Asian Century Or Multi-Polar Century ?

Abstract

Summary The “rise of Asia” is something of a myth. During 1990–2005 China accounted for 28% of global growth, measured at PPP. India accounted for 9%. The rest of developing Asia, with nearly a billion people, accounted for only 7%, the same as Latin America. Hence there is no general success of Asian developing economies. China has grown better than its developing neighbors because it started its reform with a better base of human capital, has been more open to foreign trade and investment, and created good investment climates in coastal cities. China’s success changes the equation going forward: its wages are now two to three times higher than in the populous Asian countries (India, Pakistan, Bangladesh, Vietnam, Indonesia), and China will become an ever-larger importer of natural resource and labor-intensive products. Developing countries need to become more open and improve their investment climates to benefit from these opportunities. China itself faces new challenges that could hamper its further development: unsustainable trade imbalance with the U.S., energy and water scarcity and unsustainable use of natural resources, and growing inequality and social tension. To address the first two of these challenges, good cooperation between China and the U.S. is essential. I conclude that we are more likely to be facing a “multi-polar century,” than an Asian century.