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Amid the pandemic, Asia’s economic ascent continues

Jock Finlayson: Last year, some Western analysts speculated the pandemic would slow Asia’s – and particularly China’s – global ascent. That hasn’t happened.
Still climbing.

In the two decades leading to 2020, Asia became increasingly important within the global economy and gained more influence in shaping international politics. Because the COVID-19 virus originated in China and initially caused the biggest disruptions there, last year some Western analysts speculated that the pandemic would slow Asia’s – and particularly China’s – global ascent.

That hasn’t happened.

If anything, the pandemic has served to accelerate Asia’s return to the centre of the world’s economy, with China in the starring role. Last year, China was the only major economy to post positive GDP growth.

Moreover, compared to North America and Europe, many Asian countries have been relatively successful in managing the COVID-19 virus and limiting the human toll and the associated economic damage. Apart from China itself, this judgement can be applied to Japan, South Korea, Taiwan, Singapore, Vietnam, Australia, and New Zealand.

At the beginning of the millennium Asia represented 25% of the world economy. By 2019, its share had climbed to approximately 35%. According to a recent forecast by Bloomberg Economics, by mid-century Asia will account for more than half of global output and consumption, easily eclipsing North America and Europe. China is expected to overtake the United States as the world’s biggest economy by 2030.

At the heart of Asia’s steadily increasing economic clout is a dramatic expansion in the number of “middle class” consumers living in the region. The Brookings Institution has documented the shifting geographic distribution of people who it judges to be part of the global middle class, based on a broad definition of the term.

China is the key but not the only driver of the trend. Pre-COVID, China was adding about 60 million people annually to the ranks of the global middle class. Before the end of the decade, China is projected to be home to 1.2 billion middle class consumers, equal to ¼ of the worldwide total. Based on number-crunching by Brookings researchers, by 2020 China was already the number one jurisdiction for overall middle class spending, with Asia hosting four of the top seven countries on this metric (Table 1).

Recent shifts in the balance of global economic and political power – shifts that may receive additional impetus as a result of the COVID-19 shock – are important but not sudden; instead, they unfold gradually. Even with China’s extraordinary economic achievements, the United States remains the world’s largest economy; it also stands ahead of China on many indicators that scholars use to measure economic success (see Table 2).

Even so, China continues to make progress – in absolute terms, but also on a relative global basis – across a range of indicators that capture different aspects of prosperity, business influence, innovative capability, and political power. Looking ahead, we believe China’s ongoing rise will help to underpin and cement Asia’s expanding presence within the global economy. The world’s economic centre of gravity is moving inexorably east – toward Asia, and away from the Atlantic Ocean where it was located as recently as 2007.

This seemingly unstoppable trend suggests that Canada’s economic future increasingly will hinge on our ability to forge and strengthen trade, business, and people-to-people ties with Asian countries.

Jock Finlayson is the Business Council of British Columbia’s Executive Vice President