Shihoko Goto is the Director of Geoeconomics and Indo-Pacific Enterprise and Deputy Director of the Asia Program at the Wilson Center. She previously worked at The World Bank.
China Desk
What brought you into Indo-Pacific and Asian economic affairs?
Shihoko Goto
We talk about journeys and I get asked a lot about how I ended up at the Wilson Center and the capacities that I do now, often by young people [who are] interested [at] my start and conclusion which was not a linear path. It's not going to be an easy one to replicate.
My bachelor's degree was in modern history, and I focused on European history. I think that was really kind of my first love. I'm Japanese by origin and I found that as I was becoming a specialist in the trade policy of Bismarck or Elizabethan parliamentary systems and the like.
I became curious about Asia to have a better understanding of my own ethnic identity, and in graduate school I started focusing on international relations. I did want to focus on that to understand a little bit about Asia in the wider world and the influence it has.
The role of Asian economies in the global landscape has only increased since my days as a student.
My first job out of graduate school was with Dow Jones. I focused on covering the Japanese economy at that time, and then I moved to Washington as a Donor Country Relations Officer at the World Bank. But again it became clear that even though the World Bank is an institution that lends to developing countries, the power of Asia at that time was more Japan rather than China–but quickly that was overtaken by China. The power of Asian countries in defining the international financial institutions became clear.
I've been with the Wilson Center now for 10 years, and it has brought together my interest in international relations with a focus on Asian economies, but also my love of writing. Also one of the things that I have really appreciated about journalism is meeting new people, being exposed to new ideas, and being able to kind of bring that all together [to] reach out to a broader audience.
China Desk
How did you come to understand Asia and the region?
Shihoko Goto
I think there's a very different divide even within the United States on how we perceive Asia. Here in Washington, we tend to look at it from the prism of strategic competition between the United States and China. Authoritarian rule versus democracy. But if you go to New York that's not the case. It's really about economic opportunities and investment climate.
Yes, obviously China is one part of that, but it's certainly not the dynamic simply of strategic competition. There is a far more nuanced view of what actually constitutes Asia. It is a region that is incredibly diverse.
An easy way is to say there's Asia where you can drink the tap water and there's an Asia where you cannot drink the tap water. I tend to focus on the tap-drinking advanced industrial economies, and that is really because a lot of businesses and trusts are there.
But what we are finding as we see this very diversifying world where there is a greater appreciation of what different countries and regions bring to the table…We are seeing greater interest into Southeast Asia, which includes countries like Vietnam and the Philippines as well as South Asia [countries, such as] India, Pakistan, and Bangladesh.
So we are seeing greater interest in Asia writ large and the distinction between advanced and developing economies. It's becoming more blurry as well, and of course that is where the competition lies when we talk about the strategic competition between the United States and China.
China Desk
Did you sense a difference in how people approached Japan compared to China?
Shihoko Goto
It's interesting because we have this narrative about Japan being a declining power, but for a declining power it has remained the third largest global economy for quite some time.
In terms of geography, I like to compare Japan to the UK. Both Japan and Britain are island nations with a very strong connection to a powerful continent. For Britain that's Europe, and for Japan that is Asia. Both countries though have a very love-hate relationship with the continent, and we've seen that hate appear in the case of Britain through Brexit, essentially deciding to alienate itself from the European Union.
In the case of Japan, what we have seen over the decades [is] there has been greater integration of Japan into the continent. Japan had been more of a role model immediately after World War II until about the early 90’s, as other East Asian and Southeast Asian countries really wanted to emulate that model, [which] no longer holds true.
But I do think that Japan's initial success in being able to grow as an economy and compete toe-to-toe with the United States as well as Europe has been an inspiration for a lot of Asian countries to date, but that relationship has has obviously changed a great deal over the years.
Federal Newswire
What do you see as the key drivers of what's changing in Asian economic policy?
Shihoko Goto
Well first of all, the rise of Asia has been remarkable, and this is the world's most populous nation. It is the most dynamic. The World Bank uses labels like “incredibly impoverished nations” and “developing nations.” There are very few highly impoverished countries in Asia; most are in the middle income band or above. We are seeing that band of middle income countries really trying to go up that income ladder even further.
What we are also seeing is that there is a growing appetite and competitiveness amongst the Asian nations to try to match the United States and Europe, as well.
So that distinction in terms of economic achievement and economic standing is becoming increasingly less. I think as we move forward that momentum is actually going to accelerate even further now with that growing confidence.
It had been that economic growth and increas[ing] GDP had been the single issue that united this very disparate grouping of countries, and that was the value system that these countries all shared. But as countries become wealthier, there is a growing realization that perhaps the model that they have pursued for growth–that is to say the western model–is not necessarily one that they want to emulate completely and wholeheartedly.
The biggest one that we see of course is China. China has seen a remarkable rise and a tremendous improvement in the living standards of the average Chinese citizen as well. Regardless of what we might think of their governance system, it has been able to deliver all this rapid growth. And with that confidence has also come this thinking of new alternatives, a new vision that is not simply to emulate the Western style of governance and growth but to have its own pathway for growth.
The United States tends to focus very much on what China is touting and what the Chinese model is, but I should point out that the rest of Asia is also having second thoughts. It may not necessarily want to emulate or be like China. But it is also having second thoughts of completely [and] blindly trying to emulate the growth model that has been pursued by the United States.
China Desk
How do you compare the Chinese economy with what has happened in other Asian countries?
Shihoko Goto
Each country has its own experience. China is certainly very unique, and so far it has had this from the Cultural Revolution to the China that we have today and everything in between. What we do know is that the common thread of communism has been interpreted in a very Chinese fashion, and it has led to a system that has been able to pursue very effective industrial policy and China's entry into the WTO.
The 1990s certainly opened the floodgates for new investments from overseas, and there was a great deal of excitement about the opportunities that China would give to those investing countries. What we are finding now is that the bigger opportunities came for China itself, and that the growth for China through these investments was far more beneficial in many respects than to the private companies and the public funding that went into [while] supporting China.
What we are also understanding is that the model of state-owned enterprises can be both a blessing and a curse. It can lead to a channeling of funds that [enables] companies in certain sectors to dominate the global economy without having to consider initial downside risks, and that's a tremendous advantage that Chinese enterprises have been able to leverage.
But what we also know is that as a result, we've seen countries thinking that perhaps that's not necessarily a model that they should [follow]. What I do find is that there is a limit in the growth capacity in China, but we also want to be mindful of the fact that it's not just about China growing. It's also a reflection of growth or lack thereof in the other countries as well.
So as China struggles to keep the momentum growing, we are also finding greater soul-searching here in the United States about how the United States can be competitive as well.
One thing I do want to point out though, is one of the problems. [In] the Chinese economy, when there is a downturn, when there is weakness or roadblocks that come ahead, there is a tendency to hunker down and try to introduce more protectionist measures.
For instance, today we find that the Chinese economy has slowed down for a number of reasons, not least because of the onset of Covid and the shut down to keep the contagion at bay. We've seen a great deal of weakness in the Chinese economy as a result. We've also seen the Chinese economy struggling as it is being cut off from overseas markets and foreign capital, especially from the United States and its allies.
Instead of trying to open and kind of self-correct, it is actually taking more of a defensive strategy so that we are seeing the introduction of more extreme protectionist measures, including the introduction of a greater crackdown in the name of National Security. We are also finding that China is restricting innovation and really cracking down on those who have led to its growth, like Jack Ma of Alibaba, who if he had been an entrepreneur in this country would have been celebrated, and had probably wielded political as well as economic power.
Success in China by the individual can be curtailed as well. Anything that might upset the power of the Chinese Communist Party is seen as a threat to the political system, and individuals who succeed or are seen to be a threat to the overall system can be punished. This is something that is a tremendous disadvantage to the detriment of the Chinese economy and to the Chinese people.
But it can also be played up by the United States as a reason for the U.S. model to be far more attractive in the long run and be far more competitive and innovative as well.
Federal Newswire
What tools does China use to shape how the world engages with the country?
Shihoko Goto
We see a very confident China. We saw China overtake Japan as the world's second largest economy over a decade ago, and that momentum has only continued to increase.
The narrative in China now is to say that the United States is a declining power, and it is. It's desperately clinging onto whatever influence it can, but the future lies with China and that kind of confidence is making an appearance not just in China's economic policy, but also in its security policy, political rhetoric, its relationships with its neighboring countries, and in indeed the world.
We also know that in Asia and the Indo-Pacific, China is an economic hegemon. It is the biggest economic power in the region, and it is not afraid to use that position. It makes it clear [when] it goes to public forums, tells other leaders “no, we're China, we're big, you're a small country, we are not equals here,” and that is made clear.
The Chinese government is not afraid of weaponizing that economic position. So we see this position of economic coercion, in particular, manifesting increasingly in countries that I don't think China would have dared challenge a few years ago, let alone a decade ago.
Countries like Australia, when during Covid it challenges China about the origins of Covid, and the Australian government is calling for an examination as to what extent China may or may not have been responsible for the outbreak of the coronavirus. The Chinese started taking economic action, banning the imports of Australian wine, and taking punitive action against Australia.
China took an economic course of action against South Korea even before Covid, when the U.S. defense system was put into South Korean territory. That was seen by China as a very provocative action by the United States. What does China do instead of taking action against the United States? It takes punitive economic action against Korea which really hurt the Korean economy.
A decade ago when Japan decided to nationalize the Senkaku Islands, China took action by banning the export of rare earth [minerals] to Japan, even though China dominates in this sphere.
So China has certainly not backed away from demonstrating, and not just demonstrating but actually utilizing and trying to strike fear in the minds of governments. And we see this in play.
Governments are fearful of Chinese retaliation. There is a lot of self-censorship by governments so that they do not incur the wrath of Beijing. This is seen especially across southeast Asia. It's also seen to some extent in Europe as well.
We see this not just by governments but also corporations. They want to continue to do business in China, they don't want to make the Chinese angry, so they're going to start censoring themselves to not provoke China in any way.
There is this dominant influence of China having its own way, essentially, for lack of a better word, bullying its way on the economic front.
China Desk
You just visited Taiwan. What were your observations about how the Taiwanese government or its people are handling a potential Chinese threat?
Shihoko Goto
So three things. One is that here in the United States, we hear Taiwan is in the news very frequently, and it's in the context of an invasion by China into Taiwan. It’s not a question of if but more a question of when.
The second point is that when you go to Taiwan and you come with this idea, “oh my goodness, this place is going to be invaded by the Chinese and what's going to happen?” [But], not only is it really normal, it is very prosperous. People are enjoying their bubble tea. It's great. No one is stockpiling food and panicking. Life goes on. Life is pretty good for Taiwanese people every day right now.
But Taiwan will be having an election in January, and from a political perspective, [there is] this idea of “how will Taiwan continue to have relations with mainland China in the future?” That is a big issue, but I think it's important to point out that it's not necessarily the way the United States is looking at it. It's not necessarily about how [Taiwan] is going to be able to avert an invasion or not, and what will Taiwan do when an invasion comes. I have found that when you actually talk to Taiwanese voters and when you are in Taiwan, they are not necessarily completely alienated from China. There are people, but this is a government that has splintered off from mainland China…it actually has very strong ties with China.
There is a lot of concern, yes, about a potential invasion, but also the question then becomes to what extent the Taiwanese would actually be able to withstand that, or do they even have an option to return to China to be one with China.
Once again, there is a lot of inner turmoil on the part of the Taiwanese themselves. They don't want war. They don't want their standard of living to decline. There are some options that need to be weighed heavily, and they don't necessarily want to put all their eggs in the U.S. basket insofar as they are completely dependent on the U.S. proposal in maintaining peace in cross-strait relations.
But they also want to be able to manage their own destiny and to be able to ensure their interests, their prosperity, and their stability can continue.
China Desk
What are possible plans for what Xi Jinping or China may have in the upcoming Taiwanese elections?
Shihoko Goto
China's war against Taiwan has already started if we look at it from a political perspective. The disinformation campaigns, the twisting of information to gnaw at the confidence of the Taiwanese public, it is there, and it's quite effective.
In particular, [it’s effective] in shaking some of the Taiwanese confidence in U.S. reliability that the United States would actually come to the defense of Taiwan should that become necessary. We've also seen cyber attacks against Taiwan from China as well.
These are the realities that the Taiwanese people are going to be dealing with, especially as the election heats up and comes into being in January. What we also know is that Xi Jinping has definitely not given up on Taiwan. Taiwan remains a core interest for China, and many analysts expect that Xi Jinping would not want to cede power without being able to deliver Taiwan.
He set the stage to really move in on Taiwan. Would he really want his successor to be able to take the credit and glory should that invasion actually come to fruition? Many would argue no, there is a reason why he's amassed a lot of power, and he's concerned about legacy.
One of the biggest legacies would be to have this unification with Taiwan and that puts Taiwan in a very vulnerable position.
Here in the United States, some have said that China, the PLA [People’s Liberation Army], would be ready by 2027. Just because it's ready doesn't mean it will actually act.
The fact is that Taiwan remains incredibly vulnerable, and it will become even more vulnerable. Currently there is U.S. bipartisan support for the defense of Taiwan, but the challenge, of course, is what that bipartisan support actually means in practice.
Words aren't simply going to be enough. There is going to be a lot required, and if we have learned anything from Ukraine's experience, it’s that even in an asymmetric war, it's not always easy to come to a quick resolution. The situation that Taiwan finds itself in only becomes more difficult with time.
China Desk
What is the purpose of China’s attempts at de-dollarization?
Shihoko Goto
Until very recently, even as the United States's position in many things have come into question, being a leading financial power has been essentially an unshaken true fact. That is [now] being increasingly challenged. Certainly China is looking to challenge the United States in its dominant role as the economic financial leader.
We've also seen with going back to the Ukraine experience that the sanctions against Russia have been partially circumvented, because the Chinese have been able to step up and provide not only financing, but also an alternative financing mechanism. It did alternative banking and access to capital as well.
One motivating factor for less dependence on the dollar would be, should China continue to find itself under greater scrutiny from Western powers, and if it were to be subjugated to sanctions, that it has an alternative financial pathway so that it can circumvent those sanctions as well. This trend will only increase and definitely not decrease. There's no moving back from this issue of central bank digital currency and the use of a digital currency.
Yes, the Chinese government has really embraced the idea of “having greater IT leads to greater financial efficiency.” But at the same time, it allows the Chinese government to have greater control and potentially abuse the way that people are spending and earning money. A central bank currency would actually allow them to manipulate and weaponize the fact that they have greater information about people's spending patterns.
When it comes to lending in the international financial markets, we hear a great deal about China financing projects overseas. If countries are borrowing from China and in Yuan, they need to pay it back in Yuan, then that gives greater influence and use of the Yuan.
But I think one of the bigger goals that China would also want is for the Yuan to be a principal reserve currency for the international financial institutions as well. There is a bigger goal here on the part of China, and the end goal is for the Chinese government to wield greater influence on the global economy at large.
Federal Newswire
Where can our readers find more of your work?
Shihoko Goto
My twitter is @GotoEastAsia because my name is Shihoko Goto. You can also find my longer pieces online at www.wilsoncenter.org.
