This issue of the NBR Analysis examines two of Asia’s largest economies and their integration into the global marketplace and international institutions. The 1997 Asian financial crisis caused both China and South Korea to reassess the structure of their economies and subjected the Korean economy to unprecedented intervention by the International Monetary Fund and other international lenders. For each of these countries, economic reform is not an easy process, complicated by history, domestic politics, and pressures from abroad.

In the first essay, Gifford Combs, an independent investor specializing in Asia, examines the role of international financial assistance in preventing economic collapse in South Korea. The December 1997 effort has been heralded as a benchmark of cooperation among private and public sector lenders and governments and could serve as a model for the role that international capital can and should play in effecting stabilization following the reunification of North and South Korea. According to Mr. Combs, however, the post-crisis rebound of the South Korean economy has provided the illusion of restructuring and has enabled the country to avoid much needed real reform while decreasing the leverage of multilateral lenders to encourage change—a situation that does not bode well for the challenges the society will face if the Korean Peninsula is reunified. Mr. Combs concludes that although foreign governments and societies can encourage reform in South Korea through investment programs and policies, ultimately Koreans must restructure the Korean economy if they are to have a reasonable chance of absorbing the North.

In the second essay, Joseph Fewsmith, professor of international relations at Boston University and a specialist on China’s political economy, examines the complex political maneuvering behind China’s WTO agreement. The U.S. rejection of China’s surprising concessions for joining the World Trade Organization in April and the bombing of the Chinese Embassy in Belgrade in May raised the WTO issue from the already difficult arena of bureaucratic politics to the often brutal realm of elite politics. According to Professor Fewsmith, the November 15, 1999 agreement on China’s entry into the WTO will rank with President Nixon’s 1972 visit to Beijing and President Carter’s extension of diplomatic recognition to China as a major step in bringing China into world affairs. The agreement will burnish Jiang Zemin’s (and perhaps Zhu Rongji’s) leadership credentials, reinforce domestic reform, and lead China to play an increasingly constructive role in world affairs.