After a 6% economic growth last year, this part of the developing world -- consisting of China, India, Indonesia, Malaysia, the Philippines, Thailand and Vietnam -- remains the fastest growing segment of global economy.

And that will also be the case this year. Despite an expected slowdown to a 5.5% growth, the developing East Asia will be growing at nearly twice the pace of the world output.

Forecasts about a sustained advance of these economies are based on the evidence that their strong economic fundamentals will allow supportive growth policies and an expanding intra-regional trade in goods and services.

Starting with those premises, speculations about China’s structurally flawed economy can be readily dismissed.

Most of China’s main economic indicators are good. Inflation is about 1%, unemployment is 5.1%, and the current account surplus is 1.4% of GDP. Public finances, by contrast, are not so good: budget deficit has edged up to 7.4% of GDP and public debt has reached 90.1% of GDP.

Stimulus to China’s consumer spending

That’s pointing to the policy mix of fiscal restraint and a vigorous monetary easing -- exactly what China needs to address its major problem of real estate excess supplies.

Decisive measures to stimulate housing demand would also increase household consumption with purchases of durable goods like furniture, appliances, automobiles, etc. And that would lead to a better composition of the economy by raising the share of private consumption from the present 39% of GDP.

But to raise the share of private consumption to a more normal range of 50%-60% of GDP, China needs to expand welfare benefits to make healthcare and education more accessible. Excessive precautionary savings would then be lowered, leaving more money to households for discretionary spending.

Last year, for example, China’s central bank (People’s Bank of China – PBOC) reported that household savings balances amounted to $19.13 trillion – which was more than the country’s GDP of $18.3 trillion.

China’s economy, therefore, is not bogged down by irremediable structural flaws – it simply has to implement a few policy changes to keep advancing along the path of its potential and noninflationary growth of 5%.

It’s important to understand that because China looms large in the rapidly developing east Asian world. One fifth of ASEAN (ten countries of the Association of Southeast Asian Nations) trade is transacted with China. ASEAN is also China’s by far the largest trade partner, accounting for 16% of Beijing’s foreign trade.

ASEAN and China want peace and prosperity

India is the second-largest economy in the developing East Asia, but, compared to China, its importance for regional trade is much smaller. India’s GDP of $4 trillion is only 21% of China’s output.

All components of India’s domestic demand are very strong, acting as the main drivers of its estimated GDP growth of 7% for this year. The problem is how far India can go with such blistering growth rates while running a very large budget deficit (8% of GDP) and an inflation rate near the top of its 2%-6% “tolerance range.” And with a falling savings rate (5.3%), India has to rely on foreign capital imports to finance its spending and investments.

But leaving all that aside, the most important regional issue here is an apparent thawing of strained Sino-Indian relations. Beijing and Delhi seem to have decided that unresolved territorial issues along their 2167 miles long border should be a matter of peaceful compromise. If, as seems likely, that indeed is the case, India may find that a growing and balanced trade with China could contribute to its quest for a fast and sustainable economic development.

That’s what ASEAN countries understood long ago. Partly thanks to China trade and investments, their growth rates are now in the range of 2.6% (Thailand) to 6% (Vietnam and the Philippines).

All is not plain sailing, though. East Asia’s developing economies are facing several potentially disruptive issues: (a) contested borders in the South China Sea, (b) unstable Sino-Japanese relations and (c) a precarious armistice on Korean Peninsula.

ASEAN and China are still working on the Code of Conduct of Parties in the South China Sea that would reaffirm “freedom of navigation and overflight, peaceful settlement of disputes, and self-restraint in the conduct of activities.”

Similarly, Sino-Japanese relations are now part of contentious geopolitical fault lines. That makes it difficult for Japan’s keenly interested business community to respond to China’s call for a “win-win cooperation.”

Peace on the Korean Peninsula is now as far as ever, but one wonders whether an apparently increasing involvement of original belligerents could stabilize the status quo.

Despite all that, ASEAN and China seem firmly determined to lead East Asia’s peaceful economic development.