On Saturday, April 25, 2015, the Himalayan nation of Nepal suffered a massive 7.8 magnitude earthquake. The results: at least 3,000 people dead and damage to the tiny nation’s economy that will likely last for years. Yet, for many Westerners, this small nation’s culture and economic climate remains a mystery.
A Glimpse at the Nepalese Economy
Less than two years after reports first appeared in October 2013 about the formation of a new specialized development bank focused on Asia, China’s Asian Infrastructure Investment Bank (AIIB) has become a reality.
While its birth has given rise to international tensions, it has also offered hope to developing countries that need an enormous amount of infrastructure investment in coming years.
Global economic growth is going to disappoint previous expectations, according to a new report by the World Bank.
In a move some economists were expecting, the World Bank slashed its growth forecasts for many nations throughout Asia, citing weakness in China as a negative catalyst for the rest of the region.
Economic data from China and India suggest global demand has halted and economic activity may decline further in the future.
In China, exports fell by double digits in March, the worst data to come from the largest Asian economy in over a year. In total, exports fell 15% in total, a decline attributed largely to the strength in the Chinese yuan, which has made exports less competitive relative to other manufacturing countries.
The China-led Asian Infrastructure Investment Bank (AIIB) will serve to ease the looming liquidity drought in infrastructure financing. As the World Bank and the Asian Development Bank move toward concessional lending and knowledge sharing with low-income countries, it leaves the AIIB with an important niche to fill.
Several separate economic indicators suggest Asian economies are seeing accelerating weakness, fueling speculation that more Asian banks will begin monetary stimulus programs.
Manufacturing and service growth in China saw sluggish growth after falling in February, with the Purchasing Managers’ Index rising to 50.1 in March from 49.9 in the prior month, indicating a slight expansion.
For the ASEAN member states, the benchmark of successful regionalism has been ASEAN’s effectiveness in bringing the region closer. The lack of interstate conflict is a credit to ASEAN’s success in moulding a greater regional consciousness among policymakers. But while the region has been performing well since it adopted the ASEAN Charter in November 2007, integration is still an aspiration that remains unfulfilled.
Japan and China’s economies continue to deteriorate as more indicators signal a growth slowdown.
In Japan, industrial production failed to meet expectations in February as less Japanese consumers opened their purse strings and spent in the economy. The trend towards rising savings rates and falling consumer spending indicates that the Bank of Japan’s aggressive quantitative easing program is failing to stimulate growth.
Abenomics Stalls
Everybody seems excited about the rise of a new, global middle class — especially in Asia. A report from Deutsche Bank states that ‘the burgeoning of Asia’s middle class makes it an important consumer market, an engine of economic growth in the region, and an important global political force’.
Economic institutions, international and national, are key factors in Asian development strategies. Those economies which have exhausted the growth gained from the traditional mobilisation of capital and labour are now reforming the supply-side institutions that encourage new sources of growth from innovation and productivity. Looking to the future, institutions are of increasing significance for taking up at least three roles: governing efficient global value chains, meeting the challenges of returning G20 growth to its long-term potential, and addressing climate change.
