By Peter Hartcher
In December, a Chinese official proposed a grand global division of labour. China and India should ''work together as a world factory and a world office'', China's ambassador to Delhi, Yan Zhang, said in a speech.
It didn't take long for the first part of his vision to become confirmed reality. Yesterday, new figures showed that China is now the world's biggest manufacturer.
RoccoCredit: Rocco Fazzari
With 19.8 per cent of global manufacturing output, China last year pulled ahead of America's 19.4 per cent, ending 110 years of US dominance, according to IHS Global Insight, a US consultancy.
Zhang didn't spell out which functions Beijing wanted to designate for the other countries of the Pacific rim. But from China's behaviour we can surmise that Australia is to be the world quarry. America is to be the world customer, running up ever-greater debts to buy endless supplies of Chinese products. And China's great traditional rival and neighbour, Japan, a sometime technology repository, is just supposed to gradually fade away, its economy in a 20-year stagnation, bowed under a vast debt load, its population already shrinking.
Wartime Japan saw itself as the mighty ruler of a Greater East Asia Co-Prosperity Sphere, with a subservient China, and free of Western intrusions. Postwar Japan offered itself to Washington as an ''unsinkable aircraft carrier in the Pacific'' for the US alliance, in the words of Yasuhiro Nakasone, prime minister in the mid-1980s, building a vibrant economy under the shelter of an American nuclear umbrella.
But now Japan's fate seems to be decrepitude, a nation-state increasingly resembling a comfortable retirement home, with no influence in world affairs. That would suit Beijing nicely.
The dreadful earthquake and shocking tsunami of last Friday is like a flash of light across a darkened landscape, throwing into stark relief a key moment in the choices of the great powers of the Pacific, the US, China and Japan, the world's first, second and third biggest economies.
Japan's disaster abruptly exposed the faltering of American stature. In the moment of panic on Friday evening, investment funds rushed immediately into all the traditional safe-haven assets, bar one. The price of gold rose, Swiss francs were up. But the US dollar actually lost value, by 0.65 per cent, against a basket of the world's six major currencies.
This confirms the evidence of the foreign exchanges during the Arab uprisings and oil scares of the past two months - the greenback, the world's reserve currency of the postwar era, has lost its status as a safe haven.
And China? The weekend produced two highly instructive announcements from Beijing. First, the National People's Congress, China's token legislature, drew towards the close of its annual session with an unequivocal statement on the future of democratisation in China.
There won't be any, is the conclusion to be drawn from the statement by Wu Bangguo, chairman of the congress but also a top member of the country's cabinet, the nine-man Politburo Standing Committee.
What does this mean? First, that China's Premier, Wen Jiabao, who last year made two public calls for greater democracy, has been slapped down. The conservatives have triumphed. China, in other words, is ignoring the evidence of history; that, sooner or later, people everywhere crave political liberty.
The second announcement was on China's plans for nuclear power. Prudence suggests that all governments watch Japan's unfolding experience with its melting nuclear power plants, and, when it's over, study the evidence before deciding on any future plants. But with the fate of the Japanese reactors still in the balance, China's Vice-Minister for the Environment said on Sunday: ''China will not change its determination and plans for developing nuclear power.''
The evidence of both weekend announcements suggests Beijing is allowing hubris to colour its judgment.
And then there is Japan itself. ''This earthquake symbolises the gravity and extent of the larger crisis facing Japan,'' says Ken Courtis, an international economist who has lived in Japan part-time for the past 25 years. Until Friday, Japan was already labouring under the triple burdens of debt, deflation and demography. On debt, its gross government debt is, proportionately, the biggest of developed countries at 210 per cent of GDP.
On deflation, Japan's ''lost decade'' of economic stagnation in the 1990s has become Japan's two lost decades. The economy will enjoy a brief rebound when it rebuilds from its disaster, but then, without deep structural reform, will revert to stasis.
On demographics, Japan's population has peaked and it is well on the way to becoming one of the most aged societies, with the burden of pension and health spending that goes with it.
To these three dire Ds, Courtis adds now death and devastation: ''None of these five Ds will do anything for Japan's confidence.'' Unless it can produce a decisive program for deep reform, Japan's slow decrepitude will quicken under the added burden of reconstruction spending.
Courtis, formerly vice-chairman of Goldman Sachs in Asia and now a founding partner of the China-based Themes Investment Management, says that despite considerable effort, ''I have not been able to put together a credible scenario for Japan to solve its debt problem.
''The structural reform Japan needs has to be so extraordinary one just wonders how they can do it.''
Japan's natural calamity has produced a human disaster, and a national opportunity. If the country's leadership can seize the moment to jolt the country into a serious program of national renewal, it can alter its trajectory and build a hopeful future.
All three of these great Pacific powers face junctures of fateful choice. Without meeting their problems head-on, history will hand all of them not any neat division of labour but the common fate of preventable mistakes on the grandest of scales.
Peter Hartcher is Herald international editor.