Regional economic integration has potential for further expansion
BEIJING - Major Asian countries have shown an increasing reliance on the regional economy since the global financial crisis. That has seen a decline in the region's reliance on the United States and the European Union, according to a report released on Wednesday.
China and India's rapid recoveries have served as an engine driving the rest of the region, with both countries having an annual growth rate of about 10 percent, said the annual report from the organizer of the Boao Forum for Asia. The forum's website describes it as the "most prestigious and premier forum for leaders in government, business and academia in Asia and other continents".
"Traditionally, Asia's growth has relied heavily on external demand, but the pattern has gradually shifted following the financial crisis, and the region has become less sensitive to the US and European markets," said Lin Guijun, vice-president of the University of International Business and Economics in Beijing.
In 2009, about half of the exports of major Asian economies went to other Asian economies, while about 32 percent went to Europe and North America. China's rise to its current status as the premier market for many Asian economies has become obvious, Lin said.
Major economies such as Japan and South Korea have a high trade-dependence on China. China has overtaken the US to become Japan's biggest export destination. The country's trade dependence index with Japan was 10.4 percent in 2009, while that of Japan with China was 20.5 percent, according to the report.
However, increasing Asian economic integration is mainly limited to trade in goods while trade in services still has the potential for further expansion. Asia's exports of services accounted for 15.9 percent of its total exports of goods and services in 2009, while the global average stood at 21.6 percent.
Further improvements in cross-border transport and communications infrastructure have boosted calls on more regional cooperation, Lin said.
China's huge purchasing power will continue to be a driving force for the growth of the services sector in the rest of the region.
"Destination countries will not only see the rapid growth in the number of Chinese tourists, but also their huge purchasing power," said Lin. Meanwhile, financial integration is lagging behind trade integration in this area and needs to be taken into more consideration, Lin said.
However, as Asia's economies have become less dependent on the US for trade and investment, it has become necessary to initiate a regional currency to reduce exchange rate risks, Lin said. Despite the robust growth of the Asia-Pacific region, many countries are also facing the risks of overheating economies, large capital inflows and inflation.
"Concerted intra-national efforts are needed in addressing inflation, trade imbalances and commodity price fluctuations," said Zhang Yuyan, director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.
A possible economic recession in Japan in the wake of last month's earthquake and tsunami is also a major concern for Asian economic growth, said economists.
Zhou Wenzhong, secretary-general of the Boao Forum for Asia, said that the upcoming event will host a separate session to discuss Japan's reconstruction and to build a platform to promote economic cooperation between the Japan and China.
The annual Asian economic forum will begin in mid-April in Boao, Hainan province. Around 1,400 participants from 40 countries will attend, including the Chinese President Hu Jintao and about 300 political leaders from China and overseas, said Zhou.