Asia now plays a central role in the global economy, but it wasn’t always this way. In the past 50 years, Asia’s combined GDP has grown from a relatively modest US $420 billion in 1969 to nearly US $30 trillion in 2019. A combination of active trade and direct foreign investment has contributed to this growth, leading Asia to now comprise one-third of the world’s total GDP.
Today nearly US $1.5 trillion of annual merchandise trade passes between Asia and Europe on a yearly basis. However, it’s not just the amount of trade that’s changed; the nature of the goods traded has also evolved. While raw materials like wood and rubber used to pass from Asian countries to Europe, electronics and clothing now account for a larger share of Asia’s exports.
And Asia’s economic significance isn’t limited to Europe. The United States is Asia’s largest trade partner. Many economists have dubbed the China-United States relationship as the most important bilateral relationship of the 21st century.
But how did we get here? You can look at economic booms in Japan and South Korea in the 1940s and 1950s as the starting point for Asia’s economic upturn. In Japan, a focus on industrialization following the war led to major multinational corporations taking the global stage. Brands like Sony, Toshiba, and Mitsubishi were just a few that made Japan a go-to region for popular exports including electronics and automobiles. Similarly, Samsung, LG, and Hyundai have played large roles in South Korea during its own economic ascendance.
In the 1970s, China joined in on this growth as the economic reforms of leader Deng Xiaoping introduced market principles into China’s economy. These reforms included opening up the country to foreign investment and encouraging entrepreneurship. Such reforms led to massive growth, with the Chinese GDP increasing by roughly 9.5 percent annually between 1978 and 2013. China’s rapid emergence has ended up setting a precedent for growth across all of Asia.
Other countries have followed suit in terms of opening up their economies and allowing for export-oriented growth. Singapore, Indonesia, and Vietnam are just a few that have increased their focus on manufacturing and encouraged greater entrepreneurship.
The establishment of global organizations such as the Association of Southeast Asian Nations (ASEAN) during this time has also helped promote trade within Asia as well as broaden participation in the global economy. For example, ASEAN countries' exports to the U.S. totaled US $185.8 billion in 2019, with top export categories including machinery and apparel, as well as agricultural products. The organization’s motto of “One Vision, One Identity, One Community” embodies its ethos that by working together, countries in Southeast Asia can lift each other up and grow side by side. This is important considering the economic disparity in the region, with the vast majority of wealth situated in East Asia.
The organization has been working over the years to unite Southeast Asia in global trade and investment, and sees 2020 as the year in which their collective’s initial aims come to fruition. More specifically, the ASEAN Vision 2020 asserts that by next year, the region will be “a Zone of Peace, Freedom and Neutrality” where sustainable and equitable growth will reign. The initiative's goals include greater economic integration, narrowed disparities in development between member nations, and a freer flow of goods and capital. To achieve them, ASEAN is hoping to fully implement the ASEAN Free Trade Area, promote small- and medium-sized enterprises, and accelerate the advancement of science and technology.
Yet Asia's wealth isn't only situated in the East. India has also seen major economic growth, starting with their 1991 reforms that made their economy more market-driven. These reforms led to yearly growth that rivaled others, even outpacing that of China in 2015. However, even as India's GDP grows, the country faces high unemployment rates and other structural challenges, leading some to believe that further reforms are needed. What is clear is that there is still massive upward potential in India, so the evolution of this giant economy and the ongoing opportunity it represents are significant, and will remain a force for many years to come.
Overall, the past 50 years have seen Asia become a massive player in terms of manufacturing and the export of goods. While China, Japan, South Korea, and India have led the charge in terms of making Asia a hub of economic activity, smaller Asian nations like Vietnam and Indonesia are also beginning to join their ranks as major players in global trade and investment. It’s worth watching how these trade relationships will evolve, and the starring role that Asia will play in global economic development over the next half of a century.