Asian Miracle to an Asian

¶ … Asian Miracle to an Asian Century? Economic Transformation in the 2000s and Prospects for the 2010s, Yiping Huang and Bijun Wang concern themselves with the transformation of Asian economies in the past decade. The authors further speculate on probable changes that are likely to take place in the coming years. In this text, I summarize and conduct an evaluation of this interesting and informative article.

From the onset, an examination of "the key transformations of the Asian economies during the 21st century" is cited as the main purpose of this article (Huang and Wang 2011, p.9).

An examination of these basic transformations according to the authors effectively "provides the basis for an assessment of the challenges facing these economies in the decade ahead and for drawing important implications for the rest of the world, including Australia." With the past decade as their reference point, Huang and Wang begin by focusing on three of the changes they regard most fundamental.

The first fundamental change the authors focus on has got to do with vertically integrated supply chains, their rise across the entire region as well as the enhanced role of Asian economies as consumers of commodities. From the year 2001, there was a dramatic growth of foreign direct investments into China. This according to the authors was more so the case in both the heavy industry and electronics sectors.

As the authors further point out, it is during this time that quite a number of producers deemed it fit to move their production's final stages to China. In the words of Huang and Wang (2011, p.11), "this was the beginning of the vertical integration of supply chains, of which China became the central hub." It is also from this point that exports from China to the developed world started increasing. This was in turn accompanied by increased imports from the region.

In the opinion of Huang and Wang (2011, p.12), rapid urbanization and industrialization are some of the things that have made China (and by extension Asia) important users of commodities globally. To put this assertion into perspective, the authors point out that currently, "China accounts for an average of 30 per cent of global commodity consumption and more than 50% of worldwide consumption of iron ore, cement and coal" (Huang and Wang 2011, p.12).

As the authors further observe, the amount of ore and metal that China imports from Australia has been on a dramatic increase; rising from 13.3% to 55.1% in the last one decade. The second fundamental change Huang and Wang concern themselves with in this case has got to do with "the emergence of large current account surpluses, accumulation of gigantic foreign exchange reserves and massive capital exports from the region" (Huang and Wang 2011, p.9). According to the authors, a majority of emerging Asian economies (before the financial crisis) were importers of capital.

Indeed, it is the Asian financial crisis that was responsible for the region's current account positions turnaround. To stem the crisis, Huang and Wang (2011, p.15) point out that "Asian policy-makers made special efforts to support export growth, promote current account surpluses and accumulate foreign exchange reserves." It is these policies that have informed the emergence of Asia as a major capital exporter. The trend is however largely unusual as developing economies according to Huang and Wang would not ordinarily be expected to export capital.

The last fundamental change according to the authors "was policy co-operation among Asian countries" (Huang and Wang 2011, p.18). This trend according to the authors was however less successful. It is important to note that economic liberalization is not a new phenomenon in Asia. According to Huang and Wang, unilateral reform has been the distinct feature of the said economic liberalization (which has been ongoing for decades). As the authors further point out, in the past, individual economies did not concern themselves much with other countries' economies.

Instead, they chose to steer their own distinct liberalization programs. Given the growth performance of the region in the past, this approach has largely been effective in one way or the other. However, after the financial crisis in Asia, policy-makers sought to enhance regional cooperation. This according to Huang and Wang effectively changed the previous unilateral approach. The authors are further convinced that this particular change was largely driven by two factors.

One of these factors is enhanced integration in the region and perhaps an increased level of competition across the region. The second factor identified by Huang and Wang has got to do with problems that came to the fore as a result of the region's financial crisis. In this particular case, the authors point out that in addition to the reliability of global financial institutions being put into question, the ability of individual economies to shield themselves from the crisis was largely limited.

As I have already pointed out in the introductory section, in addition to highlighting the transformation of the Asian economies in the last one decade, Huang and Wang also speculate on the further changes that could take place in the next one decade. In the words of the authors, what is likely to happen in the next one decade is largely dependent "on the sustainability of growth in the region" (Huang and Wang 2011, p.22).

In seeking to chart the prospects of the region going forward, the authors highlight a number of trends. To begin with, in regard to Asian growth and sustainability, Huang and Wang conclude that in general, the likelihood of Asian economies maintaining strong growth on the economic front remains rather high. However, with perhaps the exception of a few Asian economies, some moderation in growth potential is likely to be witnessed in the coming decade.

In the final analysis, the Asian economies according to Huang and Wang are likely to grow faster than other world economies. Similarly, the region's global GDP share is also likely to rise. Yet another trend that could emerge in the coming decade according to Huang and Wang (2011, p.24) has got to do with "economic structural rebalancing." According to the authors, a number of actions could over time trigger current account surplus reductions across the region.

Regarding regional integration, the authors are convinced that it is likely that going forward, integration will continue amongst Asian economies. As a result, the said economies could end up becoming a critical economic block. In my opinion, most of the conclusions offered by the authors are valid and make perfect economic sense largely because they are based not on mere speculation but on sound verifiable facts.

For instance, a review of literature and other data clearly demonstrates that indeed, a decade ago, economies in the said region largely concerned themselves with the exportation of products that were essentially labor intensive. Further, in addition to running current deficit accounts, Asian economies were also largely dependent on imported capital. In their article, Huang and Wang correctly identify these as some of the areas that have experienced significant changes in the last one decade. The impact the said changes have had on global economy are also visible.

In addition to identifying past changes and predicting future trends, the authors also rightfully point out that these can be.