New Asian partnership coalescing

SONG CHEN/CHINA DAILY

Emerging economies are propelling the transition to a new global economic order

The conflict in Ukraine has heightened the sense of the inevitability of a changing world order. However, the evolution toward a multi-polar world was not triggered by events beginning on Feb 24, 2022. It is clearly a trend of the last few years, since the West, especially the United States, has demonstrated the limits of its power, while Asian countries, in contrast, have been able to show their financial independence and become full participants in the world economy.

The developments over the past 10 years have produced global geopolitical shifts and indicated the directions for further transformation. In the near future, we will surely see new strategic alliances, greater fragmentation of regional settlement systems, as well as industry-oriented policies and exchange/non-exchange market systems.

The economic growth in China has led to growing parity between the two largest economies. In 2010, for example, the US was by far the world's largest economy, accounting for about 24 percent of the global GDP, while China and Japan accounted for about 9 percent each. Just 10 years later, the situation has changed radically and by 2021, the bulk of global GDP is concentrated in the US and China--they now account for 24 percent and 18 percent respectively. In terms of purchasing power parity, China has overtaken the US, accounting for 19 percent of the global GDP, compared with the US' share of 16 percent.

Together with China, India increased its share of the global economy from 2.6 percent to 3.2 percent in nominal terms and from 6 percent to 7 percent in PPP terms.

With the Republic of Korea and Indonesia also showing rapid growth, we can say that Asia is witnessing the formation of a new economic bloc made up of members of the Association of Southeast Asian Nations, China, India and the ROK. Cooperation among these Asian countries is increasingly strengthening and the region is increasingly locked into its own markets, thus requiring a fundamentally different development infrastructure than the former traditional export-orientation.

The countries of this Asian partnership have a growing need for domestic sources of investment, independent instruments of settlement and greater freedom to conduct their monetary policies, reliable energy suppliers and geopolitical partners. The success of the new Asian partnership will depend on the extent to which the countries manage to defend their interests and the right to an independent voice shaped by internal interests.

The time of the US hegemony is coming to an end, presenting a picture of a new polycentric world. In fact, the economic contour is shifting from predominantly serving the external sector to a fully engaged global economy, with the external and domestic markets becoming more and more equal on the back of rising incomes. Participants of the Asian partnership have a greater autonomy in economic decision-making, as well as a greater influence on the rest of the world.

Local currencies are growing in importance. Thus, the share of renminbi settlements in the world has risen in recent years from about 1 percent to 3.2 percent and this is probably only the share of payments passing through the Society for the Worldwide Interbank Financial Telecommunication international system, whereas with the Cross-border Interbank Payment System share, this volume could be considerably higher. In August, the renminbi overtook the US dollar in currency trading volume for the first time on the Moscow Exchange.

In fact, the new world has brought about a change in the global economic model. Whereas previously the emerging markets served the markets of the developed countries, the logical next step would be to move in a two-way direction, with the developed markets serving the developing countries as well.

However, the existing infrastructure does not allow this reverse direction to be realized to the extent that it should. The narrow monetary policy standards set by the International Monetary Fund imply that developed countries will provide services to developing countries only to the extent of the available reserve currencies of the latter. In the event of a collapse of the world markets, non-reserve currencies could depreciate dramatically, as was the case during the Asian financial crisis of 1998 and the global financial crisis of 2008.

In this context, it is important to defend and realize new opportunities for cooperation on the world stage, such as settlement in national currencies, the development of domestic financial markets, accelerated programs for the formation of domestic technologies, the global hunt for talents and an expanded role in international economic organizations.

The world is on the threshold of a new transformation. The success of the Asian partnership depends on how far individual players can move toward a philosophy of cooperation, abandoning the world's already tiresome economic zero-sum hubris.

The author is chairman of the Youth Council of the Russian-Chinese Friendship, Peace and Development Committee. The author contributed this article to China Watch, a think tank powered by China Daily.

The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn