It is often said that this will be the Asian Century. Indeed, there is good reason to think that it will be; according to a 2010 International Monetary Fund report, Asia will account for over 40 percent of global GDP by 2030.
But in reality it is not so much Asia's Century as China’s. This is not because China will be the only large economy if rosy projections of Asia’s rise come to pass, but rather because whether these projections come to pass at all will largely depend on China. Indeed, China could upend (or facilitate) the Asian Century in at least two crucial ways.
The first is by rejecting the liberal regional order and seeking to replace it with one of its own. Such a desire would hardly be unreasonable– after all, the U.S. didn’t accept the prevailing European-dominated colonial order it rose to prominence within, either within the Western Hemisphere or globally.
But trying to reorient the regional order would seriously impede Asia's rise whether China was ultimately successful or not. That's because such a move would be fiercely resisted by other regional and likely extra-regional powers. This resistance would create tensions, which would sap economic growth in a number of ways— by forcing states to divert more money to the military, reducing intra-regional trade, and scaring off investment.
The other way by which China will determine whether an Asian Century is realized or not is through the success or failure of its economic rebalancing. If the rebalance is unsuccessful and China experiences a hard landing or a lost decade or two, it will bring down most of Asia with it.
This is because China has become such an integral part of other Asian countries’ economies as a result of trade. Earlier this year, China surpassed the U.S. as the world’s largest trading nation. This is reflected in regional trade flows. As John Lee recently pointed out on The Strategist, “China has become the largest trading partner for Japan, South Korea, Vietnam, Indonesia and India.” Increasingly it has become an important export market for these countries, many of which are export-driven economies.
For example, in 2011 China was the destination of 25 percent of South Korea’s exports and in 2010 exports constituted 52.4 percent of South Korea’s GDP. Furthermore, China was the largest trading partner of 6 of the remaining 9 top ten trading partners of South Korea, and thus these would hardly be able to compensate for the drop off in China’s ability to consume Seoul’s exports.
As this suggests, the interconnectedness of Asian trade means that even countries which don’t count China as their largest trading partner would be nearly as affected as those that do. For instance, in 2011 Japan was Thailand’s largest trading partner (although China was its largest export market). But since Japan would be reeling from the significant drop in trade with China, its ability to trade on a somewhat equitable basis with Thailand would be hindered significantly. Tokyo would be hoping to further flood Thai markets with Japanese goods and services without an equal increase in the amount of Thailand’s exports it purchased.
Of course, Asia would hardly be the only region significantly impacted were China’s economy to implode. The energy exporting nations of the Middle East and Central Asia, as well as much of Africa’s and some of Latin America’s rising economies, would be in bad shape were such a scenario to occur. But owing to the greater interconnectedness of Asian regional trade, Asia would be the most adversely affected.
Interestingly, it would arguably be the developed world, and North America in particular, that would be the least impacted by China’s economy collapsing. To be sure, North America would be dramatically affected by such an event, all of the world would. However, because of its large internal markets and the fact that investors would rush to the U.S. in times of global economic uncertainty, it would arguably emerge from China’s economy collapsing the strongest.
Of course, were China to choose not to challenge the regional order and were its economic rebalancing to be successful, Asia would be the greatest benefactor. For instance, a more consumption-driven Chinese economy would provide a significant boost to many Asian countries, including those that run huge trade deficits with China, like India.
In this way, the success or failure of the Asia Century will primarily be determined by China.