I think that for the Asia-9 economies, increased trade-linkages and cross-border investment have resulted in a “symbiotic” relationship, with China as the driver of growth for the rest of Asia, AND vice-versa. Together, this relationship has helped raise the profile of Asia-9 as an important pillar for regional and international trade. Factors underlying Asia-9’s growth in trade What have been the driving forces behind this synergy in the evolution of trade among the Asia-9 economies? When one speaks of the remarkable growth in Asia, the general perception is that growth has been dominated by China. While it is true that growth has been driven by China, the traditionally strong trade and investment ties between the remaining Asia-8 have been just as important in allowing the high rates of growth to be sustained in the region. In terms of intra-regional trade among the Asia-9 economies in 2005, 13% of trade flows are with China, while 28.4% of trade goes on among the other 8 economies. Why has this intra-regional trade grown so substantially? One explanation is that East Asia has adopted an outward oriented policy of internationalization of production process which has allowed the benefits to be derived from the linkages and alliances among the players in the region, both at firm level and at the level of the macro economy.
India’s economy is the 14th largest in the world measured in nominal US dollar terms, but in terms of purchasing power parity, India is the 4th largest economy in the world according to the iMF. India’s GDP in purchasing power terms has also risen substantially, with its share rising from 4.3% to 6.1% of world GDP over the past 15 years. India’s unique characteristics that enhance this growth potential include its dynamic population and demographic structure, as well as its emergence as a global leader in service exports. This dynamism, growth, and positive sentiment has been clearly evident in India’s stock market, which has rallied 40% in 2005, second only to Korea as best performing major market in Asia last year. Sometimes overlooked however, is an informal group of Asian economies (excluding Japan) that account for the majority of trade and GDP in East Asia, known as Asia-9. The Asia-9 economies comprise China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Thailand, and Taiwan. The share of Asia-9’s GDP in purchasing power parity terms has grown from 11.4% in 1990 to 20.6% in 2005. To put this in perspective, this exceeds the EU’s PPP share of world GDP of 18.8%, Japan’s share of 6.7%, and is very close to the United States 20.7% share of world GDP in 2005. But I am not here today to overwhelm you with facts and figures! Today I would like to discuss one of the most important drivers of this phenomenal growth – and that is, international trade.