By WU LIN

SINCE the 1970s, the gravity of global economy has gradually shifted towards Asia. Compared with other regions, Asia has played an active and leading role in terms of output, trade, and development. China’s reform and opening-up and its rapid development have provided a continuous driving force for Asia’s economic development and led Asia to become the region with the most economic vigor and development potential in the world today.

Asian Economies Warm up

Although two international financial crises after the end of the Cold War hit the Asian economy, steady economic growth in developed economies such as the United States, Japan, and Europe led to a recovery in global trade in recent years. Besides, emerging markets such as China and India have continued to take the lead at a high speed, and Asian economies have gradually recovered.

Under the recent improvement of the Asian economy, however, lie many risks at the global and regional levels. In particular, as global free trade faces setbacks, trade conflicts have intensified, and the prospects of major Asian economies such as China, Japan, India, and ASEAN are variable, whether Asia can achieve sustainable development has become a matter of particular concern to the international community.

To answer these questions, it is necessary to pinpoint the crux of the problem, and start at the central part with an objective to find the key to solve the problem. This is akin to treating the illness: diagnosing the problems, and prescribing appropriate solutions.

On December 16, 2017, the Harmony Yungang, a luxury passenger ship, anchors at the Lianyungang Port in Jiangsu Province.

It must be acknowledged that the recent improvement of the Asian economy is closely related to the overall recovery of the global economy, thus the future of the Asian economy is also tied to changes in the global economy. However, one index alone cannot grasp the overall situation of the Asian economy. Reviewing the history of Asian economic development, we will clearly see that from the “flying geese regional economic model” dominated by Japan in the 1970s to the “regional integration model” led by China today, the driving force of Asian economic development does not mainly come from the global economy, but more from Asia’s highly diverse structural system in politics, economy, and culture.

Diversity is a “double-edged sword.” On the one hand, economies with different political systems and at different development stages can better play to their own advantages and carry out complementary cooperation in a diverse system. On the other hand, under the background of globalization among developed economies, middle-income economies and least developed countries, it is inevitable that they will face long-term issues such as uneven distribution of wealth and the gap between the rich and the poor. Coupled with the fact that the developed countries such as Japan and South Korea have long occupied the top of the regional economic chain and are unwilling to fundamentally change the existing “core-periphery” system, the status quo that most developing countries being at the bottom of the regional development pyramid is difficult to change. The hierarchy of the system directly determines the unfairness of economic distribution, the asymmetry of economic status, and the serious imbalance of development capacity. Therefore, in this sense, to realize the sustainable development of Asia as a whole, the priority is structural adjustments and systemic changes of the Asian economy itself. On this basis, we should promote Asia’s overall integration of openness and inclusiveness through cooperation led by major regional countries, and escalate the overall development level of Asian countries.

Change the Asian Economic Pattern

The transformation of the regional economic development system in Asia stems from the shift in the economic strength of China and Japan, and is backed by the process of Asian regional integration that China has actively led. China’s Belt and Road Initiative has boosted systematic innovation and transformation in the region.

In 2010, China’s GDP exceeded that of Japan for the first time, and the country became Asia’s largest economy. This major shift of strength indicates a profound change in the regional economic structure. With rapid growth of economic strength and continuous deepening of opening-up, China has begun to actively lead the process of regional economic integration, supporting establishment of regional mechanisms and integration arrangements, such as Asia-Pacific Economic Cooperation (APEC) and Regional Comprehensive Economic Partnership (RCEP); contributing concepts of regional cooperation, such as an Asian community with a shared future and the new type of international relations centering on win-win cooperation; promoting the regional development system to be more open, equal, inclusive, and cooperative.

However, the change in the system is not always smooth. Advanced economies such as Japan and the United States have adopted a hedging scheme such as the Trans-Pacific Partnership Agreement (TPP) to balance the Chinese efforts and defend the traditional hierarchical regional economic structure. Against this backdrop, China has put forward the Belt and Road Initiative, focusing on developing relations with neighboring developing countries, raising the level of development in backward regions and developing economies, promoting balanced development and common prosperity.

The Guangzhou Nansha Free Trade Zone develops rapidly since it was established three years ago.

This obviously runs counter to the “G20 approach” that Western countries have been pursuing. The so-called “G20 approach” refers to developed countries adopting the form of a group to jointly decide on global and regional economic systems and their arrangements. Under this mode of governance, developing countries do not have the right to speak in terms of systematic changes, nor do they have equal rights to development, let alone achieving sustainable development. Therefore, from the perspective of the system, the systematic innovation guided by China’s Belt and Road Initiative is a vital opportunity to realize the adjustment and transformation of the Asian economic structure and overall sustainable development.

Now that global trade is recovering from the international financial crisis, the Asian economy is undergoing an overall recovery and advanced economies represented by the United States and Japan have achieved relatively stable growth. Although the growth rates of most emerging economies are still higher than those of most G20 developed countries, the overall growth pace has slowed down. The stable economic growth in developed countries and the serious development imbalance of emerging countries have further consolidated the regional economic structure in which the strong are still strong and the weak are still weak. Some people may ask whether solidification of the system will dilute the urgency and necessity of structural changes in Asian countries. The answer is no. On the contrary, the good economic prospects of advanced economies make us soberly aware that there is still a clear gap between developing countries, including China, and developed countries, and that there is an urgent need to reverse this disadvantage through domestic and regional structural changes.

Take China as an example; although its total economic aggregate is the highest in Asia, its comprehensive competitiveness index has not reached the top three. Some experts pointed out that China’s shortcoming lies in the imbalance and inadequacy of human capital and innovation capacity, social development, and infrastructures. As clearly stated in the report to the 19th National Congress of the Communist Party of China, China’s economy has been transitioning from a phase of rapid growth to a stage of high-quality development. This is a pivotal stage for transforming our growth model, improving our economic structure, and fostering new drivers of growth. It is imperative that we develop a modernized economy.

Whether it is based on the need to make up for domestic shortcomings, to optimize domestic and regional development structures, or borne out of the responsibility of a major country for achieving overall sustainable development in Asia and maintaining the overall vitality of the regional economy; China is poised to take an active and significant leading role in this respect.

Leading Asia to Sustainable Development

Today, China’s leading role in the Asian economic pattern is mainly reflected in: being an important engine of Asian economic growth, an active promoter of reform of the economic and financial governance system, a supporter of regional economic integration, a practitioner of poverty eradication and sustainable development, a powerful actor in responding to climate change, as well as an important maintainer of traditional and non-traditional security in the region.

However, with the current trend of anti-globalization and protectionism, the global economic recovery faces the risk of being offset by trade conflicts; the renewed push of developed economies to attract manufacturing industries has led to a reduction in Asian dividends from globalization; the overall economic stability growth momentum faces resistance; and regional cooperation has encountered bottlenecks. Against this background, the international community’s doubts about China have risen: Can China’s economy continue to develop? Does China have the ability and will to continue to serve as the engine of Asian economic growth, the promoter of systemic changes and regional integration, and the practitioner of sustainable development, and lead Asia towards sustainable development?

With regard to these queries, the Chinese government has provided a clear response: “In the past 40 years, China’s development has relied on reform and opening-up. China’s higher-quality development in the future still depends on reform and opening-up.” And it has clearly demonstrated its openness, confidence, inclusiveness, and cooperation to the international community.

As a keyword of China’s foreign strategy and global governance, “opening” not only indicates that China adopts a more transparent and law-based approach to further open up in the financial, manufacturing and service industries, protection of property rights, especially intellectual property rights, and expansion of imports. It also means that China will gradually transform itself from a “world factory” to a “world market.” “Opening” should be two-way. A more open and confident Chinese market will surely create a more open and inclusive Asian market, which will in turn push China towards a more open and transparent market. This is a process of positive interaction and mutual promotion, which is in line with the common interests of all countries in the region and the world.

In addition to “opening,” China should also spearhead inclusive growth in Asia to strengthen regional cooperation. “Inclusive growth” is a new development concept against the traditional “economic growth.” “Economic growth” simply refers to the growth of total economic volume, while “inclusive growth” covers broader social goals, from addressing the basic needs of the people, promoting employment, fairer income distribution, poverty eradication, balanced regional development and social equality, to protecting the ecological environment.

At present, major developing countries in Asia have achieved rapid economic growth and provided favorable conditions for regional countries to deepen cooperation, promote openness, and jointly create sustainable development prospects. The Organization for Economic Cooperation and Development (OECD) raised its forecast for Asia in its latest mid-term economic outlook report released on March 13. The forecast for developing countries is that, from 2018 to 2019, China’s growth rate will decline slightly, but it will still be maintained at about 6.5 percent; India’s growth rate will increase year by year and will remain at above seven percent; and ASEAN, the world’s sixth-largest economy in 2017, is projected to maintain strong momentum.

However, economic growth does not mean “inclusive growth.” The prevalent problem in Asian developing countries is that their economic growth is often accompanied by an ever-increasing income gap and other serious socio-economic problems, which have piled up and not been solved fundamentally over a long period of time. As a result, the short-term economic growth is often fragile and unsustainable.

Therefore, in the future, if China wants to play a greater leading role in regional inclusive growth, it must make itself stronger. Accelerating the transformation of domestic growth concepts and development models is the only way. What’s more, it should take the 2030 Agenda for Sustainable Development as the guide, formulate a regional roadmap for sustainable development, and use the Belt and Road Initiative and regional integration cooperation mechanisms to align strategies for sustainable development of regional countries, and strengthen inclusive cooperation in the areas of the people’s livelihood, society, and ecology. These efforts will help Asia move from an overall stable economic growth to open and inclusive sustainable development.  

DR. WU LIN is an assistant research fellow at the Institute of Asian Studies of China Foreign Affairs University.