As usual, the Americans have overestimated their competence in managing economic and geopolitical issues. And as a result, trade tensions between Beijing and Washington will reap benefits throughout Asia this year – and particularly for those in Southeast Asia.
While US President Donald Trump aims to reduce his country’s trade deficit with China by increasing tariffs and threatening punitive actions, China has counter-punched without blinking once.
It’s clear that even as Trump says he would “put America first”, China has no plans on being left behind either.
Cooperative agreements signed under the auspices of the One Belt One Road Initiative have opened doors for developing nations to finally get a piece of the “manufacturing pie” that allowed China to be the global economic marvel that it is today.
China has transformed itself from an agrarian society to an industrialised nation. As the world’s foremost superpower, the US considers China’s advances – in less than 40 years – a serious threat to its own ambitions.
The “Asian miracle” has been built on the success of labour intensive jobs. The tigers or dragons that have emerged from the region fuelled its development through manufacturing and, agricultural sectors.
Trade tariffs would inevitably mean that manufacturers, already accustomed to selling goods on the international market, will likely move to greener pastures like Cambodia, Myanmar, Laos, Bhutan and Bangladesh, among others.
As a result, these countries will finally be able to diversify trade, improve the quality of life of their citizens, introduce new skills to the labour force and eventually move beyond just being the rice fields and bread baskets for the rest of the region.
China has spent years preparing itself for this eventuality. The country has a successful recent history of developing long-term and short-term national goals that have allowed it to fast-forward through the arc of development.
Already, China accounts for nearly half of all capital investment in artificial intelligence. The country is poised to look beyond just being “the factory of the world”. Instead, the communist government’s success has allowed it to look beyond just manufacturing.
It has fostered a situation where it will take a leadership role in industrialising other countries in Asia. The result can only be shared economic prosperity for those who need it most.
Chinese and American firms have put plans into action which would allow them to bypass harsher trade regulations so they can have continued access to the American market.
Chinese bicycle manufacturers – a $13 billion industry in 2018 – are happy to move their plants to Vietnam, where improved bilateral relations with the US has resulted in a free-trade agreement between the two nations.
Similarly, garment manufacturers like GAP, Levi’s and Zara have set up contingency plans which would allow them to move manufacturing to Bangladesh in the event their products are targeted by stricter trade regulations. The US garment market was worth $390 billion in 2018.
Benz, BMW for Thailand
Mercedes and BMW parts manufacturers in China that export to the US – another $700 billion industry in 2018 – have looked towards Thailand as being an alternative. Malaysia, which hosts over 800 auto component manufactures on its shores will also certainly benefit from the Chinese and American firms’ demands for such products.
The Economist’s Intelligence Unit forecasts that Asia’s GDP is expected to grow by 5.4 per cent this year, while North America and Western Europe’s GDP will grow by only 2.2 per cent and 1.7 per cent, respectively.
In fact, eight of the top 10 fastest growing economies are anticipated to emerge out of Asia next year – with Bangladesh, India and Bhutan leading the pack.
Cambodia, despite facing a potential withdrawal of its Everything But Arms preferential agreement with the European Union, is set to see its GDP grow at 6.8 per cent this year.
The problem which has faced Asia and the 10-nation Asean block itself is that large swathes of its population have not been given the opportunity to progress even to an industrial state. This is especially detrimental to a region which has enjoyed the bounty of having some of the youngest populations in the world.
Ironically, it’s the young people in the West who feel they are losing ground to Asians because the region has so much more it can improve on in the coming years. All the while, China seems to be turning away from funding gains by manufacturing to export – and their youth couldn’t be happier for it.
Asia has never been doomed to reflect pleasantly upon how we did the same old thing last year about this time. It’s a luxury that Asia has never had and in that is the entire region’s strength.
Asians by virtue invent and then reinvent, rework and reintroduce themselves to the world a little stronger and more optimistic than the year before.
As our cell phones update themselves to yet another calendar year – this time to the penultimate year of the new decade in the new millennium – let us remind ourselves that economic prosperity is on the way for all Asians this year.