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COVID-19 to accelerate Asia’s path as center of global economy — report

By BERNIE CAHILES-MAGKILAT

The global economic recovery from the COVID-19 pandemic is likely to accelerate an existing trend which will place Asia firmly at the center of the world economic order, according to a new report by ANZ and Eurasia Group.

“Asia’s economy: Taking center stage” is the first of three reports on the impact of the COVID-19 crisis and recovery in a G-Zero world, featuring ANZ Chief Economist Richard Yetsenga and Eurasia Group & GZERO Media President Ian Bremmer.

The G-Zero world refers to an emerging vacuum of power in international politics created by a decline of Western influence and the domestic focus of the governments of developing states, resulting in a geopolitical environment in which no country or group of countries can effectively meet global challenges.

The report highlighted the geopolitical tensions between the US and China will increase the complexity of the business environment in countries trying to balance relations with the two powers.

“Economic fallout related to COVID-19 has accelerated the relative decline of the US as the world’s economic engine and increased the centrality of Asia — and particularly, of China — to the global economic cycle,” according to the report.

According to the report, Covid-19 has shaken the global economy at a time when the geopolitical and economic order was already in flux. The US is still the world’s largest economy and dominant geopolitical power, but American influence – already waning – is likely to take another step back in the wake of the pandemic. Since the early 2000s, the US has shifted its focus increasingly to local issues, at the expense of some of the global leadership it used to provide. This trend has accelerated in recent years. Instead of promoting global, cooperative efforts to combat Covid-19, the Trump administration has often made decisions which are unilateral and, where they involve other countries, the tone has often had a harder edge than we have been used to – announcing that the US would withdraw from the World Health Organization (WHO) and preventing export of key medical supplies, and seeking to label the pandemic the “Wuhan virus”.

“These shifts in the US’s global leadership position and its eroding relations with China create a challenging economic, business, and political landscape in the AsiaPacific region. Australia has found it more challenging to balance its regional interests and global history. Other Asian countries, including Japan, Korea, the Philippines, and Vietnam, remain caught in the balance of USChinese economic competition, as well the two powers’ technological rivalry and strategic tensions in the East and South China Seas,” the report said.

It noted that the combined effects of US-China trade and technology conflict, the global downturn triggered by COVID-19, and the rapid growth of China’s neighbors have reduced the importance of the US consumer market for Asian economies.

The combined effects of the US-China trade war, the global downturn triggered by Covid-19, and the rapid growth of China’s neighbours have reduced the importance of the US consumer market for Asian economies.

In the first quarter of 2020, the ASEAN countries surpassed the US as China’s largest customers for the first time, purchasing 16 percent of Chinese merchandise exports. Only 14 percent were absorbed by the US market. This trend is likely to continue in the wake of the Covid-19 pandemic as trade and supply-chains become more regionally concentrated, and as ASEAN recovers more quickly than the US.

Although China’s importance to the global economic cycle will continue to increase, the US dollar and US monetary institutions remain central to the global financial cycle. The drivers of global recovery from the 2008 global financial purchases. This is an important structural improvement in Asia’s available policy toolkit.

“This trend is likely to continue as trade and supply-chains become more regionally concentrated, and as Asian economies recover more quickly than the US,” the report added. Eurasia Group & GZERO Media President Ian Bremmer said: “The fragile geopolitical backdrop in this G-Zero world will result in a longer and deeper coronavirus crisis than any of us would like to see. The pandemic has further weakened US global leadership and economic influence. These geopolitical shifts will undoubtedly lead to a higher degree of risk and business complexity for countries across the globe.”

ANZ Chief Economist Richard Yetsenga said: “Asia’s resilience to the pandemic has allowed many countries to emerge from the crisis with a more central role in the world economy. “China is likely to help lead a global demand recovery, while ASEAN countries have already surpassed the US to become China’s largest export customers in the first quarter of 2020.

We believe the trend will continue, placing Asia at the center of the global economy.” ANZ Group Executive International, Farhan Faruqui said: “The pandemic has changed the way we live and work forever. The forces that shape this new post-COVID world won’t be unfamiliar but the pace at which these forces move will be vastly accelerated. Digitisation, data, robotics, automation, and cloud investment will be more critical considerations for business than they have been before. We’re also seeing a big move towards de-risking of supply chains.”


Source: Manila Bulletin (https://business.mb.com.ph/2020/06/23/covid-19-to-accelerate-asias-path-as-center-of-global-economy-report/)

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