Why we can expect the return of the 'Asian Century' amid weak global economic forecasts

The ascent of China, India and Asia in the early 2000s sparked the imagination of an “Asian Century”, a prosperous age in which the world gravitates around the new economic powerhouses in the region.

Two decades later, this notion seems to have lost its lustre. The deteriorating global macroeconomic environment has cast a shadow on Asia’s export-oriented economies. The Organisation for Economic Co-operation and Development (OECD) has projected global average GDP growth to drop from 2.9% in 2023 to 2.7% in 2024, while OECD countries are estimated to achieve a growth rate of 1.4% in 2024 and 1.8% in 2025.

Although trade, travel and consumption have bounced back from the COVID-19 pandemic, the global economic outlook is tilted to the downside amid strained financial conditions, tightening regulatory environment, geopolitical tensions and international conflicts.

Within Asia, China’s economic slowdown, its “decoupling” from the US-led West, and the risk of war over Taiwan and the South China Sea have further dampened the region’s outlook.

Notwithstanding all these challenges, Asia will remain the motor of the global economy in the near future.

In the face of many domestic issues, India and China are still projected to see growth at 6% and 5% respectively. Indonesia, the largest economy in Southeast Asia, is set to achieve 5.2% growth. In the Middle East, Saudi Arabia is predicted to grow at 4.7% in 2025.

Awakened from its decades-long torpor, Japan is seeing its fastest price growth in more than 30 years. Indeed, despite some inherent demographic issues such as a shrinking population, Morgan Stanley and other investors such as Warren Buffet are bullish on Japan and believe that the country has “convincingly emerged from three decades of economic stagnation”.

According to the Economist Intelligence Unit, Asia as a whole will contribute to 60% of global real GDP growth in the coming year.

Asia’s resilience is the result of the steady growth and transformation of intraregional trade and investment. For instance, the region is leading the world in e-commerce, as manifested in the rise of new digital platforms including Temu, Lazada, Shopee and Tokopedia.

The sector’s boom coincides with the growth of Asia’s consumer class. In 2024, more than 50% of Asians will be middle class or above. Although most of them will remain lower middle class, their consumption aspirations, together with consumer preference for cheap goods in times of economic downturn, explain the success of these e-commerce platforms.

Moreover, the rise of new digital platforms in Southeast Asia will multiply and diversify regional supply chain networks. The rise of e-commerce also contributes to deepening digital financial connectivity in Asia.

The cross-border use of mobile payment platforms including WeChat, Alipay, Kakao Pay and Grab Pay, as well as the introduction of digital currency such as e-Renminbi and e-Rupee, will further facilitate cross-border travel, intraregional commerce and regional integration.

Although primary and low-tech products still make up a large portion of the regional value chain in Asia, the leading regional economies are actively investing in the development of hi-tech industries in Southeast Asia.

In the face of the United States’ export restrictions, China has turned to Singapore as a source for the import of chip-making equipment. Taiwan’s TSMC and South Korea’s Hana Micron, meanwhile, are also seeking to extend their production operations to Southeast Asia by building chip plants in Singapore and Vietnam.

Having attracted investment from BYD, Honda, Toyota, Hyundai and other companies, Thailand and Indonesia are emerging as regional centres for the manufacturing of electric vehicles.

The China-West decoupling and production diversification have, incidentally, contributed to regional industrial upgrading by promoting the growth of more disperse yet denser production networks of production.

This, in turn, will consolidate Asia’s position as an attractive designation for foreign direct investment (FDI). According to United Nations Conference on Trade and Development's World Investment Report 2023, FDI in Asia in 2022 accounted for about half of global inflows, which is around $662 billion.

The implementation of the Regional Comprehensive Economic Partnership (RCEP) will further facilitate the movement of capital, technology, goods and services within Asia.

Covering a third of the world’s population and the widening market access to 15 countries or more for the next two decades, RCEP addresses East Asia’s “noodle bowl effect” by consolidating existing trade and investment agreements into a unitary and comprehensive framework.

Injecting new impetus into China-Japan-Korea trilateral cooperation, this mega trade deal brings together these three important players since China joined the World Trade Organization (WTO) in late 2001.

There have been high hopes that further diplomatic and economic ties can be yielded, given the latest trilateral foreign minister meeting was held for the first time since the pandemic in November this year.

Most importantly, RCEP – and to a certain extent other regional projects such as the Belt and Road Initiative and ASEAN Community – serves to bridge the gap between developed and developing Asia.

With flexible entry and participation arrangements, it enables developing economies to benefit from the liberalisation of multilateral trade and investment.

As the world transitions from unipolarity to multipolarity, Asia sees the emergence of Western and non-Western-led political orders and systems of production, trade and finance.

As the values, norms and rules of these systems are not always compatible, strategic ambiguity and flexibility become a necessity. Co-existence in the future will require regional actors to practise strategic ambiguity and flexibility to manoeuvre across different orders and systems.

Fortunately, the practice of strategic ambiguity and flexibility is all too familiar to countries in Asia, as embodied most famously by the “ASEAN way” that is marked by respect for different value systems, informal diplomacy and consensus-based decision-making.

In the future, any actor that maintains the highest level of flexibility and openness will lead the next phase of Asian regionalism – one that is multiplex yet inclusive, informal yet enduring.

Countries that remain connected with multiple competing orders will play an even more prominent role in preserving international stability, keeping the threats of nationalism, geopolitical competition and ideological opposition at arm’s length.

Global cities such as Hong Kong, Seoul, Mumbai and the city-state of Singapore will not only remain regional hubs of high value-added services; they will also serve as “multi-plug / travel adapters” that can bridge different systems while soothing the tension between them.

In this world where the secure hegemonies that once defined the previous centuries are now absent, we are witnessing – to draw upon the words of Italian intellectual Antonio Gramsci – many “morbid symptoms” during this “interregnum” where “the old (order) is dying, a new one cannot be born”.

Nevertheless, Asia’s large and growing middle class, young and dynamic workforce, and ongoing investments in innovation and technology will further enhance the region’s resilience and long-term economic potential. This promises to usher in a world that is more multilateral, complex and intricate, one that is governed by a delicate equilibrium of power relations.