Chinese Quake Shows Change in Winds Across Asia: William Pesek

Commentary by William Pesek

May 16 (Bloomberg) -- The focus in Asia is now on the 7.9- magnitude earthquake that killed untold thousands in China this week. It's worth pausing for a moment to consider how the country's biggest quake in 58 years offers a reason for optimism.

The contrast between China's impressive relief efforts and Myanmar's shameful failure to allow the rapid delivery of international aid after this month's cyclone is as huge as it is telling. China's response differs markedly from how the country dealt with a 1976 earthquake that killed 250,000 people in the northeastern city of Tangshan.

Back then, the government downplayed the severity of the disaster and declined offers for international help. That left poorly equipped soldiers to aid the city's devastated population. The episode led to the downfall of China's leaders, and memories of it are probably on the minds of President Hu Jintao and Premier Wen Jiabao.

The openness with which the government has addressed this week's quake is extraordinary. It has allowed reasonably free reporting and fewer-than-usual efforts to conceal the severity of the crisis. It shows how China has learned from the past.

China yesterday gave emergency rescue teams from Japan the go-ahead to aid earthquake-relief efforts, the first country from which it accepted such help. Say what you want about Japan-China relations -- this is big stuff.

Communist Party leaders used the old playbook in recent years when rural Chinese were killed by flooding on the Yangtze River and during the SARS epidemic in 2003. News reporting also was limited earlier in the year when freak snowstorms stranded thousands. The candor about the latest disaster contrasts with the media lockdown during Tibetan riots before the Beijing Olympics.

Signs of Thawing

The quake occurred at a time when Asian nations are redefining their relationships with one another. There are now signs of thawing among East Asia's three big economies -- China, Japan and South Korea -- as they attempt to join hands.

Such efforts start small -- like with a Japanese leader, Yasuo Fukuda, who is more interested in working with China than scoring points with Japanese nationalists. They begin with a Chinese president willing to visit Japan without lecturing officials in Tokyo, as Hu did this month. They begin with a new Korean leader willing to mend fences with vital neighbors.

Korean President Lee Myung Bak last month visited Tokyo, where he and Prime Minister Fukuda called for a ``new era of bilateral relations.'' In late May, Lee is expected to fly to Beijing for a summit with Chinese leaders. Fukuda, meanwhile, hasn't visited Tokyo's Yasukuni Shrine, which includes memorials to convicted war criminals and irks Asian neighbors who say it celebrates Japan's wartime aggression.

Lee's Visit

Of course, Lee shouldn't be offended if China postpones his visit to Beijing. Hu and Wen are understandably busy grappling with the aftermath of China's earthquake.

While the steps to reconciliation are modest and may prove fleeting, they are good signs for a region with much to discuss.

Pressing issues go beyond record oil and food prices, rising interest rates, earthquake relief in China, a calamitous cyclone in Myanmar, terrorism and pandemics.

Asia needs to boost efforts to reduce poverty, create free- trade zones, build regional bond markets, link stock trading, adopt standardized accounting, streamline immigration policies, tackle climate change and ease tensions with North Korea.

The region's leaders also should be thinking about how to bring home the trillions of dollars of savings parked in low- yielding U.S. Treasuries. Those funds could be used more productively in Asia supporting local entrepreneurs and improving roads, bridges, power systems, schools and hospitals.

The Big Three

It's almost impossible to do that when three of the region's biggest economies are barely speaking, as has been the case in recent years. If ever there was a time for Asia's powers to get together and keep history or disputes over tiny islands from scuttling the future, it's now.

China, Japan and Korea have never been closer economically. The same goes for East Asian trade with India, too. Without these large and influential economies working together, the odds of today's growth continuing get worse. And so, the signs of thawing in recent weeks are heartening.

Investors are now focused on the short-term implications of the earthquake. The affected region, Sichuan, plays a small role in China's overall economy. Still, economists such as Ting Lu of Merrill Lynch & Co. in Hong Kong expect China to put off interest-rate increases aimed at taming inflation, which surged to 8.5 percent last month.

The tragedy may make the government ``even more cautious in pursuing further macro tightening measures,'' says Denise Yam, an economist at Morgan Stanley in Hong Kong. ``Controls over bank lending could be eased earlier than expected.''

Yet over time, the events unfolding in China may usher in a sea change in China's willingness to open up to a curious world. As that phenomenon dovetails with efforts in Asia to reduce tensions, the region's economic and political prospects will become all the brighter.

Asia's status quo is poised for an overhaul.