Economic Overview
Asia houses some of the largest economies in the world and is comprised of more than 4.4 billion people, making up 60% of the world population. Asia is the fastest-growing economic region in the world, the largest regional economy with a nominal GDP of US$18.5 trillion as of 2010. China’s socialist market economy is the world’s second largest economy and Asia’s largest, with a nominal GDP at an astounding US$10.36 trillion in 2014.
Asia has had some of the largest economic booms in history, starting from the 1950-1990 Japanese economic miracle—the 1961-1996 Miracle of the Han River in South Korea—and the 1978-2013 economic boom in China. In fact, China is the world’s fastest-growing major economy, with annual growth rates averaging 10% over the past 30 years.
The wealth of Asia highly differs between, and within, countries. This is attributed to vast differences in size, culture, environments, and government systems. The largest economies in Asia (not including the Middle East) in terms of GDP (PPP) are China, India, Japan, Indonesia, South Korea, Taiwan, Thailand, Malaysia, Philippines, Vietnam, and Singapore. The Chinese city, Hong Kong, has the twelfth highest GDP (PPP) in the region at US$397.5 billion in 2014. Wealth—in terms of GDP per capita—is greatest in the East Asian territories of Brunei, Hong Kong, Japan, Macau, Singapore, South Korea, and Taiwan.
Asia—with the exception of Hong Kong, Japan, Taiwan, South Korea, and Singapore—is currently experiencing quick growth and industrialization. China and India are on the forefront of the growth as they are the two fastest-growing major economies in the world. Most Asian economies depend on manufacturing and trade for growth. Over the past hundred years, Asia has had large trade surplus with the rest of the world and rapid economic growth, accumulating over US$4 trillion of foreign exchange reserves—over half of the world’s total.
In 2013, the economy of China experienced a significant slowdown in GDP growth, from 9-10% annual growth to around 7-8%, when there was a change in leadership (Hu-Wen Administration to Xi-Li Administration). This slowdown had a significant effect in some developing economies, Southeast Asia and India in particular. The Philippines were an exception, growing at rates at par with China from 2012-2013.
In September of 2013, China opened the Shanghai Free-Trade Zone to improve their economy. This free-trade zone allows international trade to be conducted with minimal restrictions and fewer customs duties, increasing the ease of foreign trade. The zone is tax-free for the first ten years and provides financial support that benefits overseas investments, intended to encourage foreign direct investment. Chinese businesses have since been able to obtain foreign loans at lower interest rates. The implementation of the Shanghai Free-Trade Zone appears to have been successful, as China remains the fastest-growing nation in 2015, according to the Bloomberg News Consensus Surveys.
Although there are large economic disparities in Asia, contributing to large tension in the region, smaller East Asian countries are experiencing economic growth. When you look away from the larger economies in Asia—such as China and Japan—you will see growth rates in 2014 between 1.6 to 5.6%, averaging around 4%. Despite recessions and sub-par growth in Europe and the US, East Asia (excluding China and Japan) is a net capital exporter at US$245 billion.
There are some concerns about the economy in the region. There is an enormous quantity of cheap labor, particularly in China and India, giving large work forces an economic advantage over other countries. However, the rising standard of living in this region will eventually lead to an economic slow-down. This slow-down isn’t too threatening. According to the World Bank, China may become the largest economy in the world between 2020 and 2030 while India may become the second largest world economy between 2030 and 2035.
According to economists, Asia will see dominating global growth in 2015. The Philippines is the second fastest-growing economy in the world thus far in 2015, only behind China. India, Indonesia, Malaysia, and Thailand are ranked the fastest-growing economies in the world—according to Bloomberg News Consensus Surveys. Taiwan, South Korea, and Singapore also made it into the top 20. Due to Asia’s steady growth, it will likely remain an investment hot-spot for businesses around the globe.
