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Asia Rising: Quantifying the Asian Century

 

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The “Asian Century” has been a long-time dawning.  First referenced in 1988 by Chinese leader Deng Xiaoping in a meeting with Indian prime minister Rajiv Gandhi, the intervening years have been tumultuous, witnessing the collapse of the Soviet Union, the US’s ascendance to hyperpower status, 9-11, the global financial crisis and the weakening of the global liberal world order.[1]  Through this period, however, Asia has risen (more or less steadily), gradually shifting the world’s centre of economic, political and potentially military gravity towards the East.  Following the initial success of Japan and the Asian Tigers in the late 20th Century, China, and now India, have in the early 21st Century established themselves as the two fastest growing major economies in the world.  Both countries, given their absolute scale and high growth rates, are today exerting an increasing amount of economic and geopolitical influence globally.  More recently, a series of “newer” developing Asian economies like Indonesia, the Philippines, Vietnam and Thailand, are stepping into their predecessors’ footprints, delivering high economic growth and development rates.  The continent accounts for more than 50% of the world’s population and is home to almost half of the world’s middle class.   Moreover, the region is a global engine for consumption, the world’s investment and trade destination of choice, and is playing an increasingly important role in matters of global geopolitics and strategy.  This month’s Sign of the Times focuses on global shifts that Asia’s growth promises to deliver during the 21st Century, keeping it simple, using a series of charts to demonstrate Asia’s growing weight in demographics, economics and global influence.  Recognising, however, that while the long-term direction of growth appears to be fixed its trajectory is by no means a certainty; political strategies and rivalry not only within Asia but across continents can change these trajectories.  Asia’s leaders will also need to focus their energies on solving a series of challenges and issues that have the potential to hold back the continent, and by extension the world.

 

Defining the Asian Century: 15 Charts that Underline Asia’s Rise

For most of world history, Asia led the world in terms of technological development, military power and economic strength, generating an average 70% of gross world product between the years 0 and 1500 CE.  Against this backdrop, the Western dominance quote for most of world historyof the past centuries is an anomaly driven by a series of socio-political changes in Europe that drove economic, technological and political revolutions, and in particular the Industrial Revolution, which saw Asia’s share of world output fall below 60% in 1700 and to a low point of 15% in the middle of the last century.  During this period however, Asia’s share of the population never dipped below 55% however and has since increased to c.60%.[2]  This growth and scale provides Asia with a significant demographic advantage compared to the United States and Europe that will continue over the next thirty years.  There are of course significant differences between countries in Asia too – Japan and China’s demographics are not as strong as India’s, for example – but that is for another analysis in the future.  Asia’s demographic advantages should translate not just into economic growth, but also into increasing global influence across areas like investment, trade, capital markets and military power.  Accordingly, the unfolding Asian century is perhaps best understood through multiple lenses which shed light on the region’s growing importance across demographics, economics and socio-political influence.

 

A. Demographic Factors

 

1 Population

2 Consumption

3 Education

 

B. Economic Factors

4 GDP Asia

New 5 Investment

6 Input

 

C. Global Influence Factors

7 Hard Power

8 Trade and Investment

9 Capital Markets

 

The Next Three Decades: Key Considerations for Asia

As highlighted earlier, the trajectory of the Asian Century however is by no means set in stone.  In an earlier Sign of the Times, ‘China’s Path to World Leadership’,[4] the trajectory and the moves that would position China as the world leader were outline, as were the countermoves that would stop that from happening.  What is clear is that the scale and share of Asia of the world is increasing at a pace that cannot be contained (barring a catastrophic event).

Given the region’s diversity and complexity, and the various economic, political and social themes playing out around the world, the countries in the region will need to navigate multiple issues as they become more prosperous and bring to wield greater global influence.  Three challenges seem to stand above the many others:

1. Avoiding a Self-Harming Populist Revolution: Addressing Rising Income Inequality. Despite a c.60% improvement in per capita income levels over the last decade, the wealth gap in Asia is among the highest in the world.  In Vietnam, for example, the country’s richest individual earns more in one day than its poorest individual earns in a decade[5].  Similar patterns persist throughout the region, particularly among women, who earn between 70% and 90% lower than man across key Asian countries[6].

2. Avoiding a Regional Malthusian Crisis: Developing Sustainable Resource Consumption. Asian countries will need to balance economic growth and resource consumption. Resource demand will grow with rising prosperity levels, and intense global competition for the world’s finite natural resources (including energy, water and minerals) is driving global warming, higher pollution levels and an increase in natural disasters.  In Asia, in particular, access to natural resources is also shaping the region’s security dynamics (see China’s One Belt, One Road Initiative), requiring the development of integrated resource strategies by the major countries in the region.  

3. Not Succumbing to Autocracy as a Path to Growth: Promoting Freedom and Opportunity. As the world transitions to the Information Age, the more “command and control” industrial age model of economics and politics is becoming redundant and, fuelled by the internet and social media, populations are demanding freedoms.[7]  Governments in Asia will find it more and more difficult to strike a pact that trades-off economic growth and political and personal freedom, reversing a more than decade-long regional trend.  Of the 39 countries in the region, less than half are now considered ‘free’[8], with the remainder categorised as either “partially free” (33%) or “not free”.  Beyond enabling peace and stability, open and free societies promote the effective facilitation of transfer of goods, people and information[9], and therefore sustained growth, which are essential ingredients in the Information Age.

Key Conclusions

Asia’s rise of course is to some degree balanced by the West’s, particularly the US’s relative decline.  The 20th Century has been widely recognised to have been the American Century, beginning with either the end of the First Wold War, when the US overtook Europe as the main driver of global economic growth, or by some accounts at the end of the Second World War, when the US towered supreme in terms of both military and economic might.[10]  quote the demographicThe demographic, economic and political data suggests that the Asian Century has clearly begun and is rising to a critical point very rapidly.  However, it does not point to a change in global leadership, at least not in the near to medium-term. Beyond demographics and trade flows, the United States has secured its position of pre-eminence through a variety of other factors that define a modern ‘Open Society’ including the US dollars status as the global reserve currency, the liquidity and size of its financial markets, the diversification of its economy, its leadership in multi-lateral institutions, its entrepreneurship and innovation, its soft power leadership and its possession of the essential elements that create global giants dominating the Information Age that the world has entered.  These factors may well allow the US to maintain global superpower status long after headline metrics suggest its demotion to the status of a second tier of power.
The factors that create an ‘open society’ that underpins the Information Age also provide the list of priorities Asian countries, particularly India and China, will need to focus on if they are to leverage their attractive demographics and growth trajectories into positions of true global power and influence.  Given current trends and projections, the ‘Asian Century’ is set to be realised much faster than the west has imagined since it builds on the American Century.  It will ultimately be up to the major economies of Asia to determine whether it will be as peaceful and prosperous for the world as the American one has been.

 

 

India-China Rivalry| Asian Century | Demographics| Global Growth| | Superpower

 

1. Source: Xiaoping, Deng (1993). Deng Xiaoping Wenxuan (Selected Works of Deng Xiaoping). Vol. 3.  Interestingly Deng at the time was doubting the supposed inevitability of the Asian century occurring
2. Source: Angus Maddison, The World Economy: Historical Statistics
3. Asia’s share of global gross capital formation (a proxy for infrastructure investment) expected to increase from 2017 to 2050 in line with the region’s increase in share of global GDP
4. See the August 2018 Sign of the Times: China’s Path to World Leadership
5. Source: Forbes
6. Source: Oxfam
7. Source: See the March 2018 Sign of the Times: The Shape of the World to Come – Part III: The Path to a New World Order
8. Source: 2019 Freedom House Report
9. Please refer to GPC’s October 2015 Sign of the Times, “Does Democracy Drive Growth? Can China Succeed Without it and India Prosper Under It?”
10. Source: See the June 2012 Sign of the Times: American Power, Patterns of Rise and Decline