Embracing the Asian Century
After the global financial crisis in 2008, Asia grew at more than 6 per cent each year, outperforming a troubled world. Not just East Asia moreover, but also South Asia, South-east Asia, Africa and Latin America. While the United States and Europe floundered, the gravity defying feat substantiated the idea of Asia’s rise to close the gap with developed economies. Now, gravity seems to be catching up with Asians, Africans, and Latin Americans.
In the Asian Century, the triumphal regions of Asia, Africa and Latin America are expected to thrive economically but will face the immense challenges of poverty, burgeoning populations, vast slums, housing demolitions and natural disasters. The rise of Asian economies over the last 50 years – which started with Japan in the 1950s and then spread to Korea, Taiwan and Singapore, and later to the rest of Southeast Asia, with China and India taking the lead since the 1980s – has been mainly a story of production. With the notable exception of India, Asia’s rising prosperity has been largely driven by an export-oriented economic model. Asia has been the world’s biggest factory, a gigantic, increasingly integrated production machine churning out everything from toys, garments and shoes to electronics, engineering goods and automobiles.
For the last half century the West and, above all, the United States, has voraciously consumed what Asia has produced. In the process, Asian countries have almost uninterruptedly run trade and current account surpluses. America, by contrast, has run deficits that have ballooned in recent years. Between 2003 and 2008, for instance the US current account deficit averaged US$700 billion, equal to around five percent of GDP. Almost half of the US deficit was with the countries of East Asia. In short, America has been the main consumption engine and Asia the main production engine for the global economy.
New generation of economic dynamos, provides strategic creation of new cities of 120 new cities in China (100), India (13), and Latin America (8).
But this dynamic is now changing. Asia’s growing prosperity, especially since the 1980s, when the Chinese economy started to take off, has been a major impetus for this change. Asia’s pro-export policies – essentially low wages and cheap currencies – are becoming increasingly obsolete and unsuitable. This has become increasingly evident after the global financial crisis of 2008/09.