August-2010-International

INTERNATIONAL AFFAIRS

China overtakes Japan as second-largest economy
After three decades of spectacular growth, China has passed Japan in the second quarter of 2010 to become the world’s second-largest economy behind the United States. The milestone, though anticipated for some time, is the most striking evidence yet that China’s ascendancy is for real and that the rest of the world will have to reckon with a new economic superpower.

The recognition came on August 16, 2010, when Tokyo said that Japan’s economy was valued at about $1.28 trillion in the second quarter, slightly below China’s $1.33 trillion. Japan’s economy grew 0.4 percent in the quarter, substantially less than forecast. That weakness suggests that China’s economy will race past Japan’s for the full year.

Experts say unseating Japan—and in recent years passing Germany, France and Great Britain—underscores China’s growing clout and bolsters forecasts that China will pass the United States as the world’s biggest economy as early as 2030.

For Japan, whose economy has been stagnating for more than a decade, the figures reflect a decline in economic and political power. Japan has had the world’s second-largest economy for much of the last four decades, according to the World Bank. And during the 1980s, there was even talk about Japan’s economy someday overtaking that of the United States. But, while Japan’s economy is mature and its population quickly aging, China is in the throes of urbanization and is far from developed, meaning it has a much lower standard of living, as well as a lot more room to grow.

China is already a major driver of global growth. The country’s leaders have grown more confident on the international stage and have begun to assert greater influence in Asia, Africa and Latin America, with things like special trade agreements and multi-billion dollar resource deals. Beijing is also beginning to shape global dialogues on a range of issues; for instance, in 2009 it asserted that the dollar must be phased out as the world’s primary reserve currency.

While the United States and the European Union are struggling to grow in the wake of the worst economic crisis in decades, China has continued to climb up the economic league tables by investing heavily in infrastructure and backing a $586 billion stimulus plan.

There are huge challenges ahead, though. Economists say that China’s economy is too heavily dependent on exports and investment and that it needs to encourage greater domestic consumption—something China has struggled to do. The country’s largely state-run banks have recently been criticized for lending far too aggressively in 2009, while shifting some loans off their balance sheet to disguise lending and evade rules meant to curtail lending growth.

China is also locked in a fierce debate over its currency policy, with the United States, European Union and others accusing Beijing of keeping the Chinese currency, the renminbi, artificially low to bolster exports—leading to huge trade surpluses for China but major bilateral trade deficits for the United States and the European Union. China says that its currency is not substantially undervalued and that it is moving ahead with currency reform.

Regardless, China’s rapid growth suggests that it will continue to compete fiercely with the United States and Europe for natural resources but also offer big opportunities for companies eager to tap its market.

US ends combat mission in Iraq
On August 31, 2010, US President Barack Obama announced an end to the US combat mission in Iraq, not with a declaration of victory but rather a sombre admission that the US had paid a “huge price.”

Announcing an end to Operation Iraqi Freedom in a nationally televised speech from the White House, the President said the Iraqi people now have lead responsibility for the security of their country.

But as US troops roll out of Iraq, the country continues to be locked in a political stalemate with disagreement over who will lead it, after elections failed to throw up a clear winner.

Obama urged Iraq’s leaders to “move forward with a sense of urgency to form an inclusive government that is just, representative, and accountable to the Iraqi people.” “And when that government is in place, there should be no doubt: The Iraqi people will have a strong partner in the United States. Our combat mission is ending, but our commitment to Iraq’s future is not,” he added.

Anthony Cordesman of the Center for Strategic and International Studies said while US troops may have withdrawn, the Iraq war is not over, it is not “won,” and any form of stable end state in Iraq is probably impossible before 2020.

A transitional US force will remain in Iraq with a mission of advising and assisting Iraq’s security forces, supporting Iraqi troops in targeted counter-terrorism missions, and protecting US civilians.

Mid-East Summit
US President Barack Obama waded into a new round of Middle East diplomacy September 1, 2010, seeking momentum for revived peace talks clouded by a flare-up of West Bank violence and a deadlock over Jewish settlements.

Obama met Israeli Prime Minister Benjamin Netanyahu as he launched a series of one-on-one meetings with Middle East leaders attending a US-led peace summit that culminated with the first direct Israeli-Palestinian talks in 20 months.

With Obama's peace bid facing broad skepticism and the clock ticking toward the September 26, 2010 expiration of an Israeli settlement construction freeze, Israel's defence minister sounded a conciliatory note about the prospects for sharing Jerusalem, an issue at the heart of the decades-old conflict. But big obstacles remain to Obama's quest for a peace deal that eluded so many of his predecessors.

Hamas militants declared war on the talks even before they began, killing four Jewish settlers in the occupied West Bank, vowing more attacks and underscoring the threat hard-liners pose to the fragile peace process.

The summit marked Obama's riskiest plunge into Middle East diplomacy, not least because he wants the two sides to forge a deal within 12 months, a target many analysts call a long shot.

Cricket shamed again
Yet another match-fixing scandal rocked Pakistan cricket on August 29, 2010, engulfing its captain Salman Butt, brilliant pace duo of Mohammad Asif and Mohammad Amir and four other players, leading to the arrest of a bookie in London and questioning of the players by the Scotland Yard after a tabloid sting.

The ‘News of the World’ tabloid alleged that a Pakistani man Mazhar Majeed had paid bribes to the players to bowl no-balls in the series and the Lord’s Test. The video evidence that the tabloid has presented also shows Majeed talking about his links with Indian bookies.

The two Pakistanis who bowled no-balls allegedly on directions from Majeed were Asif and Aamir. Both bowlers delivered three no-balls during the Lord’s Test.