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Progress of Asian Economic Integration

BFA Progress of Asian Economic Integration Annual Report 2015

Time:2015-03-24 22:51:20    Views:6147353    Origin:Boao Forum for Asia

BFA Progress of Asian Economic Integration Annual Report 2015

On March 17,2015,Boao Forum for Asia (BFA) Aisa Economic Integration Report 2015 was released in Beijing at a press conference held by the BFA Secretariat at the China World Summit Wing in Beijing.

Asia’s future integration is facing greater uncertainty. The concern expressed in last year’s report over Asia’s economic growth slowdown seems to be becoming more and more a reality. The once shining halo of “Asia Miracle” appears to be looking dimmer and dimmer.

In 2013, Asia’s commodity trade growth speed was neck and neck with the global average. Of it, the export growth speed was 2.4%, just slightly higher than 2.1% in 2012. In comparison, Asia’s import realization is more worrying, with its proportion to global amount remaining at the level in 2008. In addition, the growth speed of Asia’s service trade also lags behind the global average.

All signs indicate that Asia’s economic integration is also slowing down. In the finance sector, the financial openness of Asia’s major economies had no obvious change in 2013. In a relatively small scale, Asia’s internal financial market highly depends on external financial intermediaries such as those in the US and EU. Asia is being faced with even more outstanding challenges in trade integration and global production system. In 2013, Asia’s trade dependence lowered to 53.01% from 59.49% in 2012, its highest level in history. After experiencing the high-speed growth since 2000, Asia’s intermediate goods trade seems to have entered a low-growing phase. In 2013, its growth rate increased to 7% from 3% in 2012. The internal intermediate goods trade of Asia is the best indicator of the development of its internal international production network. Asia’s internal intermediate goods trade grew by 7% in 2011, 8% in 2012, and 5% in 2013, showing that Asia’s internal intermediate goods trade lacks the driving force for sustainable growth. In the intermediate goods trade in global value chain, Asia’s internal dependence has lowered to 60.1% from 61.1% in 2012, or has basically been in stagnancy. China has only been in a relatively favorable situation. As countries and regions like Japan, South Korea, Hong Kong of China, Indonesia, Malaysia, Singapore, Thailand, and Vietnam have further strengthened their intermediate goods trade with China, China’s status as the center of “Asia Factory” was further enhanced from 2011 to 2013.

For a long time, Asia with its huge market potentials has been the major attractive destination for foreign investment worldwide. However, its recent performance in drawing foreign investment has been disappointing. After the breakout of the global financial crisis in 2008, Asia apparently picked up speed in absorbing foreign investment. In 2008, Asia attracted 27% of the foreign investment made in the whole world. The figure reached 31.1% in 2011 and 37.7% in 2012, the highest point in history. By 2013, such rising tendency seemed no long to exist and the figure dropped to 34.8%. An interesting phenomenon emerges: ASEAN countries and China show similar features in attracting foreign investment. Both of them have experienced foreign investment influx after the financial crisis. From 2008 to 2012, the foreign investment absorbed by ASEAN countries had tripled and its proportion to global influx had increased from 2.8% to 8.8%. The figure with China has increased from 6% to 9.1%. In 2013, the foreign investment influx proportion of ASEAN countries and China decreased to 8.6% and 8.9%, respectively.

 

Direct foreign investment is one of the few fields Asia has made outstanding performance. In 2013, the direct foreign investment from Asia increased by 7.9%, compared with the world average of 4.8% during the same period. China is the “superstar” in this sector. In 2013, its foreign investment grew by 15% and such increase momentum continued into 2014, making its annual direct foreign investment reach 103.0 billion USD, up by 14.1%.

Confronting Asian economies are two major challenges: slowdown of the growing speed of the intra and inter-regional trade and risks with the international production network. While the growing speed of Asia’s export slows down, its import is even more disappointing. The traditional trade mode of Asia is highly dependent on the market demand in the US and EU. If such demand permanently slows down, Asia’s integrated production network, or rather, the development of the global value chain will surely undergo significant reshuffling. Therefore, Asian countries had better prepare for the changes.

Considering the huge production capacity of Asian countries, a key countermeasure to cope with the challenges will be expanding Asia’s internal market, which, especially the final product market, is still of a relatively small scale. Although the intra-Asia trade takes up more than 50% of its total trade volume, of it, the intermediate goods trade accounts for 43% and the final product trade only about 50%. If the market scale can be expanded, more intermediate investment and final products will be diverted from developed countries to this region and Asia may gain new growing power. To attain this goal, the policy makers in Asia should cooperate with each other to lower trade barriers.

Asia’s specialized production network is an important asset of Asian economies and even the global economy. Its stability deserves sufficient emphasis. During the past years, this report mainly focused on the policies on the production sector with a view to ensuring the smooth operation of the value chain, including the lowering of the customs on intermediate goods, liberalization in investment and service sectors, trade facilitation, competition policy, and protection of intellectual property rights. In fact, factors affecting demand need equal attention. Many Asian countries still set relatively high trade barriers against final products. Some countries enjoy continuous trade surplus from their current projects. If trade barriers can be reduced to a reasonable level, the products in global value chain will have new market and more investors will be attracted to choose the places close to the consumer markets as the production venues. It is believed that Asia can make a big difference in this field.

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