Integration of dynamic Asian economies
.jpg?w=728)
By Dilip K. Das
Although the various sub-groups of Asian economies represent a varied mix of stages of development, they began integrating in an essentially market-driven or private sector-led manner some four decades ago. This process began to accelerate after the Plaza Accord (1985) and further after the early 1990s. Since this point in time, Asia saw an efflorescence of regionally based economic initiatives, which accelerated further after 2000. Asian economies are a good deal more productively integrated today than they were at the turn of the century.
The economic integration of the various sub-groups of the Asian economies was first de facto or private-sector driven. Their policy- or institution- or government-led integration is a relatively recent phenomenon. Trade and foreign direct investment (FDI) were the principal channels of regional integration. In addition, creation of special economic zones (SEZs), vertically integrated production networks and increased trade in parts, components and intermediate products were also instrumental in integrating them.
The emergence of Asia as a global growth hub is centered around China. The economic rise of other Asian economies was followed by the Chinese economies. Their interactive dynamics, symbiotic growth and regional integration were indubitable notable. Rapid growth in the outward-oriented Asian economies not only integrated them in a market-led manner but also transformed patterns of cooperation and competition in the region. During the last decade, China evolved as an important engine of growth for the region. Asian economic integration is essentially soft-open and largely non-institutionalized. It is flexible in nature and follows an incremental path. It was principally motivated by economic or geo-economic factors.
China played a vital role in turning the region into an economic growth pole of global consequence as well as in advancing soft-regionalism in Asia. As a large and open economy growing at double-digit pace, China played a defining role in Asia’s economic integration ― particularly during the post-Asian crisis period. Its WTO accession enhanced this role further. China was instrumental in promoting regional growth and integration in both de facto and de jure manner. China has become the driver of wide-ranging transformations in the regional economies through myriad of inter-linkages and inter-dependencies.
Integration of dynamic Asian economies was instrumental in Asia forging ahead at a rapid pace. Even in difficult periods of global financial and eurozone sovereign debt crises, Asia maintained the highest GDP growth rate in the world economy. Development in Asia has been projected to grow 6.7 percent in 2012 and China 7.8 percent. This performance is a great deal superior to that of the global economy (3.3 percent) and the advanced economies (1.3 percent) (IMF, 2012). It was made possible by better business opportunities as well as institutional cooperation in the region. Regional integration is one of the driving forces behind the relative strength of the Asian economy.
Integration of dynamic Asian economies is also responsible for the growing influence of Asia over the global business and economy. In the recent past Asia has been endeavoring to generate domestic demand and domestic demand-driven growth. To the extent Asian economies succeed they will have greater impact over the global economy. It is helping shape the contours of the global economy. It is one of the most significant events in the global economy during the contemporary period. The theme of Asia’s growing heft is attracting a great deal of scholarly interest. It is also of enormous direct consequence and value for the public policy mandarins and senior decision maker in the business world.
Until the last quarter of 2012, both the eurozone and the U.S. failed to put together credible medium-term plans to resolve the sovereign debt crisis and serious fiscal disorder, respectively. While the industrialized economies suffered from a real downside risk to growth, Asia was in a strong position to tackle headwinds from the unsettled global economy. Both recovery and recent growth in Asia was remarkable. As growth prospects in the other major regions of the global economy diminished since the global financial crisis (2007-09) and the so-called Great Recession, there was higher investment in Asia from both the regional players and the multinational corporations (MNCs) from the advanced industrial economies. Strong economic fundamentals of the regional economies would ensure consistent growth across a range of industries over the medium to longer term.
China and Japan, the two largest Asian economies ― also the second and third largest in the world ― have a special place in Asia. Of the two, China’s influence over the regional economy has been augmenting while that of Japan has been on the wane. There have been lasting consequences of Japan’s real estate and stock bubbles burst in the early 1990s. It has had two lost decades of insipid growth and weak job markets.
Large and small Chinese business enterprises conducting their businesses from different Asian bases are a force to reckon with in the Asian business world. These business houses have contributed a great deal to the continuing regional integration. Numerous scholars have predicted that the 21st century will be Asia’s century and that China will have a major role in Asia. It has emerged as a leader in this pivotal region of the global economy.
The author is professor of international economics and finance at SolBridge International School of Business, Woosong University in Daejeon.