Monitor guidance east asia

• 
  Political gridlock and anything that has potential to break it. Elections, defections, new parties, new coalitions, opposition wins at regional elections.
  
• 
  Liberal Democrat Party (LDP) – anything suggesting intra-LDP fighting, or splits, disagreement, defection among high level members
  
• 
  Revolving door prime ministers and cabinets
  
• 
  Junichiro Koizumi – anything he says
  
• 
  Ichiro Ozawa – anything he says
  
• 
  Corruption scandals - have a big effect on public perception of politicians
  

• 
  Monthly quarterly yearly stats and economic indicators
  
• 
  Exports – performance of export sector crucial for economy
  
• 
  Imports – especially mineral fuels, raw materials and food (oil, coal, natural gas, liquid natural gas, iron ore, other ores). Japan’s dependent on these.
  
• 
  trade balance – deficits, esp any month other than Nov-Feb, are important.
  
• 
  Fiscal policy, public budget -- stimulus packages, allocations to regions, infrastructure projects
  
• 
  Interest rates
  
• 
  Government debt – bond issues
  
• 
  Deflation – Consumer Price Index, etc
  
• 
  Non-performing loans – growth rates, ratios, disposal of NPLs, etc
  
• 
  Liquidity shortage – anything that suggests liquidity shortage anywhere is a red flag
  
• 
  Bankruptcies – especially affecting SMEs
  
• 
  Unemployment --
  
• 
  Demographics – any major studies on population change, births, deaths, life expectancy, etc.
  
• 
  Immigration – any changes further constraining immigration, or promoting it and trying to become more open to it, are relevant
  
• 
  Tax increases - consumption tax especially
  
• 
  Foreign currency reserves
  
• 
  US dollar assets – buying more or not
  
• 
  High-technology, green tech, genetics, robotics, etc
  

Japan is constitutionally pacifist due to American demands after WWII. But since the 1990s it has been advancing the capabilities of its Self-Defense forces and preparing them for a greater role in international missions, while also becoming more capable of securing Japan’s crucial supply lines and reinforcing its territorial claims. Japan provided refueling assistance for American operations in South Asia, and has sent a naval task force to fight pirates in Somalia – these actions require delicate legal juggling to get around the injunction in the constitution not to wage war or maintain armies. With the rise of China posing serious challenges to Japan’s perceptions of its own security and defense capabilities (and with North Korea’s provocations serving as a great excuse), Tokyo is on a long term drive to improve its defense and security capabilities. (The fact that Tokyo feels it cannot and should not always depend on the US entirely is also a factor.) Japan has long-standing quarrels with its neighbors, especially over sovereignty claims on islands and maritime boundaries that could give access to natural resources. The major constraint on defense improvement to watch for, however, are fiscal, because of the weakness of Japan’s economy.

• 
  US-Japan alliance – ballistic missile capability (SM3, PAC, etc), trade/sharing in other weapons and weapon systems, removal of US troops
  
• 
  Rearmament, evolution of Japanese Self-Defense Forces (JSDF) – including maritime, air, etc.
  
• 
  Nuclear is also an issue to watch out for here as Japan has always made sure that they have the capability to go nuclear very quickly if the circumstances call for it.
  
• 
  Space science – legal distinctions long restrained Japan's military exploitation of space, and despite its technological sophistication, the movement into spy satellites, etc., is presenting a certain challenge. Keep an eye on what the Japanese are doing in space.
  
• 
  Constitutional interpretation, change – relating to pacifist clause
  
• 
  Ongoing reforms in Self-Defense departments and agencies
  
• 
  Deployments abroad, peacekeeping – like Somalia, Afghanistan,etc
  
• 
  Minor security incidents at US military bases
  
• 
  Godzilla and Mothra
  

• 
  US alliance, US economic relations
  
• 
  Tensions and economic integration with China
  
• 
  Relations with South Korea
  
• 
  North Korean provocations, abductees in North Korea, sanctions on DPRK, etc
  
• 
  Relations with Taiwan
  
• 
  Island disputes – Russia (Kurils), China (Senkaku/Diaoyutai), South Korea (Takeshima/Dokdo)
  
• 
  Maritime activity – such as Japan’s survey of East China Sea, run-ins with China, etc
  
• 
  Middle East – relations to Japan’s primary energy suppliers
  
• 
  multilateral and international activities, IMF, UN, etc
  
• 
  Investments in Southeast Asia
  
• 
  US military bases – controversies, security incidents, public criticisms by Japanese politicians
  

One of the key drivers of the Chinese leadership is the preservation of the ruling status of the Communist Party of China (CPC or alternately CCP). While there are also several official non-Communist Parties, power is centralized in the CPC (and there is frequent overlap in CPC and Government roles), and concentrated within the Standing Committee of the Politburo, headed by [national] President and CPC General Secretary Hu Jintao. The Politburo Standing Committee also includes (in technical order of heirarchy) NPC Chairman Wu Bangguo, Premier Wen Jiabao, CPPCC Chairman Jia Qinglin, Li Changchun, Vice President Xi Jinping, Vice Premier Li Keqiang, CCDI Secretary He Guoqiand and Zhou Yongkang (former Minister of State Security). Within the top leadership, there are numerous factional affiliations based on age, background, education, family, training, experience and policy leaning. The CPC Congress in 2012 will see a transition from the current “fourth generation” leadership to the “fifth generation,” spearheaded by Xi Jinping and Li Keqiang. These two are representative of one of the factional splits along economic policy lines, Xi backed by those still supporting a focus on exports as a way to keep hard currency and technology flowing in to achieve a much more gradual evening of economic disparity in China, Li backed by those advocating more rapid shifts in China’s economic patterns from the export-dependent resource heavy model spawned in the late 1970s to one driven more on domestic consumption and services. That debate is also manifest in the coastal/interior inequalities, and a south/north split (northern China - Manchuria - being now a rustbelt after the collapse of its oil and heavy industry amid the rise of south China - Shanghai and Guangdong - light industry, technology, exports and banking.

The National People’s Congress (NPC), though still often freferred to in western media as a “rubber-stamp parliament,” has been gaining input and influence in shaping domestic policies and in raising discussions and even criticisms of policy ideas in circulation. When the NPC is not in session, its Standing Committee continues to operate and discuss/debate policy and legal proposals put forward by the Politburo. This often offers one of the first windows into key issues being discussed by China’s top leaders, and reveal some of the alternate policy ideas being circulated. 

The Chinese People’s Political Consultative Congress (CPPCC) is primarily an advisory body where old cadre are retired and ethnic minorities can show off their costumes at annual meetings. It serves little real function. 

Changes in leadership at the provincial or municipal level can ften be indicative of economic or political struggles at higher levels. This includes governors, mayors and local CPC Secretaries. The most significant to watch are usually those along the southeastern coast and one province inland from those, as well as Sichuan, and the municipalities of Beijing, Shanghai, Zhejiang, Guangzhou and Chongqing.
Economics:

China has seen years of double digit economic growth based on exports and foreign direct investment. The Chinese managed to weather the Asian economic crisis and succeeding US slumps, but have been hit hard by the current global slowdown. Internal debates over the viability and desirability of maintaining the export-focus while slowly altering the domestic economy or using quicker and more wrenching methods continue, but all look at it from the persepctive of the impact on the unity and security of the CPC as the single core leadership, and at the impact of economic policies on social stability. In fact, social stability is a major concern for the the leadership in determining economic policies. China sees frequent conflicting economic pronouncements, as well as leaked rumors of policy changes, usually about a week before the actual change occurs (this is particularly true for pricings of commodities and fuel, rebates, taxes, and for governemnt subsidies). 

Chinese economic statistics are nototiously suspect, but that doesnt mean they arent important. Employment numbers are relatively meaningless, but we should be watching for GDP growth (be very clear on the methodology China uses to calculate, it isnt comperable to US or Europe), exports and imports, electricity consumption, oil and gas imports, raw commodity imports (Iron, aluminum, copper and their components), industrial output, bank loan amounts and the like. Also, we should be looking for signs of shifts in trade patterns, shifts in the contribution to GDP or economic activity by province (is there a movement of activity from the coast to the interior? a slowdown in a particular province or an acceleration in another), and any reports on economically-motivated public unrest (a bit more on that in the security section). 

China has been on a binge buying spree around the world, exploiting the availability of credit in China to buy up or invest in companies and commodity producers around the world. This is something to watch - the rumors of bids, active buying tours, completed deals and deals falling through (including nationalistic backlashes in the countries where deals are being struck). The key industries to watch are energy, primary commodities and technology. 

There are multiple layers of security issues the Chinese leadership is concerned with. At the very basic level is the potential of social unrest, triggered by economic instability, corruption, environmental issues, or, perhaps even more troubling, political or religious rights. 

The second tier is potential domestic unrest triggered by ethnic movements, the two most immediate being the Xinjiang Uighur community (including the East Timor Islamic Movement [ETIM], also known as the Turkistan Islamic Party [TIP] - more at http://www.stratfor.com/weekly/china_and_enduring_uighurs and a three-part series beginning at http://www.stratfor.com/analysis/china_shining_spotlight_etim) and the Tibetan movements, both domestic and abroad. China also has some concern about other ethnic problems spilling over its borders, including the struggle in Myanmar, the spread of Islamist militancy from Central Asia and Afghanistan, and to a lesser extent social problems with its ethnic Korean population in the northeast. 

The next ring of concern for China is the neighboring countries. China has resolved most of its land border disputes, aside from the Indian border (which is growing more problematic after New Delhi’s defense reviews determined that India was not prepared should China carry out a surprise attack). But its maritime border is another story. China has recently launched the Department of Boundary and Maritime Affairs, which will focus on enhancing and actualizing Beijing’s claims on the whole of the South China Sea (http://www.stratfor.com/analysis/20090512_china_beijing_strengthens_its_claims_south_china_sea). Chinese maritime activity is growing more assertive, and confrontations with neighbors and the United States Navy will likely increase. Watch particularly close for any submarine and anti-submarine acrtivity. In addition, however, Beijing is likely to be working toward attempting bilateral and multilateral arrangements to explore the South China Sea floor. 

Want to watch for deployments, acquisition, shipbuilding programs but also shifts in training, doctrine and personnel. All developments are worth noting. Watch for both traditional, conventional capabilities (e.g. underway replenishment) as well as asymmetric, unconventional capabilities (e.g. the development of anti-ship ballistic missiles).

In a broader sense, the Chinese military is well advanced in a decades-long process of fundamental reform and modernization. We need to be noting and tracking these efforts – not just the buying and developing of modern weapons but the shifts in training, strategy, tactics, doctrine, personnel issues.

One of the key Chinese concepts is 'informationalization' a blanket concept for 'wiring' its forces with command, control, communications and intelligence surveillance and reconnaissance capabilities.

Finally, China deals with several international-sort of problems, from its East and South China Sea policies butting up against Japan and the other states along the boundary of the seas to its Taiwan policies (look for any sign that Hu Jintao as CPC Secretary General may arrange a meeting with Taiwan President Ma, who is going to be chair of the KMT, allowing for “party-to-party” dialogue between the two presidents) to its mixed dealings with North Korea’s nuclear program. In addition, Chinese projects overseas were, at least briefly, becoming targets of local militants and others. Lets see the reactions on the ground as China takes a more active role internationally, and evolutions of China’s security response. 

The United States is the primary focus of China’s international attention, and is likely to remain so for some time. Beijing is both trying to cooperate with Washington to take a role as a global partner/equal, and hedge to provide defense against any potnetial political, economic or military confrontation with the United States. 

In the Asia-Pacific region, where China is establishing itself as the regional power (challenging Japan), Beijing has a two-part strategy - intra-Asian cooperation to reduce US influence, and a second track of Asia-US dialogue to undercut Washington’s ability to exploit bilateral relations in Asia to contain China. Beijing is obsessed with the prospect of the United States creating an alliance ring around China to “contain” the rise of China. 

China sees multilateral instiututions, such as the United Nations, as entities that can temper U.S. unilateral power (even if it cant directly challenge or replace the USA). In most cases, the norm is for Beijing to side with multilateral rules and regulations and try to coax Washington to follow along and accept the constraints the multilateral institutions impose. At the same time, Beijing is working to gain greater involvement in the operations of multilateral institutions, to better shape their focus. Also watch for efforts by Beijing to redefine international legal norms. The best example of this is it worknig to shift the understanding of certain concepts in the U.N. Convention on the Law of the Sea in order to make it more difficult for U.S. Navy operations near its shores.

The Chinese-Russian relations is complex, and I’m sure the Eurasia team will cover it in part as well in their guidance document. There is the longrunning perception that China’s massive population bordering Russia’s sparsley populated but resource rich far east is a sure formula for a creeping (or not-so-creeping) invasion of the Russian wasteland. History doesnt seem to back this, but the concern does shape relations. The two main issues that Russia and China deal with are energy (and the interminable delays in Russian energy supplies to China) and Central Asia (an issue of energy, resources and regional influence). 

SOUTH KOREA
Politics:

South Korean politics are convoluted and contentious. After decades of autocratic military-backed rule, the country finally held its first truly democratic election in 1997, bringing Kim Dae Jung to power (though there was an election five years earlier btringing Kim Young Sam to power, in that case the outgoing military-backed clique manipulated funding to ensure Kim YS, who had joined their party, won against his competitors). But the South Korean Constitution, to avoid any further chance of a return to autocracy, set up a single-term presidency that serves alongside a parliamentary system with a Prime Minister. The president can only serve a single, five-year term, and there is no Vice president, so continuity is effectively eliminated from the system. The current pattern, then, sees a President elected, taking about one or two years to become truly established and battle past the parliamentary barriers, have a year to rule, then go into decline as a lame duck, usually stuck with a parliament that has elected the opposition to lead. 

South Korea’s democracy is young and volatile. It isnt going away, but after decades of only knowing how to oppose something, the koreans now have a tough time with open political debate, and instead quickly shift to wideranging street protests, strikes, and parliamentary blockades. The recent suicide of former President Roh Moo Hyun, who was accused of corruption, has enflamed protests against President Lee Myung Bak and sparked no end of conspiracy theories about how, actively or incidentally, the current government had Roh killed. 

There is also a geographic split to South Korean politics (though this is finally starting to soften), with the southwest traditionally being the “liberal” base, and stronger authoritarian and industrial power being around Seoul and down the east coast to Pusan. 

The currently ruling Grand National Party (Hannaradang) is normally considered more conservative, closer to the United States, a stronger supporter of national defense an the US defense alliance and less likely to appease North Korea. 

There are other pillars of power in South Korea, including the continued influence of teh Chaebol (major family-run business conglomerates like Samsung and Hyundai), the media (particularly the big three pro-govermment papers Chosun Ilbo, DongA Ilbo and JoongAng Ilbo) and labor. 

Watch for street protests (large scale), crackdowns on “political freedoms” like instagatory internet groups and street rallies, and debates over key policies, particularly domestic economic development (and the national canal plans), North Korean policies and the US defense alliance.
Economics:

South Korea’s economic development is a classic case of an Asian tiger rags-to-riches story. In the 1960s, North Korea, backed by Soviet industrialization, was far ahead of the South economically. Against US advice to focus on labor-intensive light industry for export, then President Park Chang Hee in the 1970s launched a crash heavy industrialization program for South Korea, working directly with the Chaebol and bringing South Korea racing past the North in a decade. 

South Korea’s economy is fairly quick to shift direction, and still can be shaped by govenremnt involvement fairly quickly in times of crisis. In addition, the movement of South Korean investments in Asia has often been a signal of what would come later - so if they go into a country failry heavily, it often meant others would follow a year or two later. If they bailed, others would a year or two later. 

South Korea is heavily export dependent, with major exports including automobiles, technology and shipbuilding. Any major shifts in their markets for these goods needs watched. 

South Korea is always wary of competition from Japan and China, though it also works closely with the two economically. 
Security:

North Korea represents the bulk of South Korea’s security concerns. The status of the US-Korea defense alliance is always one to watch. There is a planned transition of power in the relationship, as well as movement of US bases within South Korea. Watch the discussions and status of this. The occassional misconduct of US soldiers can create rapid protests.  Keep an eye on indigenous South Korean military developments and purchases of new equipment. Seoul is looking far beyond DPRK, and is looking at longer-range technologies like Global Hawk UAVs. Watch strategic capabilities particularly closely. Watch the development of South Korea’s navy closely, as well as the emerging South Korean space program (the first launch is set for late July). 

South Korea has expanded its international reach via its corporations and more recently its energy companies. The Six Party process still takes up a lot of talking time (even though it is largely defunct). SOuth Korea maintains a cautious balance between the USA, Japan and China. Traditionally, Korea is squeezed between China and Japan, so ROK wants to keep the US as a buffer between those two for a while into the future.