While the growth outlook for developed economies looks increasingly gloomy, forecasts for demand and output in emerging and developing Asian countries are constantly upgraded.

The latest estimate puts Asia’s economic growth for this year at 5.3%, indicating vastly different business cycle dynamics compared with those in mismanaged and recession bound U.S. and European economies.

China and India are expected to advance this year at roughly the same growth rates of 5.2% to 5.4%, but their contributions to Asia’s economic growth will be very different because China’s economy is more than 5 times larger.

With sound public finances, big trade surpluses and virtually no inflation, China’s economy is also underpinned by much better economic fundamentals. And that, of course, provides a solid base for a steady and sustained growth of aggregate demand.

China, therefore, remains a strong pillar of regional and global trade and investments. To see that, one only has to look at China’s last week diplomatic whirlwind.

China’s strong Asian agenda

Part of it was unfolding during the proceedings of the Boao Forum for Asia (March 30-31, 2023) on the Hainan Island. Delegations from more than 50 countries and regions were there to discuss economics, politics and Asia’s lucrative business deals.

The Spanish prime minister also spent there the first day of his state visit to China, where his hosts delicately moved his mission toward economic cooperation -- instead of dwelling on a futile and divisive European war agenda.

By contrast, the ensuing visits from Malaysian and Singaporean leaders last week refocused the spotlight on Asian issues of peace and regional development – the core questions of interest to Southeast Asian constituencies.

For both countries, China is by far the most important trade and investment partner. They are actively working with Beijing to establish the ASEAN-China Free Trade Area (ACFTA 3.0) and to implement the Regional Comprehensive Economic Partnership.

The Malaysian Prime Minister Anwar Ibrahim wanted to promote digital economy, automotive, energy and farm industries. A special attention was also devoted to culture, tourism and people-to-people exchanges.  

During the Singapore’s Prime Minister Lee Hsien Loong visit relations with China were upgraded to an “all-round high-quality future-oriented partnership,” as China’s President Xi Jinping noted that “Singapore has been the most involved in China's reform and opening-up and its interests are most closely integrated with China.” The two countries are also upgrading their free-trade agreement. Singapore's prime minister considers Taiwan’s status an internal matter for China, and is sternly warning those “touting ‘Ukraine today, Taiwan tomorrow’ of unpredictable and serious consequences.”

Unfortunately, Japan’s foreign minister’s visit last weekend (April 1-2, 2023) showed that China’s apparent harmony in ASEAN relations is missing in the case of Japan.

China leads Asia’s business cycle

Tokyo complained that China often violates its territorial integrity around Senkaku/Diaoyu islands in East China Sea. Those islands are claimed as an inherent part of China, illegally annexed by Japan as “terra nullius” (nobody’s land) during the Sino-Japanese war in 1894-1895. The Japanese are also concerned that Beijing was cooperating with Moscow in an increasing military activity around Japan.

Beijing, for its part, stated that “the fundamental cause” of tense relations is that Japan cooperates “with the U.S. side to discredit China and make(s) provocations on issues concerning China's core interests.” One such event is Japan’s military exercise with the U.S. and South Korea on April 3-4, 2023.

What now? China will continue to watch Japan carefully – and Tokyo knows how far not to go too far. That much was intimated by Japan’s former Prime Minister Yasuo Fukuda during his visit to China last Friday. He is the son of the former Prime Minister Takeo Fukuda who agreed with China’s paramount leader Deng Xiaoping in October 1978 to “set aside the dispute and pursue joint development.”

China will also have an interesting talk this week (April 5-7, 2003) with the French president and the president of the European Commission. Beijing has already warned them that they lack independence to discuss issues of peace and Europe’s new and credible security architecture. China, obviously, believes that Washington has a final say on those key questions of our time.

Meanwhile, China is forging ahead with supportive monetary and fiscal policies to keep the economy on a 5% to 6% growth path. China’s export sales to east Asian markets are moving along at a blistering pace of 18%. A similar trend is observed about China’s exports to central Asia, Middle East and Russia.

With ample, reasonably priced and secure energy supplies, China’s economic growth will also be strengthened by large foreign direct investments in its huge, open and increasingly affluent markets.