Asia is leading a recovery in world trade

Asia is leading a recovery in world trade


Asia and the Pacific is leading a recovery in world trade amid the continued uncertainty surrounding the global trade policy environment.
This year’s Asian Economic Integration Report introduces a new composite index to gauge the progress of regional cooperation and integration (RCI) in Asia and the Pacific. RCI plays an important role in supporting economic growth and poverty reduction and has been high on the development agenda for many Asian economies in recent years. Supporting RCI is one of ADB’s key strategic priorities for development assistance in the region. An index that calibrates the status of RCI can be a useful policy tool for assessing the progress of RCI efforts, especially by various subregional initiatives.
In 2016, Asia’s trade (by volume) grew faster than global trade but remained below its economic growth. Asia’s trade growth picked up to 1.7% in 2016 from 1.4% in 2015, while the world trade growth decelerated to 1.3% from 2.6%. Ongoing global economic recovery lifted demand for the region’s exports, particularly from Japan; Taipei, China; Hong Kong, China; and Viet Nam. The region’s import growth has also accelerated recently due to robust demand from the People’s Republic of China (PRC) and India, among others. Asia’s trade growth accelerated further to 7.4% during the first half of 2017 and will likely continue to gain momentum as the global economic recovery gathers pace. However, potential bilateral trade friction and policy uncertainties among the world’s major trading partners remain downside risks.
Asia’s intraregional trade continued to strengthen in 2016. Asia’s intraregional trade share—measured by value—rose to 57.3% in 2016 from 56.9% in 2015, up from an average 55.9% during 2010–2015. Strong intraregional trade offers a buffer against potential headwinds from global trade and policy uncertainties. Subregionally, trade integration—measured by the share of intra-subregional trade to total trade—is strongest in East Asia, followed by Southeast Asia and Central Asia.
Amid a slowdown in total inward foreign direct investment to Asia, intraregional investment flows continue to rise.
Global foreign direct investment (FDI) into the region (measured by gross inward FDI) fell 6% in 2016—to $492 billion from $525 billion in 2015. The region’s share of global inward FDI dropped to 28% from 30%.
Nonetheless, intraregional FDI rose in both absolute value (to $272 billion in 2016 from $250 billion in 2015) and its share in total (to 55% from 48%). Intra-Asian FDI is geared more toward global and regional value chains, mainly going to greenfield investments in manufacturing. This should help strengthen the region’s trade globally as well as regionally.
Asia’s outward foreign direct investment rose 11% in 2016—to $482 billion from $434 billion in 2015. The region’s outward FDI accounted for 33% of global FDI, up from 27% in 2015. In 2016, the PRC; Japan; and Hong Kong, China were among the world’s top 10 global investors. Combined, their outward FDI reached $391 billion, or 81% of total outward FDI from Asia. Emerging Asian investors such as India, the Republic of Korea,
Malaysia, Singapore, and Thailand are also expanding their global presence in such areas as renewable energy, semiconductors, natural resources, information technology, and food, among others.

– Asian Economic Integration Report 2017 by ADB


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