According to an Asian Development Bank (ADB) forecast – ‘Developing Asia’s Economic Outlook: April 2023’ — developing Asia which consists of 46 countries is likely to grow at 4.8%, in 2023 and 2024, as opposed to last year’s 4.2%. The recovery is being attributed to multiple factors. The most important is the removal of COVID-19 restrictions in China and re-opening of the country’s borders — post the COVID-19 pandemic. China’s economy is likely to grow at 5% in 2023. Excluding China, the rest of Asia will grow at 4.6%.
The ADB report also stated that China has the potential of growing at an even higher rate even though the country’s property sector is still “a point of concern”. During the Boao Forum also referred to as ‘Asia’s Davos — held at Hainan, China from March 28-31, 2023 — Chinese Premier Li Qiang said that China’s economy was firmly on a recovery path, pointing to the country’s economic performance in March 2023. He also said that China would continue with reforms and opening up. Of late, China has once again been pro-actively reaching out to international companies, and the China Development Forum (held last month in Beijing) was attended by top international business personalities including Tim Cook, CEO of Apple. While speaking to CEOs on the sidelines of the Forum, Li Qiang urged them to invest in China, and also said that: “China will open its door wider and wider.”
In addition to China’s economic recovery, ASEAN countries – especially Indonesia and Thailand — are likely to witness a recovery as a result of increased tourism and domestic demand. India is likely to grow at 6.4% in 2023, and 6.7% in 2024 as a result of robust economic demand.
A few points need to be borne in mind. First, conflict in Ukraine could lead to spiraling commodity prices which will impact the global economy significantly. It would be pertinent to point out that several Asian countries, especially India and Indonesia have been playing a pro-active role in seeking to end the conflict. Both countries have repeatedly flagged the impact of the Russia-Ukraine conflict on global supply chains of food and fertilizers.
Second, while the severity of COVID-19 has reduced, there is always the apprehension of a new variant raising its head and even with sub-variants of mild strains of covid19 a rise in cases does impact the economy and results in uncertainty and apprehension.
Third, a lot will depend upon the China-US relationship. Increased tensions between Beijing and Washington DC in recent years, arising out of the trade wars, as well as competition in the area of tech, have impacted Asia. ASEAN countries have had to strike a fine balance between Washington and Beijing. During the Boao Forum the Chinese Premier Li Qiang spoke against a new cold war in Asia, while Singapore PM, Lee Hsien Loong and Malaysian PM, Anwar Ibrahim warned against the perils of conflict between Washington and Beijing. Both leaders were critical not only of economic tensions between China and US, but also insular policies in the area of tech.
Even other ASEAN nations like Indonesia and Philippines will seek to walk a tightrope, though it may become difficult in case China becomes assertive on South China Sea. Here it would also be important to state that ASEAN countries — especially Vietnam, Indonesia, Philippines and Thailand — have been the preferred choice for not just Western, but also Asian companies seeking to shift from China.
India-China relations and Asia’s economic landscape
Another factor which is important in the context of Asia’s economic trajectory in the longer run is the relationship between China and India. While until a few years ago China and India, in spite of differences had managed to build robust economic relations, in the aftermath of skirmishes between the armies of both countries in 2020 along the Line of Actual Control (LAC) – ties have witnessed a clear downward spiral, though attempts have been made to reduce tensions. While trade between both countries has remained high, with the balance of trade in favour of China, India has sought to restrict Foreign Direct Investment (FDI) from China and like Western countries also sought to keep a close watch on the political background of entities, and is giving preference to investments in physical infrastructure vis-à-vis areas like tech. Like many other countries, India has also introduced policies to prevent opportunistic takeover of companies by Chinese firms.
It would be pertinent to point out that India has also emerged as an important alternative to China as there is talk of diversification of supply chains and as discussed earlier many Western companies are seeking to relocate from China. While India may have sought to follow a balanced foreign policy, when it comes to Russia, on China it has firmly aligned itself with the West. One strong reiteration of this point is India playing a pro-active role in Quad (which also consists of US, Australia and Japan).
India also did not join the China-led Regional Comprehensive Economic Partnership (RCEP) due to geopolitical tensions and the fact that it would have led to the Indian market being flooded with cheap Chinese goods. RCEP consists of China, Japan, South Korea Australia, New Zealand, ASEAN member states.
Russia has been trying to play a role in reducing tensions between India and China, though Chinese Foreign Ministry spokeswoman Mao Ning recently remarked, “As the international and regional landscape is facing profound and complex changes, we are ready to strengthen communication with the international community, including Russia and India, and send a positive signal to the world about defending true multilateralism and jointly responding to global challenges.”
In the imminent future, the possibility for a thaw between China and India is bleak, though both countries will find synergies in certain areas and work with each other on multilateral platforms.
It is true that Asia is likely to be a major engine of global growth. It remains to be seen whether Asia can cope with geopolitical challenges within the region as well as geopolitical turbulence at a global level.
[Image credit: Prime Minister’s Office, Government of India (GODL-India), via Wikimedia Commons]
The views and opinions expressed in this article are those of the author.
Tridivesh Singh Maini is a New Delhi based analyst interested in Punjab-Punjab linkages as well as Partition Studies. Maini co-authored ‘Humanity Amidst Insanity: Hope During and After the Indo-Pak Partition’ (New Delhi: UBSPD, 2008) with Tahir Malik and Ali Farooq Malik. He can be reached at [email protected].
