The Asianization of World Economy: Challenges and Prospect
Chen Dongxiao 22
Distinguished guests,
It’s my great honor to attend this CICA Business Forum at such a crucial moment. I would like to share with you three observations.
First, from a world-historical perspective, Asianization has been one of the most salient and consequential features of global economic development.
Geographically speaking, economic growth began to extend from Atlantic littoral states to the Pacific world after the end of the Second World War. In particular, the center of economic gravity has increasingly moved to the Pacific littoral countries since the end of the Cold War.
After nearly seven decades of development, especially the latest thirty years of fast growth, leading East Asian economies, for example, China, Japan, South Korea, and ASEAN, have all established their full-fledged industrial bases with vigorous regional industrial clusters. Compared with Latin America and Africa, East Asia is the only region where systematic industrialization has been fully achieved after the Second World War.
Entering the 21st century, a new round of international division of labor helped concentrate industrial chains within the region, accelerating the Asianization of global economic growth. Moreover, economic cooperation and regional integration prove to be rather resilient against a two-years-old pandemic and rising geopolitical tensions.
This Asian success story tells us that after a century of sea-based industrial civilization, the world may be on the cusp of a real Asian century.
Whatever we call it, “Asianization of the world economy” or “Asian century,” this new era should be better understood within a grand historical context. When Halford J. Mackinder published his famous article “The Geographical Pivot of History” in 1904, the world was undergoing a shift in terms of geographical economics, from Heartland theory to Sea Power theory. According to Mackinder, the web of railways running through Eurasia replaced camel and horse transportation, enabling economies on the Eurasian heartland to project its power toward outlying areas. His prediction, however, did not materialize in the century of sea-based industrial civilization, when the United States, blessed with a unique geographical advantage, projected its immense economic power across the Atlantic and Pacific, while “pivot areas” of Eurasia became marginalized as they were out of reach for maritime transportation.
But more than one hundred year later, today’s Eurasia, with its well-developed and sophisticated networks of railways, is proving how prescient Mackinder was. Rail lines that crisscross the continent are pushing forward the economic frontiers of Eurasia, helping create a new continent-wide geoeconomic space that is challenging the century-old predominance of maritime powers since the Age of Exploration. The accessibility, affordability, and reach of rail networks, along with secure and resilient industry chains, are reshuffling the division of labor at both ends of Eurasia, turning the vast inland area into new production and market spaces.
This process also shows that Asia’s dependence on outside players for economic growth and national security over the past decades is also changing. On the one hand, this longtime dependence has been a hurdle for the formation of a collective Asian identity. As the East continues to rise and the West’s decline seems more obvious, the changing international economic and political landscape marked by China’s spectacular growth, is prompting a rethink by Asian societies of their economic orientation.
On the other hand, the neoliberalism that prevailed in the Eurasian inland after the disintegration of the Soviet Union has under-delivered on its promise of development through integration into Western markets. After nearly thirty years of experiment, the “Western anchor” of Asian economies is increasingly losing its appeal. The raging Russia-Ukraine conflict has pushing those inland nations of Eurasia dependent on the West for security deeper in a dilemma, forcing them to adopt more neutral and independent security measures amid growing political and military competition among great powers. Local actors increasingly recognize the necessity of confidence-building measures in political and economic realms to improve their ability to shape regional economic and security landscape.
My second observation is that there is a growing risk of Asian economic split.
On the one hand, rising political and economic tensions are threatening to sever Asian industry chains.A number of policy measures initiated by Washington over the recent years—from a revived QUAD to Biden’s Build Back Better World, from the Indo-Pacific Economic Framework and G-7’s upgrading to the Summit for Democracy—aim to use U.S. levers in trade, finance, energy, and development, to sow greater division and discord in Asia by reorganizing Asian and global supply chains in the name of economic security.
On the other hand, the Russia-Ukraine conflict threatens the economic security of neighboring Asian countries, increasing the risk of further industry chain disruptions. The conflict is sending shock waves throughout the emerging markets and developing world, creating supply chain disorder, pushing up energy and food prices, and causing financial fluctuations. According to the World Bank’s latest estimate, part of Europe, Central Asia, and many CICA members—is expected to contract by 2.9 percent economically this year, 5.9 percent lower than the pre-war forecast. Forecasts for East Asia and South Asia, another two net losers, have also been lowered by 0.7 percent and 0.8 percent respectively, with economically distressed Sri Lanka and Pakistan threatened by sovereign default.
In contrast, the total GDP of the Middle East is projected to grow by 5.3 percent, 0.9 percent higher than previous forecast, due to soaring energy prices. But this war dividend is unsustainable. As the U.S. Federal Reserve Board continues to raise interest rates, vulnerabilities in bulk commodity prices and global financial markets will be further exposed, aggravating the woes of Asian countries that lack economic diversity. The war has left Russia further isolated economically, widening the risk exposure for Asian industry chains.
My third observation is that greater solidarity and cooperation are strategic imperative for Asian countries.
To begin with, Asian nations must jointly counter external actors’ wedge strategies by promoting further regional integration as a boost to global development.
Asia’s development should be based on both ends of the Eurasian geographical space where industry chains originate, realize the in-depth development of industrial networks, and establish a stable division of labor within in the continent.
Industrial networks are the foundation of real independent, autonomous, and self-reliant development of Asia. From the perspective of systems theory, the more sophisticated a system is, the more stable and resilient it will be. The United States and West is promoting an industry chain strategy based on security and political considerations. The transregional projection of industry chain power must involve new forms of industry chain power and diffusion of resources. Therefore, competition among regional development strategies doesn’t mean mutually-exclusive industry chains.
Effective economic circulation within Asia requires division and collaboration among diverse sectors and economic functional nodes. In this sense, competitive programs pushed by the West to reorganize industry chains may give birth to a new complementary relationship with existing regional economic patterns.
Then, strengthening CICA’s role in promoting Asian security and independent development. The vast Asian continent is marked by cultural diversity and economic divergence resulted from lack of mutual trust, the very reason that Asia lacks behind other parts of the world in terms of regional integration.
Since the colonial age, Asian nations have long been the victim of outside interference that has eroded Asia’s homegrown political culture and social values. Even today, the region is still not free from great power interventions that have often resulted color revolutions and regime changes.
The unique role of CICA in promoting mutual trust and common security should be further enhanced. At the same time, Asian values and independent security should be upheld while cultural diversity is respected. Asian development must meet the aspirations of its people as the true master of their own fate.
Last but not least, seizing on the Global Development Initiative to increase practical development cooperation across Asia.Chinese President Xi Jinping put forward the initiative at the General Debate of the 76th session of the UN General Assembly on September 21, 2021. On January 20, 2022, China’s Permanent Mission to the United Nations launched the Group of Friends of the Global Development Initiative (GDI), an event that attracted more than twenty leaders of UN agencies and representatives from over 100 countries, showcasing Beijing’s determination to uphold a development-first approach and true multilateralism.
Focusing on people-centered, inclusive, and sustainable development, the initiative lays out eight priority areas for cooperation, namely, poverty alleviation, food security, Covid-19 response and vaccines, development financing, climate change and green development, industrialization, digital economy, and connectivity. The initiative could serve as the foundation for both practical cooperation and economic security among Asian nations.
Thank you very much.
