What was the top Asia story of 2010? My colleagues, Liz and Adam, posted their own "top ten" list last week. I hate to disagree with them, but, for me, the top story—actually, the top three stories—were all about economics.
My latest “DC Diary” column is out in India’s financial newspaper, the Business Standard, and I try to make this case. The column offers a look-back at Asian economies in 2010 with a preview of some of what may be to come in 2011.
My bottom line is this: For two generations, much of Asia relied on global demand to power its growth. But as the world economy claws its way back from crisis, others are looking to Asia to step up and lead.
And that, to my mind, was the top Asia story of 2010.
My top three? Here they are:
1. Asia consolidated its role as the essential player driving global recovery. Developing Asia, including China, India, and five major ASEAN nations maintained or exceeded 6.5 per cent economic growth in 2008 and 2009, a stark contrast to the advanced economies’ collective negative growth over the same period. Indeed, while the advanced economies are predicted to muster 2.1 per cent growth in 2010, this will be easily outstripped by developing Asia’s 8.4 per cent economic growth for the year.
2. Chinese demand now powers much of Asia’s growth. Just consider South Korea: Long one of Asia’s best performers, Korea’s economy contracted by 5.6 per cent in the fourth quarter of 2008. Yet it bounced back in 2010, with IMF projections reaching 6.1 per cent growth for the year, on the back of strong domestic, Chinese, Indian, and emerging market demand for Korean products. In fact, demand in China and Asia insulated South Korea’s economy somewhat from slowdowns in the U.S. and Europe. So persistent worries in Seoul about the export sector are as much about weakening demand in China, where growth is moderating, as they are about weakness in traditional markets.
3. Asians continued to forge trade agreements and investment arrangements, often on a regional basis. By contrast, the U.S. dithered until the eleventh hour on its free trade agreement with Seoul. One question for Washington will be whether—and how quickly—Washington gets back into the trade game in 2011. And here’s why: Liz and Adam argue that America “is back,” in large part because its role as a security provider in Asia was reinforced in 2010. For my part, I don’t think America ever went away—certainly not as a provider of security-related public goods. But America could fade strategically in Asia if isn’t equally committed to economic leadership.
The business of Asia is still business, so economic and security policies increasingly collide. In 2011, Asian countries will strengthen defense and political coordination with the U.S. (and each other) as a hedge against Beijing’s expanding strategic weight. But Asians are increasingly responsible for their own growth—and for much of the world’s too.
That’s just not a position that’s sustainable for the U.S. The weaker America’s fiscal and economic position—indeed, the weaker its commitment to be an economic and trading leader in Asia—the harder it will be to adapt to these new dynamics and assure U.S. interests.