By Jennifer Min
In the 19th century, Europe was in charge; in the 20th, it was the United States. Now, with the rise of China, it appears that the time has come for Asia to steer the global economy. Although it’s true that China is driving the economy in Asia, and indeed the world, China is not synonymous with Asia. The wider Asia region is taking centre stage in the world economy in its own right.
Firstly, though, let’s acknowledge China for what it is. As the second-largest economy in the world (in US dollars), China is an economic behemoth. In fact, it already overtook the United States to become the world’s biggest economy in 2016 if we’re speaking in PPP terms .
The economic stats for Asia as a whole are even more impressive. Asia’s economies, as defined by the United Nations Conference on Trade and Development (UNCTAD), were on track to become larger than the rest of the world and home to half of the world’s middle class by 2020 . They now also represent two-thirds of global economic growth .
China is but one piece in the Asia puzzle – albeit a big one. It makes up only one-third of Asia’s population and less than half of Asia’s GDP. From an economic perspective, Asia can be split into four groups: “Advanced Asia”, China, “Emerging Asia” and “Frontier Asia and India” . You can track the rise of Asia in real time simply by looking at each of the “four Asias”. Japan and South Korea, which belong to “Advanced Asia”, were the first Asian countries to climb up to the top of the global economic ladder. China is catching up, and now Emerging Asia – largely South-East Asian nations – along with Frontier Asia and India are making their way up, too.
Not only are the “four Asias” at different economic stages, but they also lie all along the political spectrum and have diverse cultures. This is especially the case in South-East Asia, where countries range from Vietnam, a communist state, to Indonesia, a democratic and largely Muslim nation. For all their differences, most South-East Asian economies have followed a similar growth trajectory since the 1990s , which makes for an interesting case study in international economics.
There isn’t a single explanation for Asia’s remarkable growth. Experts point to a mix of economic openness, high savings rates, large investments in human and physical capital, and sound macroeconomic policies .
Looking ahead, Asia has much to offer in the tech revolution. It already accounts for half of the world’s internet users and nearly half of global investment in start-ups . In the renewable energy sector, it has the largest share of installed renewable capacity at 45%, compared with Europe’s 25% and North America’s 16%. It is expected to generate 43% of energy demand by 2040; Australia should smell opportunity here. E-commerce and fintech are the other areas where Asia’s presence is growing rapidly .
All of the above are based on evidence that emerged right before COVID-19 struck. If we’ve learned anything from 2020, it’s that we don’t know what tomorrow will bring. But overall, the Asia-Pacific region has been handling the pandemic relatively better than anywhere else . We know that health and the economy go hand in hand. If Asia keeps things up, it may return to, or even accelerate beyond, its pre-COVID levels of economic growth. Its economy may get an extra kick from the world’s largest free trade agreement – the Regional Comprehensive Economic Partnership (RCEP) – which was signed by Australia and 14 other Asia-Pacific countries late last year. Even if Asia doesn’t return to pre-COVID trajectories, there’s no doubt that its influence in the international space will continue to grow. Of course, economic growth shouldn’t be the be-all and end-all – that’s another thing we should take away from the pandemic. Perhaps, then, Asia’s post-COVID recovery will present an opportunity to rechart the course of our global economy for the better.
Asia has arrived at a crossroads where it is being pulled in all directions by competing forces. The path it chooses will shape not only its own future, but the future of the world. As one of Asia’s closest neighbours, Australia should take note: if the Asian Century hadn’t already begun, it is now well and truly underway.
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