “ischemia” in the rivalry between the two countries. Even at the embryonic stage, this kind of bipolarity cannot offer stability to the world or anything that would even remotely resemble U.S.–Soviet relations.

One of the reasons why the rivalry between the Soviet Union and the United States grew into a standoff between two poles was that external contours emerged in the form of the socialist and capitalist camps, respectively. The events of the past 20 years show that the West, in the previous sense of the word, no longer exists. The dominance and economic might of the United States are very much on the decline, as its ability to use force effectively and maintain its leading technological status in a respectable way. Even the United Kingdom, traditionally Washington’s closest ally, refused to support the White House in its war against the Chinese telecoms giant Huawei. According to the people of Japan, Canada, Germany and France, the United States poses a greater threat to their respective countries than Russia and (with the exception of Japan) China [6].

It is unclear exactly where the boundaries of the West begin and end. It is turning into a dual-core system with centres in Washington and the European Union that are undergoing a kind of strategic decoupling [7]. The United States has, since the presidency of George W. Bush, pursued a course of monetizing and pragmatizing relations with its allies, strategically leaving Europe. The European Union is trying to shed its image as a purely economic centre of power through the idea of strategic autonomy and a common strategic culture. Europe will never again be the focus of the United States’ attention, writes Foreign Affairs, and so must ensure the survival of its own model in order to stake a claim to global leadership.

As for China’s external contours, there is nothing here that resembles the socialist camp that existed under the auspices of the USSR. Political and ideological cohesion was key to the bipolarity that we witnessed during the Cold War. China has long surpassed the Soviet Union in terms of its economic influence, but politically Beijing has very few allies, especially when it comes to an out and out confrontation with the United States. This is perhaps the biggest difference between what we are witnessing today and the bipolarity of the past – when superpowers are not surrounding themselves with ideological blocs, bipolarity becomes nothing but two states getting into a bickering match, albeit with certain global attributes. China has perhaps one true strategic partner, and that is Russia. The United States, on the other hand, has many allies, although many of them, including France and Germany, are tired of being of their forced dependence on Washington.

Can the Russia–China tandem stake a claim to being one of the blocs in the new bipolar world? Probably not. As a rule, the poles can have only one indisputable leader. China–Russia relations are largely asymmetrical in favour of China, although they are far from being subordinate. Neither side is willing to let the other assume the role of leader. And let us not forget that the two countries pursue strategies that do not always coincide: the military and political standoff between China and the United States is largely focused in the South China and East China seas, thousands of miles away from Russia. Russia does not have any interests in that region. Yet it is precisely here that China’s most vulnerable geopolitical sore spots are located (Hong Kong, Taiwan and the Paracel and the Spratly Islands). Russia has a zone of strategic tension of its own to the west, far away from China.

Another thing that we should keep in mind is that bipolarity was only possible in a world that was already split along ideological lines. But the confrontation between socialism and capitalism is a thing of the past, and value differences have also receded into the background, making way for realpolitik and geopolitics [8]. Without an ideological confrontation, it is impossible to recreate the necessary conditions for the world to split into two camps. It is true that China and the United States have fundamentally different values and political systems, as was the case with the United States and the Soviet Union during the Cold War. But these contradictions run nowhere near as deep. The United States remains convinced of its exclusivity and its God-given right to global leadership [9]. China, on the other hand, does not demonstrate any kind of messianism and, unlike the Soviet Union, it does not promote socialist and communist ideas. Beijing does not rely on hackneyed ideological phrases, rather, it points to the effectiveness of its development model. The inescapable growth of competition between Beijing and Washington is not due to the irreconcilability of ideologies, but rather to their geopolitical incompatibility, and this is simply not enough for the confrontation to transmute into a bloc-based rivalry.

Yet many are still enticed by discussions of a new bipolarity, and there are many reasons why. Let us outline a few of them. First, the world order that existed during the Cold War was relatively simple. Second, people are motivated by anti-Chinese sentiments. That is, many associate the bipolarity of the Cold War with the eventual victory of one of the sides, and they hope that the United States will defeat China in much the same way that it defeated the Soviet Union. Third, it would seem that those who still believe in the return of a consolidated West under the leadership of the United States and the emergence of an anti-Western bloc led by China and neighbouring Russia see U.S.–China bipolarity as a viable option. Such conclusions are normally based on the immature and ideologically motivated idea of the world being split into “liberal democracies” on the one hand and “authoritarian regimes” on the other.

If the idea of a new bipolarity is untenable, then the possibility of a new Cold War, that is, the appearance of elements of the political, military, financial and economic confrontation between Russia and the West, has also no substance behind. The phenomenon of the Cold War is inseparable from the post-War conditions that led to the emergence of U.S.–Soviet bipolarity. Its key parameters are well known and almost none of them have been recreated. No one makes the claim today that there is a new geopolitical rift between Russia and the United States, and thus the West. The phrase “New Cold War” would still make sense with regard to the trajectory along which China and the United States are currently travelling. However, even then it is used rarely, and mostly by Washington [10]. Again, we need to keep in mind that the Cold War as an element of U.S.–Soviet bipolarity was a path to a certain balance of interests, and not a slippery slope towards an open confrontation.

As for relations between Russia and the European Union, I dare say that, even given the depressing strategies pursued by both sides, the principle of a new bipolarity has not taken root. It is only under extreme duress and with extreme reluctance that the European Union has taken any steps against China. This was laid bare for all to see in the tragicomic story involving the EU report on disinformation about the COVID-19 pandemic. The handling of the coronavirus is leaving more and more people in Europe with no illusions about the United States and the “shining city upon a hill,” or indeed about the far-reaching ambitions harboured by Brussels. The point of view that the current state of relations with Moscow will only make the situation worse has been argued very articulately in a number of analytical works [11], not to mention by a number of politicians in Europe. The pandemic has led to a certain opportunistic surge in anti-Russia and anti-China rhetoric. But it works far better on the European Union’s less blinkered view of the world than it does on neoliberal apologetics, which in many ways perverts legacy of liberal thought.

[1] Pence M. Remarks by Vice President Pence on the Administration’s Policy Toward China. The Hudson Institute, Washington, DC, 4 October 2018. Perlez J. Pence’s China Speech Seen as Portent of ‘New Cold.

War,’” The New York Times, 5 October 2018. Rogin J. Pence: “It’s Up to China to Avoid a Cold War.”

Washington Post, 13 November 2018.

[2] Monaghan A. Dealing with the Russians. Cambridge, Polity Press, 2019.

[3] Allison G. Destined for War: Can America and China Escape Thucydides’s Trap? Boston and New York: Houghton Mifflin Harcourt. 2017, p. xvii.

[4] Campbell K. M. and J. Sullivan. Competition Without Catastrophe. How America Can Both Challenge and Coexist with China // Foreign Affairs, September–October 2019.

[5] Campbell K. M. The Pivot: The Future of American Statecraft in Asia. New York, Twelve, 2016.

[6] Munich Security Report 2019, p. 7.

[7] Gromyko, A. A Splintered West: The Consequences for the Euro-Atlantic // Contemporary Europe, No. 4, 2018, pp. 5–16.

[8] The return of geopolitics had been a topic of discussion long before Donald Trump moved into the White House. See, for example, Larrabee S. Russia, Ukraine, and Central Europe: The Return of Geopolitics // Journal of International Affairs, No. 2. Spring–Summer 2010, pp. 33–52.

[9] The idea of American leadership appears 36 times in the country’s 32-page National Security Strategy for 2015.

[10] Pence M. Remarks by Vice President Pence on the Administration’s Policy Toward China. The Hudson Institute, Washington, DC, 4 October 2018. Perlez J. Pence’s China Speech Seen as Portent of ‘New Cold War,’” The New York Times, 5 October 2018. Rogin J. Pence: “It’s Up to China to Avoid a Cold War.” Washington Post, 13 November 2018.

[11] Monaghan A. Dealing with the Russians. Cambridge, Polity Press, 2019.

From our partner RIAC

Director of the Institute of Europe of the Russian Academy of Sciences (IE RAS), RAS Corresponding Member, RIAC member

East Asia

A brief history of Sino-Australian political relations from 1949 to 2020

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Former prime minister Malcolm Turnbull and Mr Xi met for a bilateral talk during the G20 Forum in Hangzhou.(Supplied: Twitter)

To understand what is happening now requires an understanding of history. The recent Sino-Australian relations have been like a roller coaster ride, which needs to date back to history at least from 1949.

There are several characteristics worth mentioning in Sino-Australian relations. First, there have been diplomatic ups-and-downs between the two governments due to the divergence of the two countries’ political systems and ideology. Second, by comparison, bilateral ties have generally been improving for decades due to the reciprocal economic complementarities and cooperation despite the recent trade disputes. Third, Sino-Australian relations “has become more unequal with the passage of time” due to China’s rise. Fourth, the influence of the US on the foreign policy of Australia cannot be underestimated. In terms of structure, this part will be divided into four periods, posited on the founding of the People’s Republic of China in 1949, the establishment of diplomatic relations in 1972, the outbreak of Tiananmen Incident in 1989 and the recent decline of bilateral relations starting from 2015 with additional illustration of the influence of the US in Australian foreign policy.

The Pre-recognition politicial relations from 1949 to 1971

Graeme Dobell argues, “China has always loomed in the Australian consciousness”, possibly because Australia is geographically located in the Asia Pacific and surrounded by Asian countries with a significant number of ethnic Chinese. Historically, China was viewed in Australia as a threat, namely, “Yellow Peril”. The notion is a color-metaphor, full of racism. East Asians, especially the ethnic Chinese, are an existential hazard to other countries as immigrants.  Professor Gina Marchetti argues that

the rooted in medieval fears of Genghis Khan and Mongolian invasions of Europe, the yellow peril combines racist terrors of alien cultures, sexual anxieties, and the belief that the West will be overpowered and enveloped by the irresistible, dark, occult forces of the east.

In Australia, as a Western country located away from the West,  its Immigration Restriction Act of 1901, infamous as the White Australia Policy, was designed to prohibit Chinese settlers. “Fear of China and hostility to the Chinese immigrants were factors” that supported the Federation of Australia, and both factors existed for decades. The federating of Australia was the process by which the sixBritish colonies consented to unite and become the Commonwealth of Australia. Liberal Prime Minister Harold Holt formally abolished the White Australia Policy in 1966 with the introduction of the Migration Act 1966. By legislating legal equality among European and non-European migrants, this new Act has opened a new immigration history era. It has been the most crucial step in forminga multicultural society in Australia.

However, Australia’s unique geographic location and huge disparity of population between Australia and China have decided that the natural insecurity of Australia as a nation, for that linguistically, historically and intellectually, Australian ancestry originates from Europe, and its vital economic partner and most crucial military ally is the United States, both far away from Australia. Furthermore, Gyngell argues there is always “fear of abandonment” in Australian foreign policy. Likewise, former Australian Minister for Foreign Affairs Gareth Evans and former Australian diplomat Bruce Grant confirm that

the evolution of Australian foreign policy needs to be assessed against a background in Australian politics of persistent anxiety about a threat from Asia: sometimes vague and undifferentiated, sometimes specific, but always there.

In this period, China was viewed in Australia as a threat, namely, the aforementioned “Yellow Peril” and “Red Menace”. Arguably, the Red Menace has always existed in the Australian society and the government until now,which is a term applied during the Cold War for describing a nation that faces the increasing authoritarian threat of communism. This term was used to refer to the Soviet Union, while nowadays, it has been employed to mean Communist China. Besides, the difference of scare only reflects the extent to which the Australian government fears the Chinese Communist Party. From 1949 to 1972, especially when Australian and Chinese troops participated in the Korean War as rivals and later the Cultural Revolution was launched in China, Sino-Australian relations were hostile to each other due to the fact they were both subordinated to different political and ideological camps: USSR-led communism and the United Stated-led capitalism.

The steady development of Sino-Australian political relations from 1972 to 1989

During this period, Sino-Australian relations encountered the most drastic ups and downs the bilateral ties have ever experienced. In 1972, the Whitlam Labor government’s election marked the most radical turning point in Sino-Australian history by establishing diplomatic relations with China in December of the same year. Despite the endeavor, Whitlam made, this new chapter of the bilateral relations is mainly dependent on the change of  China Policy from the strongest ally of Australia, the United States. More concretely, in the early 1970s, the American army was withdrawn from Vietnam, indirectly ending the military collisions with the People’s Liberation Army.At the beginning of 1972, Nixon has his dramatic visit to Beijing and Shanghai.

From 1972 to 1989, the bilateral relations were at the stage of steady development. Partly, the positive Sino-Australian relations can be attributed to the same view of opposing the Soviet threat, which facilitated the Sino-Australian cooperation. More specifically, in July 1973, the first Sino-Australian trade agreement was signed by the Chinese government and the Whitlam government. The visit of Whitlam to Beijing in late 1973 culminated in a joint communique, concurring with the promotion of views exchanges among the Sino-Australian officials. In 1976, during the period of the Coalition-led Fraser government, “the Australian Parliament even stood in silence in the honor” of Mao Zedong, when Mao passed away. In 1978, the Australia-China Council was built by the Coalition-led Fraser government to facilitate bilateral relations.

Furthermore, in the 1980s, with the economic reform of Deng Xiaoping and the incrementally frequent visits of Sino-Australian senior leaders, the Australian government saw the economic opportunities China may bring, and the Chinese government also realized the Chinese modernization might benefit from the support of Australia. Mackerras argues that “the mid-1980s saw the relationship reach a peak”. In 1984, the ALP-led Hawke government launched the China Action Plan, “an overall economic program towards China”, aiming to deepen bilateral economic cooperation. In 1985, Hawke told the Australian parliament that a ‘special relationship’ between the two countries was forming.

The realistic Sino-Australian political relations from 1990 to 2015

The outbreak of the Tiananmen Incident in 1989 was a devastating turnaround in Sino-Australian relations, bringing the vigorous relations to a sudden stop. To some extent, Deng’s economic reform gave Australia and the Western world an illusion that China tried to become more Western. Contrariwise, the Incident shattered misapprehension of the special relationship between the two countries and has pushed human rights to one of the central issues that needs to be addressed in the bilateral agenda until now. It is noteworthy that the negative influence of the Tiananmen Incident was in all domains. Antagonized by the Australian broadcasting of violence in Beijing, the Australian people, including politicians, business people, scholars and religious figures, unanimously condemned Beijing. All aspects of Sino-Australian relations were affected at varying levels.

Arguably, after the Tiananmen Incident, the attitudes of the Australian government has changed to be more pragmatic and national-interest-driven. Wang argues that  the reassessment of Sino-Australian relations “did not lead to a fundamental policy shift” in Canberra “and human rights were not emphasized to the detriment of Australia’s economic interests”. In 1993, as the first Australian Prime Minister after the Incident, Keating visited China, breaking the diplomatic ice, partly because he needed to push wool exports to China.

Noticeably, from 1989 to 2015, China and the comparison of world powers experienced earthshaking changes. The hazards of the Asian Financial Crisis in 1998 and the Global Financial Crisis in 2008 lead to the economic meltdown of some Southeastern countries and the relative decline of the West. Bearing the two Crises, China has benefited enormously, even the most, from joining the WTO and other regional and global economic organizations as a member of economic globalization. At the end of 2010, China surpassed Japan and has become the second-biggest global economy, indicating that the global economic center has gradually transferred to East Asia. During this period, Hong Kong and Macao were subsequently handed over to China, enhancing China’s confidence. There is no doubt that bilateral relations have been increasingly asymmetrical during this time, leading to the concept of equal partners less possible.

From 1989 to 2015, facing China’s economic rise, on the one hand, the Australian government and business took advantage of the historical opportunities and have been more engaged in the Chinese economy. For instance, the Coalition-led Howard government was a firm“ supporter for China’s accession to the WTO” to share better Chinese economic growth. In 2014, the Coalition-led Abbott government and the Chinese government started to portray the bilateral relations as a “comprehensive strategic partnership” due to the incremental and robust trade relations and more frequent communication between top leaders of the two sides. On the other hand, due to the different political ideologies and systems, and the gradually widening disparity of the two countries, there have been strong concerns in the Australian government that China may leverage trade over Australia. Foot  indicates the sense of uncertainty and insecurity in Canberra that

Has Beijing worked to support the dominant norms of the international order, or has it striven to overturn them? Has it ever deserved to be called “responsible power”, a term defined by the dominant states, or has it acted irresponsibly? To place these questions more explicitly within an international relations framework, has China shown itself since 1949, and more especially during the period of reform and opening since 1979, as capable of be socialized into supporting global norms? Or, as realists would predict, have there been signs that its rising power over the past two decades has generated new tensions in the international system? Looking more to the future, what kind challenge does its enhanced capabilities pose to the status quo?

Despite the dilemma that the Australian government has to face and the political ups and downs between the two countries during this period, “the growing sense of independence in formulating Australia’s policy towards China, as well as the increasing saliency of trade considerations in implementing such policy, has transcended political and inter-administration divides”. Thus, to some extent, although there were still ups and downs during this period from the ALP-led Hawke government to the Coalition-led Abbott government in 2015, the bilateral relations “appears to have become less uncertain” and matured. Arguably, the Australian government started to view China either without unjustified fear as they had before 1972, or super optimism as they had before 1989.

In fact, the differences may only exist in the style of how different administrations approach China. For instance, the first Mandarin-speaking Prime Minister Kevin Rudd introduced a concept called “Zhengyou in Chinese that means to voice different opinions to benefit the Chinese leadership. By comparison, another Prime Minister John Howard preferred to deal with China on more practical issues.

The increasingly strained bilateral political relations from 2016 to 2020

Bilateral relations have deteriorated since the exacerbation of territorial disputes in the South China Sea in 2016. The Australian government criticized China for not abiding by the South China Sea Arbitration, a joint statement with Japan and the US. In response, the Chinese government expressed its strong displeasure through its state-owned media the Global Times, denouncing Australia as a “paper cat”. Currently, the Australian government is concerned that Chinese activity in the South China Sea may threaten Asia pacific security, thus influencing Australian sovereignty and security.

More importantly, Australia’s closest and strongest ally, the US, initiated a trade war with China at the beginning of 2018.  Since Australia often follows American foreign policy, the increasingly intense Sino-American relations have negatively affected Sino-Australian relations. In the same year, Sino-Australian ties soured further when Australia became the first country to officially ban China’s Huawei from its 5G network. A similar prohibition on Huawei was later executed in the US in 2019.

In terms of domestic politics, there are continuously more negative speeches about China.Australian politician Andrew Hastie urges urged the Australian government and public to realistically recognize the unprecedented democratic conviction and security threat from China. He even goes “as far as to compare the Western tolerance of China’s rise with the appeasement of Nazi Germany”. Hamilton argues Chinese infiltration in Australia is a “silent invasion”. The Minister for Home Affairs Peter Dutton, one of most senior officers in the Liberal-Coalition-led Morrison administration, condemned China’s interference and cyber hacks in Australia and claimed that the policies of the CCP are incompatible with Australian values.

2020 may have been the most turbulent year for Sino-Australian relations so far. Facing the once-a-century Covid-19 pandemic, Beijing has taken trade actions against a series of Australian goods such as barley, cattle, wine, cotton and coal after the Morrison administration advocated an independent Covid-19 inquiry without consulting Beijing first.

The tension also extended to people-to-people exchange. Canberra has warned its residents against arbitrary arrest in China. In contrast, Beijing has cautioned against studying and visiting Australia due to purportedly increasing racism and discrimination against people of Chinese and Asian descent. At the end of 2020, Morrison reacted furiously and demanded an apology from Beijing to an image tweeted by a Chinese diplomat showing an Australian soldier holding a knife to an Afghan child’s throat, which has further shadowed current and future relations.

Meanwhile, despite the global pandemic, there is increasing scrutiny in Australian media, including of the Hong Kong anti-extradition bill, the Xinjiang re-education camp, and China’s political donation to Australian political parties, Chinese spy students, the fight between Hong Kong and Chinese students in Australia, the defection of Wang Liqiang, Huawei backdoor suspicion and the detention of Cheng Lei and Yang Hengjun. According to the Lowy Institute poll in 2019, Australians’s trust in China to ‘act responsibly’ has dropped to 32 %, a 20-point decline from 2018. In 2020, trust in China has deteriorated to 23%, the lowest point in the Poll’s history.

Whatever, if any, evidence underpins these narratives or not, they seem to point out one reality: the plummeting state of Sino-Australian relations. Geoff Raby, former Australian Ambassador to China, even argues that Sino-Australian relations are at their lowest ebb since 1972.It may be controversial to argue that the current bilateral relations are worse than the relations in 1989, but it is appropriate to point out the reality that the Sino-Australian relations have been incrementally damaged. The Australian government’s dilemma is the overreliance of the Australian trade upon China and the exacerbated political disagreement. Jonathan Pearlman argues that “security and economics are tugging Canberra in different directions, as are its values and its interests”.

The Influence of the United States in Australian foreign policy

Undoubtedly, the Australian foreign policy has been influenced by the American government, as Australia has been called the “fifty-first state” of the US. Australia and the US have the same language background, similar European ancestry, similar political systems and strong economic ties. More importantly, in 1951, Canberra and Washington agreed on the Australia, New Zealand and United States Security Treaty (ANZUS), regulating that “an attack on either country’s armed forces or territory in the Pacific area” means “common danger” for the three countries. Since the US abolished its responsibilities to New Zealand due to the disputes of nuclear-armed ships, the ANZUS has become a bilateral treaty between Australia and the US and, separately, between Australia and New Zealand.

Given the American economic and military power around the world and the substantial disparity of Australia-American strengths, it is easy to argue that the ANZUS is the cornerstone of Australian security, and the US is the most important ally of Australia. In fact, Australia followed the US’s leadership through the UN, in the Korean War in 1950, the Vietnam War in 1962, the Afghanistan War in 2001 and the Iraq War in 2003 and recognized the PRC after the Nixon government had changed its China policy. To underpin the above view, Tow and Albinski affirm that the “ANZUS alliance remains Australia’s primary security relationship”. The former Australian diplomat Dr.Alison Broinowski argue that

Australia uncritically and voluntarily imitates its major ally (the United States) and its minor ally (the United Kingdom) in most things, yet lacks the capacity to do them well and the independence to do them differently. Having taken the drug of dependence from birth, Australia seems allied and addicted to it.

Thus, it is easy to question how independent Australia’s foreign policy is, especially its China policy, and argue that Australia does generally imitate the US’s foreign policy. As for the recent downturn of bilateral relations, Geoff Raby, an insider of Australia politics, believes that Canberra has developed policies to push back China’s rise in that the US started regarding China as a strategic competitor.

However, there is some policy flexibility in the Australian government, mainly economic-interests-motivated. To cite an instance, despite the opposition of the US, Australia participated in the China-led Asian Infrastructure Investment Bank in 2015 and leased the Port of Darwin to a Chinese company in the same year. Australia took the position as an outsider in terms of the Sino-American trade war, suggesting the two sides to end the fight to avoid the risks of collateral damage to Australia. Even in the 1950s and 1960s, when the Australian government adopted a hostile attitude towards China, the wheat trade between China and Australia“reached a significant level”.

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East Asia

The Economic Revival of Japan

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Photo: Jezael Melgoza/ Unsplash

Amidst the uncertainty weaved by the pandemic, the stock markets around the world have shunned the preconceived notions associated to their functionality over the past year. While some sophisticated economies are suffering turmoil at the ensue of new Covid variants, deviant vaccination drives, and resumption of state-wide lockdowns, some of the countries are outright negating the educated forecasts made by seasoned financial experts all over the globe. China stands as a flag-bearer of such reality-defying markets: bagging GDP growth unlike any in the world whilst simultaneously controlling the virus strain in Beijing. Recent to the tally, however, is the quaint nation of Japan that despite being head-to-head with another gruesome wave of Coronavirus, still manages to consistently outperform the hailed champions of the global financial markets.

The 3rd biggest economy in the world astonished the financial gurus when Nikkei 225, Japan’s core stock market Index, soared up steadily over the last few weeks. With a 1.9% hike at the week’s opening on Monday, 15th February, Nikkei 225 Index surpassed the coveted 30000-point threshold after more than three decades. The economic rebound is associated to the export sector picking up the pace after a sluggish performance last year. The country still wrestles with the throttle of the pandemic; confirming over 1000 Covid-positive patients since November 16th and adding the cumulative death toll of 7056; surpassing the 7000 deaths mark in just under two weeks.

The positive effect, however, dawns since the daily confirmed cases are showing a steady drop; below 1000 daily-confirmed cases in over 4 months. This occurrence is in tandem to the global fall in the Covid cases. Moreover, Japan’s approval of the Covid vaccine produced by Pfizer Inc. is reflecting the recovery in the health condition of the country, especially a lucrative news amidst the second health emergency recently imposed in Tokyo.

Standing at the 30393.13-point mark, Nikkei 225 is expected to follow the bullish trend heavily over the following week as well. According to the measured forecasts, the bourse is optimally headed to strike the 33000-point mark after crossing the milestone of triple decades. This is due to the positive economic outlook in tandem to the rebooting of the global economy which would ultimately enable the export-reliant country. With Japan announcing a 12.7% GDP growth trailing from the recovery of the last quarter of 2020, followed by a hefty government stimulus to prompt domestic consumption, the Japanese bourse is expected to inflate by up to 30% by the end of the first quarter of 2021 in March, presumably speculating a record surge to bypass the highest ever figure of 38915.87-point, posted by Nikkei 225 back in 1989 before being subsequently floored by the notorious price bubble crash.

However, the economic recovery much less a record shattering surge in the market is heavily dependent on some of the core facets. The debacle of the nationalisation of vaccines is evident in Europe and ironically is the crisis posing more of a serious threat than the pandemic itself. Japan’s economic stability would only be possible given the vaccinations are administered effectively and timely with minimal resistance. As Japan still finds it hard to evade the emergency measures introduced in multiple regions, a vaccine crisis could intensify the emergency precautions and lockdowns may even gear into effect. This could seriously undermine the production capabilities of the country which ultimately could carry forward as an element hampering the blooming investor confidence in Japan.

Much to the global conformity of economic peril last year, Japan’s economy also contracted by 4.8% in 2020. The steep contraction, despite being of a greater extent relative to the 3.5% annualised shrinkage in the US economy, was still much controlled than the forecasted 5.3% fall projected by the International Monetary Fund (IMF). However, unlike some of the regional economies, the pandemic-induced decline lasted only for a short span of time before Japan waded through and rallied. Posting a 3% growth in the 4th quarter of 2020, when major economies like Germany and US grappled with recession, Japan steadily made surface.

Now as the pessimism looms in Europe and the political divide worsens in US, Investors are pouring confidence in Japanese equities which provide a solid foundation to the already surging Japanese Indices. This shift in perspective could be gauged by the purview of global stock positions taken by the active equity investors throughout the globe; pouring investments unlike the sceptical position adopted since January. The increasing investor confidence coupled by the improving economic and social health of Japan has proved monumental on the financial charts; despite being in the highs of a heavy stimulus, S&P 500 continues to be outperformed by Nikkei 225, sometimes even falling short by colossal margins to the returns added by the Japanese Index.

Which way the markets would turn and how Japan could sustain the whelming economic recovery depends largely on how Japan deals with Covid and how efficiently it regulates the vaccination drives. Moreover, Japan’s success may be upped the ante by any new misery that might befall on US or Europe that could ultimately drive more confidence and flare to the 3rdlargest economy of the world.

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East Asia

Mongolia-World Bank Group Partnership: Three Decades of Partnering for Prosperity

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It all began exactly thirty years ago. On February 14, 1991, the eve of Tsagaan Sar, Mongolia joined the World Bank Group[1]. This was the period when the country had just gotten on the path of democracy, free market, and openness to the outside world.  Mongolia rightly took pride in this transition but, at the same time, it presented enormous challenges, including a sharp economic contraction. Following the cut of external aid, the hardship was felt by Mongolians every day. Long lines were visible on every street corner for rationed food.

The World Bank’s support was quick to arrive. By the end of 1991, the first project of $30 million was already signed to help rehabilitate production in key sectors such as agriculture, energy and transport. The World Bank also carried out a comprehensive macroeconomic analysis, zooming in on the immediate challenges of runaway inflation and falling output.

Since these early days three decades ago, the World Bank Group (WBG) has accompanied Mongolia’s strong recovery and development, culminating in the country’s graduation from the International Development Association (IDA) – the WBG’s lending window for low income countries – last year. Mongolia’s economy has expanded significantly over this period, with GDP per capita rising more than fourfold from $1,072 in 1991 to $4,339 in 2019. But growth has been volatile. Like many other resource-rich countries in the world, Mongolia experienced persistent boom-and-bust cycles. Economic diversification remains critical to generate productive jobs, especially for the young. People’s living standards have improved, but growth did not not generate shared prosperity for all. Mongolian citizens expect their government to deliver quality education and health services, and provide for a clean and safe living environment. Their aspirations have not yet been fully realized.

Through good and difficult times, the WBG has remained a steadfast partner of Mongolia. Our budget support operations helped Mongolia restore macroeconomic stability and lay the foundations for inclusive growth. Our investments contributed to economic development in both mining and non-mining sectors, improving people’s livelihoods, and addressing environment and climate challenges. A total of $1.28 billion World Bank financing has been committed to Mongolia for these years. The WBG’s private sector arms—the International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA)—have also been active in supporting private investments.

The investments have helped improve people’s livelihoods across the country. In the energy sector, we supported electricity access to over 100,000 rural and herder families providing them with portable solar panels in the 2000s. In the early 2000s, the World Bank telecommunications project helped all 360 soums in Mongolia gain access to modern phone and internet services. To help herders mitigate natural disaster risks, we supported the world’s first index-based livestock insurance system in Mongolia. To improve governance, we helped revamp the statistical system in Mongolia to match international standards to inform decision making, and empowered citizens to make their voice heard on public expenditure allocations at local levels. IFC financed Mongolia’s first utility-scale windfarm for the country and supported reforms to increase access to finance for SMEs through enabling movable collateral.   

Most recently, in the face of the COVID-19 pandemic, the WBG quickly mobilized over $60 million to support the relief and stimulus measures for saving lives, protecting the poor and vulnerable, and ensuring sustainability of businesses and jobs. These resources are being invested for the most essential medical and diagnostic equipment in three tertiary hospitals, nine district hospitals of the capital city and 21 aimags, personal protective equipment for frontline health workers, and training for medical staff. A new project, which would finance the vaccination of about 60 percent of Mongolians has just been approved. The Bank is also financing the temporary relief of social insurance contribution for over 120,000 self-employed workers including 72,000 women and around 150,000 workers employed by 18,000 firms affected by COVID-19. Bank support has also benefited approximately 1.19 million children through the top-up payments to the government’s Child Money Program.

After thirty years of partnership with the World Bank Group, Mongolia has become a lower-middle-income country and its vision is to become by 2050 a high-income country with high levels of human development, better quality of life, a diversified economy, and good governance. This is an aspiration we will continue to support. To turn it into reality will be challenging. The first step will be to gradually phase out short-term relief measures and return to the important agenda of structural reforms which are needed to rekindle growth and make it sustainable and inclusive. Over the medium-term, Mongolia will have to contend with the growing risks associated with climate change, and the challenges this will bring to the structure of its economy. And it will need to offer its youth the perspective of productive, well-paying jobs, to retain the country’s talents at home.

The WBG is honored to have been Mongolia’s trusted partner over the past thirty years. We are confident that our partnership will continue and further strengthen in the decades ahead, rain or shine.

 [1] Mongolia joined the International Bank for Reconstruction and Development (IBRD), International Development Association (IDA), the International Finance Corporation (IFC), and International Centre for Settlement of Investment Disputes (ICSID) in 1991; and Multilateral Investment Guarantee Agency (MIGA) in 1999.  All these organizations together known as the World Bank Group.

World Bank

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