Ira Singh
Khabar Khabaron Ki,25 Nov’23
Asia’s economic landscape has undergone a monumental shift in recent decades, emerging as a powerhouse that significantly shapes the global economy. The region’s rapid industrialization, technological advancements, and economic policies have propelled it into a position of unprecedented influence.Over the past half-century Japan, South Korea, Taiwan and more recently China became bustling hubs for manufacturing goods, which they then exported to the rest of the world, especially the well-off West.Millions of Asians escaped poverty by making stuff; many grew prosperous. Now the region’s economic model is shifting again, with consequences for Asia and for the world.
Asia’s long manufacturing boom fostered a wave of trade integration. In 1990, 46% of Asian trade took place within the region. By 2021 that figure had risen to 58%, making it the most integrated continent after Europe. As Asia has become richer and its firms more muscular, investment flows are becoming more regional too.Over the past decade Asian firms have been enthusiastic investors in their own neighborhood. Foreign direct investment into Asia by other Asians has grown almost twice as quickly as that by Western investors.Much of it has come from rich and ageing South Korea as well as from China and has gone to poorer, younger places.As a result in 2021 Asians owned 59% of the stock of foreign direct investment in Asia (excluding the financial hubs of Hong Kong and Singapore),up from 48% in 2010.The West’s share meanwhile has fallen, according to recent reports.
What development finance is done in the region by America is done in large part through multilateral banks.Asian countries are bigger lenders ,and direct ones too,as per recent offical data.
Despite strong global headwinds and aggressive liquidity tightening by the central bank, the Indian economy is still accelerating.Speaking at ICFAI’s NJ Yasaswy memorial lecture in Bengaluru, the part time member of the Economic Advisory Council ,Axis Banks’ chief Economist Neelkanth Mishra, who is also the part-time chairman of UIDAI,said India is in a better position to handle global headwinds than its Asian rival China.Mishra credited this growth to an increase in export of modern services, higher investment in infrastructure and better penetration of basic amenities through the country. While India’s share in global services trade is 4.5%, we have done significantly better in the trade of modern services like remote work, taking up 8% of the market share, he said.
Despite being structurally sound, the Indian economy will still be facing a few headwinds in the future, he said. “The need to reduce the fiscal deficit, and higher repo rates will be a continuing issue against growth,” he added. He predicted a slowing of global growth in 2024, which would also hamper the country’s prospects with a fall in the demand for goods and services.
“The US Treasury Bonds’ 10 year yields are very likely to be high in the year to come. This would prompt Central Banks to buy up these bonds, leading to shortage of dollars across the world,” he said. The dollar availability across the world is at the worst level in 65 years, added.
Asian integration is likely to deepen.Newish trade agreements such as the Regional Comprehensive Economic Partnership have removed some of the barriers to commerce.As supply chains become still more complex, more cross-border investment in logistics will be needed, according to economists.Even where regional firms are scrambling to reduce their reliance on China,many are looking to set up factories in India or Vietnam instead.
Asia’s economic revolution is an ongoing narrative with profound implications for the world. Its transformative impact extends beyond economics, shaping politics, culture, and international relations. How countries navigate and collaborate with this evolving landscape will define the course of the global economy in the years to come.