Economic development Ancient and medieval times China and
India alternated in being the largest economies in the world from 1 to 1800 AD. China was a major economic power and attracted many to the east, and for many the legendary wealth and prosperity of the ancient culture of India personified Asia, attracting European commerce, exploration and colonialism. The accidental discovery of America by Columbus in search for India demonstrates this deep fascination. The
Silk Road became the main east–west trading route in the Asian hinterland while the
Straits of Malacca stood as a major sea route.
Pre–1945 Prior to World War II, most of Asia was under
colonial rule. Only relatively few states managed to remain independent in the face of constant pressure exerted by European powers. Such examples are China,
Siam, Iran and Japan. Japan in particular managed to develop its economy due to a reformation in the 19th century. The reformation was comprehensive and is today known as the
Meiji Restoration. The Japanese economy continued to grow well into the 20th century and its economic growth created various shortages of resources essential to economic growth. As a result, the
Japanese expansion began with a great part of Korea and China annexed, thus allowing the Japanese to secure strategic resources. At the same time, Southeast Asia was prospering due to trade and the introduction of various new technologies of that time. The volume of trade continued to increase with the opening of the
Suez Canal in the 1860s.
Manila had its
Manila galleon where in products from the
Philippine islands and China were traded with Spanish America and Europe from 1571 to 1815. The Spanish colony of the Philippines was the first Asian territory to trade with the Americas, from Manila to
Acapulco. The route continued overland across present-day Mexico to
Veracruz on the Atlantic coast, then to
Havana and
Seville, forming the first global trade route.
Silk,
porcelain,
ivory,
tobacco,
coconut and
maize were some of the goods exported from Asia to the Americas and Europe, through the Philippines.
Singapore, founded in 1819, rose to prominence as trade between the east and the west increased at an incredible rate. The British colony of
Malaya, now part of
Malaysia, was the world's largest producer of
tin and
rubber. The
Dutch East Indies, now Indonesia, on the other hand, was known for its
spices production. Both the British and the Dutch created their own trading companies to manage their trade flow in Asia. The British created the
British East India Company while the Dutch formed
Dutch East India Company. Both companies maintained trade monopolies of their respective colonies. Significant
de-industrialisation took place in South Asia during its first few decades of British rule in the 1800s. Extreme poverty doubled to over 50% and famines increased significantly during the colonial era. In 1908,
crude oil was first discovered in
Persia, modern day Iran. Afterwards, many oil fields were discovered and it was learnt later that the Middle East possesses the world's largest oil stocks. This made the rulers of the Arab nations very rich though the socioeconomic development in that region lagged behind. In the early 1930s, the world underwent a global
economic depression, today known as the
Great Depression. Asia was not spared, and suffered the same pain as Europe and the United States (except for the Soviet Union). The volume of trade decreased dramatically all around Asia and indeed the world. With falling demand, prices of various goods starting to fall and further impoverished locals and foreigners alike. In 1931,
Japan invaded Manchuria and subsequently the
rest of China and south-east Asia in what eventually became the
Asia-pacific leg of
World War II.
1945–1990 Following World War II, the People's Republic of China and the Republic of India, which accounted for half of the population of Asia, adopted socialist policies to promote their domestic economy. These policies limited the economic growth of the region. They are being abandoned in India and reformed in China. In contrast, the economies of Japan and the
Four Asian Tigers (
South Korea,
Taiwan,
Singapore and
Hong Kong) were economic successes, and the only successful economies outside of the
Western World. The success of these four economies led other Southeast Asian countries, namely Indonesia, Malaysia, Philippines, and Thailand to follow suit in opening up their economies and setting up export-oriented manufacturing bases that boosted their growth throughout the 1980s and the 1990s. One of the most pronounced Asian economic phenomenons during this time, the
Japanese post-war economic miracle, greatly impacted the rest of the world. After World War II, under central guidance from the Japanese government, the entire economy was undergoing a remarkable restructuring. Close cooperation between the government, corporations and banks facilitated easy access to much-needed capital, and large conglomerates known as
keiretsu spurred
horizontal and
vertical integration across all industries, keeping out foreign competition. These policies, in addition to an abandonment of military spending, worked phenomenally well. Japanese corporations as a result exported and still export massive amounts of high quality products from "the Land of the Rising Sun". Another amazing economic success story is that of South Korea's, also referred to as the
Miracle on the Han River. The country was left impoverished after the
Korean War, and until the early 1970s was among the world's poorest countries (even poorer than
North Korea). However, it was since able to recover with double digit annual growth rates. Many conglomerates, also known as
chaebols, such as
Samsung,
LG Corp,
Hyundai,
Kia,
SK Group, and more grew tremendously during this period.
South Korea has now become the most wired country in the world. Taiwan and Hong Kong experienced rapid growth up till the 1990s. Taiwan became, and still remains one of the main centers of consumer electronics R&D as well as manufacturing. However, unlike in Japan and South Korea, the bulk of Taiwan's economy is dependent on small to medium-sized businesses. Hong Kong, on the other hand, experienced rapid growth in the financial sector due to liberal market policies, with many financial institutions setting up their Asian headquarters in Hong Kong. Until 2021, Hong Kong was ranked as one of the world's freest economies by
The Heritage Foundation and
The Wall Street Journal, and it remains one of the world's top five leading financial centers. In Southeast Asia, economic development was fueled by the growth of the
bamboo network. The bamboo network refers to a network of
overseas Chinese businesses operating in the markets of Southeast Asia that share common family and cultural ties. The network expanded as Chinese refugees emigrated to Southeast Asia following the
Chinese Communist Revolution in 1949.
Singapore in particular experienced very rapid economic growth after declaring independence in 1965, following a two-year federation with
Malaysia. In addition to creating a conducive economic and political climate, the government developed the skills of its multi-racial workforce, and established export-oriented industries by encouraging foreign investors to set up regional operations in manufacturing. The government also played a prominent role in
Singapore's growth as a major financial and business services centre.
Singapore is today one of the richest countries in the world, both in terms of
GNI per capita, and
GDP (PPP) per capita. This period was also marked by military conflict. Wars driven by the
Cold War, notably in Vietnam and Afghanistan, wrecked the economies of these respective nations. When the
Soviet Union collapsed in 1990–91, many
Central Asian states were cut free and were forced to adapt to pressure for democratic and economic change. Also, several of the USSR's allies lost valuable aid and funding.
1991–2007 The
Chinese economy boomed following the
reform and opening up undertaken by
Deng Xiaoping, in the late 1970s, and continuing under
Jiang Zemin and
Hu Jintao in the 1990s and 2000s. After the
liberalization of the
economy of India, growth in India and China increasingly shifted the center of gravity of the global economy towards Asia. By the late 2000s, China's economic growth rate exceeded 11% while India's growth rate increased to around 9%. One of the factors was the sheer size of the population in this region. Meanwhile, South Korea, Taiwan, Hong Kong and Singapore emerged as the
Four Asian Tigers with their GDPs growing well above 7% per year in the 1980s and the 1990s. Their economies were mainly driven by growing exports. The Philippines only began to open up its stagnated economy in the early 1990s. Vietnam's economy began to grow in 1995, shortly after the United States and
Vietnam restored economic and political ties. Throughout the 1990s, the manufacturing ability and cheap labor markets in Asian developing nations allowed companies to establish themselves in many of the industries previously dominated by companies from developed nations. By the dawn of the 21st century, Asia became the world's largest continental source of
automobiles,
machinery, audio equipment and other
electronics. At the end of 1997, Thailand was hit by
currency speculators, and the value of the
Baht along with its annual growth rate fell dramatically. Soon after, the
1997 Asian financial crisis spread to the ASEAN region, South Korea and other countries in Asia, resulting in great economic damage on the affected countries (but with Japan and China both largely escaping the crisis). In fact, some of the economies, most notably those of Thailand, Indonesia, and South Korea actually contracted. By 1999, most countries had already recovered from the crisis. In 2001, almost all economies in both Europe and Asia were adversely affected by the
September 11 attacks, with Indonesia and Japan was hardest. Both continents quickly recovered from the attacks in United States after more than a year. In 2004, parts of Sumatra and South Asia were severely damaged by
an earthquake and the subsequent tsunami. The tsunami wreaked havoc, causing massive damage in the infrastructure of the hit areas, particularly Indonesia, and displaced millions. For a short time, GDP contracted among nations such as
Indonesia and
Sri Lanka, despite massive inflow of foreign aid in the aftermath of the disaster. The
economy of Japan suffered its worst post-World War II economic stagnation set in the early 1990s (which coincided with the end of
Cold War), which was triggered by the latter event of the
1997 Asian financial crisis. It, however, rebounded strongly in the early 2000s due to strong growth in exports, although unable to counteract China in 2005 after China gradually surpassed it as the largest economy in Asia. From 1995 to 2005, share of Asian foreign exchange reserves had risen from 46 percent to 67 percent. From 2002 to 2005, central banks in Asia alone accounted for three-quarters of total global currency reserve buildup.
2008–2019 The
2008 financial crisis, triggered by the housing bubble in the
United States, caused a significant decline in the GDP of the majority of the
European economies. In contrast, most Asian economies experienced a temporary slowdown in their rates of economic growth, particularly
Japan,
Taiwan,
South Korea, and
China, resuming their normal growth soon after. The
Arab Spring and the ensuing civil unrests since 2011 had caused economic malaise in
Syria,
Lebanon and
Yemen, amongst the most adversely affected nations in the Middle East. At the same time, in the early 2010s,
Iraq,
Saudi Arabia, the
United Arab Emirates and
Kuwait registered their highest GDP growths on record in the years that followed due to increased oil prices and further diversification of exports, as well as rising
foreign exchange reserves. In 2013, in a once-in-a-decade party leadership reshuffle in
China (change of
Hu-Wen Administration to
Xi-Li Administration), the Chinese economy experienced a significant slowdown in the GDP growth, slowing down from the unprecedented decades of 9–10% annual growth to around 7–8%, which has significant effect in some developing economies, particularly in Southeast Asia and
India. The
Philippines, however, managed to grow at rates at par with China in the period 2012–2013, and became the world's fastest growing emerging market economy in the second half of the 2010s decade, overtaking
Malaysia in 2017 as the fourth largest economy overall in Southeast Asia. It also recovered after getting hit by
Typhoon Haiyan, the strongest storm on record to make landfall, in November 2013, which killed at least 5,200 and displacing millions more. On September 29, 2013, China opened the
Shanghai Free-Trade Zone. This free trade zone allows international trade to be conducted with fewer restrictions and lower customs duties. The zone is tax free for the first ten years to encourage foreign direct investment (FDI) with a 'negative list' used to regulate in which fields foreign investments are prohibited. In 2018,
India has overtaken
Japan as the second largest economy in Asia and the third largest overall in the world, while
China has overtaken the
U.S. in terms of purchasing power parity or
GDP (PPP) in the world, marking the first time in almost 2 centuries that any country outside the Americas and Europe has taken the top spot globally.
2020–present The Asian economies were affected by the demographic shifts between
China and
India, the latter becoming the world's most populous country in the middle of the decade, as well as the
COVID-19 pandemic that started in the
Hubei province of
China, the country of origin of the first confirmed virus case.
China's economy experienced its first contraction in the post-
Mao era as a result of the
COVID-19 pandemic.
Iran is the second worst-hit country in Asia in terms of mortality rate after India, raising concerns of an economic collapse following the U.S. expansion of
sanctions against them during the
Trump administration since 2019 and declining oil prices due to both the
ongoing economic collapse in Venezuela and the
oil price war between Saudi Arabia and Russia.
Japan was also affected by the
COVID-19 pandemic amidst its
declining population and a
stagnant economy since the 2011
Fukushima nuclear accident, with its postponed hosting of the
Summer Olympics to 2021.
South Korea,
Singapore,
Qatar, the
Philippines,
Indonesia and
India were also affected by the
COVID-19 pandemic, further raising fears of a
recession across the continent after a streak of
stock market losses in the region amidst
nationwide lockdown in India and continued school and work closures in China, effectively quarantining more than 2 billion people (a quarter of the world's current human population).
Turkey was one of the few nations in the globe where activity continued to grow throughout the COVID pandemic, while Central Asian nations withstood the crisis with less economic damage. Turkey and Syria's economies, however, faced pressure as a result of the
series of earthquakes that struck both countries in 2023 alongside continuing
economic sanctions against both countries. The
economic contractions in nations with strong tourism-focused economies and nations with stricter pandemic containment policies, particularly in Thailand and Indonesia, were shorter but both significantly more severe during the COVID pandemic.
Vietnam's economy, however, benefited from their
strong COVID pandemic response and overtook the Philippines as the third largest economy in Southeast Asia in 2022.
Future Asia's large economic disparities are a source of major continuing tension in the region. While global economic powers China, Japan, India, South Korea, Taiwan continue powering through, and Indonesia, Malaysia, Philippines,
Thailand, Vietnam, Bangladesh and
Sri Lanka have entered the path to long-term growth, regions right next to these countries are in severe need of assistance. Given the enormous quantity of cheap labor in the region, particularly in China and India, where large workforces provide an economic advantage over other countries, the rising standard of living will eventually lead to a slow-down. Asia is also riddled with political problems that threaten not just the economies, but the general stability of the region and world. The nuclear neighbours, Pakistan and India, constantly
pose a threat to each other, causing their governments to invest heavily in
military spending. Another potential global danger posed by the economy of Asia is the growing accumulation of
foreign exchange reserves. The countries/regions with the largest foreign reserves are mostly in Asia – China (Mainland – $3,205 billion & Hong Kong – $430.7 billion, April 2023), Japan ($1,253 billion, June 2023), Russia ($599 billion, May 2023), India ($594.8 billion, August 2023), Taiwan ($566.4 billion, July 2023), South Korea ($418.3 billion, August 2023), and
Singapore ($326.7 billion, July 2023). This increasingly means that the interchangeability of the Euro, USD, and GBP are heavily influenced by Asian central banks. Some economists in the western countries see this as a negative influence, prompting their respective governments to take action. According to the
World Bank, China surpassed the United States and the European Union to become the world's largest economy in terms of purchasing power by early 2015, followed by India. Both countries are expected to rank in the same positions between 2020 and 2040. Moreover, based on Hurun Report, for the first time in 2012 Asia surpassed North America in amount of
billionaires. 951 billionaires came from Asia, whereas North America had 777 billionaires and Europe with 536 billionaires. Businesses anticipate that it will take an average of five months for revenues to return to pre-pandemic levels and two months for the workforce to do the same. It is anticipated that Central Asian nations will be more severely impacted. Only 4% of those businesses that were permanently closed anticipate to open again, with the impacted industries' levels of heterogeneity ranging from 3% in the
lodging and
food services sector to 27% in the
retail trade sector. ==Regional variation==