Civil society enjoys a privileged role in Europe’s China policies. Europe has aimed at promoting China’s economic opening with civil society at the centre, stressing the advancement of both political and economic rights. Europe has developed solid instruments to ensure an inclusive approach towards civil society. This has guaranteed its power of example. Beijing has been ambiguous in its approach to civil society. It has shown relatively more openness to cooperation on economic, and much less on political rights. This has constrained Europe’s influence. Europe’s weakened power of example as a result of it dealing with its crises has further challenged its ambitions, most notably as a result of the migration crisis, questioning Europe’s claims of inclusiveness and partnership with civil society. Criticism about its ability to find solutions in partnership with civil society has increased. As a result, Europe’s normative power effectiveness has been limited.
Zsuzsa A. Ferenczy
Edited by Ray Yep, June Wang and Thomas Johnson
Ray Yep, June Wang and Thomas Johnson
Urban China has undergone seismic change in its physical and socioeconomic landscape over the last four decades. Urban life in Mao’s China was simply an extension of the regime’s faith in the superiority of teleological planning, and Chinese cities were given a central role in the socialist industrialization programme. All aspects of urban existence were organized along the imperative of production. Urban architectural landscapes were characterized by buildings of monotonous design and prosaic outlook. The ethos of egalitarianism inherent in Soviet practices and the functionality logic of Le Corbusier’s modernist principles of design determined the allocation of space. Scarcity was permanent, with the rationing system effectively restricting personal consumption to subsistence level, lest excessive personal indulgence misappropriate resources for unproductive purposes and thus decelerate the pace of the industrialization programme. Urban life was in general highly organized, disciplined and mundane, with expression of individuality severely circumscribed by politics and material conditions. Yet most urban dwellers probably felt blessed with their ‘privilege’ of residing in the cities, aware as they were of the deprivation and desperation of the Chinese peasantry. The concomitant operation of centralized control over employment through the work unit system (danwei) and the unified job allocation arrangement, and the effective regulation of personal movement through the residential permit system (hukou), powerfully sustained the impermeability of the rural-urban divide.
Inho Song examines aging as a structural factor affecting housing prices. His long-term price model, using a model of demographic structure by age group, simulates the trend of housing prices, assuming that Korea’s housing market may experience aging similar to Japan’s over the next 20 years. Results show a downturn from 2019 (annualized growth rates of –1 to –2 percent) in real housing prices, but a rise in nominal ones (by an annual average 0.4 percent), even with effects of population aging. Results are consistent with the lifecycle hypothesis and overlapping generation models, in that aging has a direct impact on asset prices. Korea’s housing market has not yet experienced the aging effects that Japan’s has. Inflation in housing prices will be the factor deciding whether population aging effects on the housing market in Korea will be similar to those in Japan.
Jerry Schiff and Ikuo Saito
Recent global economic stagnation has stimulated debate about the role of fiscal policy in supporting growth, notably through infrastructure spending. Japan’s experience during its “Lost Decades” provides insights on maximizing the impact of fiscal policy during downturns. First, while Japan provided early and effective fiscal stimulus, later fiscal policy was conducted in a “stop-and-go” and often pro-cyclical manner. Second, a shift in spending away from infrastructure toward transfers reduced the overall fiscal multiplier. Third, a decline in the efficiency of public investment—partly reflecting weaknesses in fiscal institutions—also reduced the impact of fiscal policy. Fourth, the concurrent dramatic shift in demographics reduced potential growth and limited fiscal space, so that fiscal policy was fighting against a strong tide. Avoiding similar problems can help countries design effective fiscal policy responses in the current economic environment.
There is little agreement about deflation as a problem for economic growth and financial stability. Economists may question it as a transitory phenomenon or whether monetary policy can solve it without more serious risks. Historical experience generally confirms that it should be a central-bank priority and does not solve itself. Once deflation is under way, monetary policy can return inflation to positive target levels. If that is not achieved, banks need to do more. If doing more threatens financial stability, macroprudential tools are appropriate. If a central bank runs out of government securities to buy or worries about liquidity in the government bond market, there are other assets to buy. If it worries about purchasing other assets, a helicopter drop of money is an option. If that drop targets productive public infrastructure investments, they not only can proceed without increasing public debt but also can actually reduce it.
Exploring the Causes and Remedies of Japanization
Edited by Dongchul Cho, Takatoshi Ito and Andrew Mason
Kyu-Chul Jung examines how Korea’s export market today resembles Japan’s since the 1990s and faces increasing competition from China. In the 1990s Japan lost export market shares as Korea began to catch up, but China began to catch up with Korea in the late 2000s. The old strategy of exporting the same goods as advanced countries is not sustainable. With its limited resources, Korea needs to concentrate on exports where it has a comparative advantage, to undertake structural reforms (dealing with insolvent enterprises and improving labor-market flexibility) and to develop new export markets. Korea needs to focus on core capabilities, so that China and other latecomers cannot easily emulate Korea’s technology and market strategy.