Alex Vatanka writes:  President Hassan Rouhani’s recent trip to Turkmenistan cannot be dismissed as a one-off. Since coming to office in August 2013, the Rouhani administration has prioritized relations with the Muslim states of the former Soviet Union. Given the potential for economic ties and trade, Tehran’s aspirations are fully understandable.
Meanwhile, the Central Asian states are largely receptive. But for this latest momentum to gain enduring traction, Tehran has to be smart about its appeal to the Central Asians. For them, Iran is a very familiar civilization and a much-needed bridge to world markets. On the other hand, any attempt by Tehran to interject its Islamist ideology into relations will very likely give the famously cautious secular Central Asian governments reasons to once again pull away.

Rouhani has said that Iran and Turkmenistan have decided to increase trade from $3.7 billion to $60 billion per year in 10 years time. There was not much detail about how such a 16-fold increase can be achieved for two countries that each rely extensively on exporting oil and natural gas.

Rouhani and his counterpart, President Gurbanguly Berdimuhamedov, signed 17 cooperation agreements in political, economic and cultural fields as well as a pledge to collaborate in tackling environmental issues.  Both Iran and Turkmenistan are neighbors of warn-torn Afghanistan. Iranian-Turkmen cooperation about ways to prevent a spillover from Afghan instability and to combat the flow of Afghan drugs makes plenty of common sense. In that context.

In early December, Iran, Kazakhstan and Turkmenistan launched a much-awaited railway that will link Central Asia to Iran’s southern ports. The first cargo of Kazakh wheat has already been shipped through this new route. The new 930-kilometer (577-mile) rail link is promoted by Tehran as a critical part of a regional transit hub that Iran considers itself best suited to undertake. At the same time, geography alone makes Turkmenistan Iran’s inevitable “bridge to the rest of Central Asia,” a point made by a former Iranian ambassador to the region.

The Central Asian states are clearly open to more economic and infrastructural linkages with Iran. Much of the new infrastructure put in place since they gained independence in 1991 has been eastward orientated with the aim of linking up to the Chinese market. That has so far worked well but there is always a danger of overreliance on China. Russia, on the other hand, the traditional route for much of Central Asian oil and natural gas exports, is experiencing deep political and economic challenges thanks to its fallout with the West.

These security and economic realities facing Turkmenistan and the other Central Asian states are providing a new impetus for the Iranian option to be reconsidered. That Rouhani is committed to return Iran to the international mainstream economy, and is pushing ahead to resolve Tehran’s nuclear file with the international community, only encourages Central Asian confidence in looking for ways to work with Iran.

Andrew Sheng and Geng Xiao write: China’s leaders are taking action to support the shift to more sustainable growth models. The finance ministry has raised the central-government budget deficit from 1.8% of GDP in 2014 to as much as 2.7% in 2015, and will allow highly leveraged local governments to swap CN¥1 trillion ($161.1 billion) of debt maturing this year for bonds with lower interest rates.

Likewise, the People’s Bank of China (PBOC) has provided monetary support, gradually lowering interest rates and reserve requirements. Because wages are still rising, the inflation target for 2015 has been set at 3% – higher than the actual 2014 inflation of 2%, even though producer-price inflation has been negative for 36 months. The PBOC also has projected a stable exchange-rate environment for this year – despite the steep depreciation of the Japanese yen, the euro, and emerging-economy currencies against the dollar – thereby promoting global stability.

These policies reflect a remarkable determination to continue on the path of structural reform, despite strong headwinds from the deteriorating external environment and domestic structural adjustments. In short, China’s government seems to have a clear long-term vision.

The claimby some that China’s economic and political development is in jeopardy seems to ignore the country’s adaptive learning process, which shapes every economic, diplomatic, military, and social policy. This process – characterized by experimentation, assessment, and adjustment – emerged from the CCP’s military experience of the 1930s, was applied by Deng Xiaoping to his reform program in the 1980s, and has been refined by subsequent Chinese leaders. Because no economy had ever experienced such rapid growth on such a large scale, the only way to manage China’s development was, as Deng put it, to “cross the river by feeling the stones.”

Some experiments have had less clear results, making, say, a positive contribution to GDP growth, but also contributing to problems like excess industrial capacity, pollution, corruption, and the creation of ghost towns.  The mere fact that problems have emerged in no way suggests that China is headed for disaster; that would be the case only if these problems were allowed to persist.

China’s “new normal” needs to go beyond policies intended to sustain economic growth. Reforms must aim to bolster inclusivity, advance environmental sustainability, promote innovation, and boost competitiveness. And this is precisely the four-pronged approach that China’s leaders seem to be taking.

Indeed, from slashing coal consumption to address air pollution to plans for integrating information technologies with modern manufacturing, the government has shown time and again that it recognizes its reform imperatives. And, by remaining dogged in its efforts to root out official graft, it has demonstrated its will to do what is needed to ensure that China succeeds..

Market forces will benefit from the growth in households’ spending power. Indeed, continued real-wage growth is forcing inefficient industries that relied solely on cheap labor out of the market, while bolstering the competitiveness of producers that appeal to the evolving tastes of China’s increasingly potent consumers. To support this process, China is now implementing deposit insurance, for example.

At the same time, China is reforming its inefficient approval-based system of initial public offerings to one based on registrations. A more active and efficient IPO market will allow companies to meet their financing needs without bank intermediation – a step that is vital to helping firms eliminate their debt overhangs.

Despite the recent rebound, China’s stock-market capitalization amounts to only 40% of GDP, while banking assets total 266% of GDP. Meanwhile, only 10% of total social funding comes from the equity market.

Improved bankruptcy procedures for failed borrowers must be implemented.  Unless failed borrowers and projects exit the system quickly and smoothly, the market will be saddled with bad debt and incomplete projects, undermining its performance.

China has repeatedly proved its durability and adaptability. Now, it must do so yet again, by ensuring that its “new normal” is as stable, sustainable, and inclusive as possible.

Failure may be the mother of success – but only if one makes the effort to learn from it. Fortunately, China’s leaders seem intent on doing just that.