As we enter 2025, we also enter the last year of the first quarter of the 21st century.
Twenty-five years ago, many forecast the arrival of an “Asian Century”, witnessing the rapid rise of post-war Japan, followed by the so-called “Asian tigers” -- Hong Kong, South Korea, Singapore and Taiwan. They were then followed by the Southeast Asian economies of Indonesia and Malaysia and, finally, China. In the early 2000s, India too showed it could speed up. The 19th century was Europe’s, the 20th century was America’s and the 21st century would be Asia’s, predicted economic soothsayers.
China’s great moderniser, Deng Xiaoping, had already claimed that the rise of China and India would define the return of Asia to its historic place in the comity of nations. Singapore’s founder Lee Kuan Yew borrowed an economic metaphor from Walt Rostow, whose “stages of growth theory” had defined the “take-off” of an economy as a precursor to economic maturity, and declared that China and India were the twin engines of an Asian jet plane soaring into the skies.
The trans-Atlantic financial crisis of 2008-09, wrongly dubbed as a “global financial crisis”, was the next milestone and for a few years after that the world saw Europe in crisis, America bogged down in wars but China and India rising. China’s rise was spectacular, India’s was more subdued but Asian optimism was the flavour of the decade. Then came the Covid-19 pandemic.
A fellow Hyderabadi and Osmanian, Vasuki Shastry, now at London’s Chatham House, published a book in 2021 titled Has Asia Lost it? Dynamic Past, Turbulent Future, raising doubts about whether indeed the 21st century would be Asian. China had already started slowing down, and so had India. Japan has been on a downward slope through the 2000s. While Europe had also lost its coveted place in the global ranking of economies, it remains home to advances in science and technology. The United States had regained momentum.
Since the publication of Shastry’s book China, Japan and India have slowed down even more. Most other Asian economies are in a tizzy adjusting to the emerging “new Cold War” between the United States and China and President Donald Trump’s stated strategy of pursuing the geo-economic containment of China. Most Asian economies are caught in a trap in which they are dependent on the US for security but on China for prosperity. Has Asia “lost it”? Is the Asian rise running out of gas?
Some facts stand out. In Asia, Japan has certainly fallen back. In 2010 China overtook Japan to become the world’s second largest economy. In 2025, India could well overtake Japan and secure the third place. Though the gap between number two and number three will still be huge, with China now five times bigger than India. A second fact that stands out is that Europe is slowing down too. Europe’s biggest economy, Germany, is in crisis mode. There’s still some life left in Europe but it remains to be seen how much energy is in there to recover lost space.
If in 2000 the Group of Seven (G-7) economies accounted for more than 50 per cent of world income, by 2020 their share was well below 50 per cent and that of Asia was well above 50 per cent. But, by 2024, the balance was tilting in G-7’s favour only because the US has bounced back and China has slowed down.
Going forward, both the US and China may take steps to retain their existing share of world income, even if they find it difficult to increase their shares by much. It would be the performance of Europe, in the West, and of India, Japan and the Asean economies in the East, over the next decade that would set the stage for whether indeed the 21st century would be Asian or not.
During the forthcoming Donald Trump presidency we can expect the United States to take steps aimed at retaining its global dominance. The US has declared that the 21st century would also be defined by Pax Americana. On the other hand, China too would take steps to ensure that its economy regains momentum so that it can remain a close second to the US. China knows that it will take a long time for it to in fact overtake the US.
Hence, we will live through a period of intense competition.
It is in China’s interest to ensure that competition with the West does not escalate into conflict. Hence, a rational strategy would be one in which China does not undertake any kinetic action to integrate Taiwan. The US, on the other hand, may be tempted to draw China into a conflict in the western Pacific to slow down China’s economic rise. The dynamics of US-China relations will define to a great extent whether the 21st century would be Asian.
Going forward, India has an important role in defining the centre of gravity of the world economy in the 21st century. That centre had decisively moved East from the Atlantic and towards Asia. It will be the performance of the Indian economy that will drive that centre of gravity closer to the Indian Ocean. India is at present cruising at an annual average rate of growth around 6.0 per cent. It has to accelerate to at least 7.5 per cent, a record that was set during Manmohan Singh’s decade in office, for India to play a role in how the 21st century is viewed.
India will not only have to deal with competition within Asia, especially with China, but also competition with the West that is fighting back to regain space. The United States and the European Union will work hard to retain their share of world income and trade. They may provoke conflicts that slow down the rise of emerging economies. It is in Asia’s interest to seek a decade of peace for its economies to regain momentum.
Asian nations, big and small, have a role to play in this game. How Japan, South Korea and the Asean economies, especially Indonesia, Malaysia and Vietnam, perform will also play an important role in setting the stage for a resumption of Asia’s rise. In 2021, Shastry was right to suggest that Covid had marked a shift from a dynamic past to a turbulent future for Asia. While Asia has recovered from that setback, America has recovered even faster. The race, once again, is on.
