The Asian Development Bank (ADB) forecasts show good growth in Asian economies despite the expected slowing in China. This message of diminished Chinese significance is no doubt inadvertent but unmistakable, nonetheless. The picture flies in the face of Beijing’s ambitions and is no doubt a disappointment for the crowd in Zhongnanhai.
The ADB economists clearly see China as less significant going forward than it has been, although they do not say so explicitly in their report. Against a projected Chinese slowing to 4.8 percent real growth this year and only 4.5 percent in 2025 from 5.2 percent last year, the overall Asian economic outlook recently released by the Manila-based ADB is broadly upbeat. It projects an average of 4.9 percent real growth in 2024 for its composite of 46 members, of which China is one, and slightly faster in 2025. In place of Chinese economic power, the ADB sees leadership elsewhere on the continent, especially in India, where it expects 7.0 percent real economic growth this year, accelerating to 7.2 percent in 2025.
Perhaps the reasons behind the ADB’s expectations are more telling than the forecasted figures. Its discussion of China highlights the economic drag imposed by the country’s property crisis and depressed state of consumer confidence. These problems, of course, have plagued China’s economic prospects for over two years now and are closely related. The failures of property developers, which began in 2021, have dragged down the still-important homebuilding and home-buying sectors and, by forcing down real estate values, have cut into household wealth, depressing confidence and accordingly restraining the willingness of Chinese households to spend. Further depressing confidence and spending is the legacy of the lockdowns imposed by Beijing’s “zero-COVID” policy. In addition to reduced levels of household wealth, these still-fresh memories have made the Chinese feel less secure in their ability to earn a regular paycheck.
In contrast to the poor domestic economic support so clearly evident in China, the ADB notes improving consumer confidence elsewhere in Asia and points to domestic demand in these other countries as a secure driver of growth. That is not all. The ADB economists also highlight strong demand for semiconductor exports from Taiwan and South Korea as well as robust investment flows into India and Southeast Asia, two considerations where China is facing trouble as Washington, Brussels, and Tokyo show increasing hostility toward China trade and Western and Japanese businesses seek to diversify their supply chains away from China toward Vietnam, Indonesia, the Philippines, and other venues in Asia. The picture takes on the look of Asian strength at China’s expense.
Inflation patterns present another telling comparison. China is fighting deflation in both consumer and producer prices. For Asia generally, the ADB feels comfortable forecasting a relatively steady 3.2 percent consumer inflation for this year and 3.0 percent for next year. Because these rates are still higher than optimal, especially in food and other staples, the bank’s economists expect the growth to emerge despite continued tight monetary policies from Asian central banks as well as the Federal Reserve in the United States. However, this problem is far less imposing than China’s deflation. Inflation, whatever ills it brings, offers an immediate inducement for growth, as people and businesses spend in order to avoid higher prices in the future. Deflation, however, depresses immediate growth prospects by impelling people and businesses to delay spending in the hopes of getting lower prices in the future.
Only a few years ago, China was the undisputed economic growth leader in Asia. People would have thought it impossible for Asia, especially developing Asia, to grow if China was having economic trouble. Now, the ADB has announced, implicitly if not explicitly, a revolutionary change in the Asian economic picture—one that diminishes China’s stature. It should give the Chinese regime pause in its clear ambition to dominate not only the Asian but the world economy.
