Conference Presentation, Panel
Asia's Power Plays: The Economics of Geopolitics
Milken InstitutePrerna Suri, Karen Brooks, Curtis S. Chin, Evan Medeiros, Michael W. Michalak, Yasuhide Nakayama
- Asia's security and economic dynamics are projected to drive broader global trends, leading to a multipolar structure in the Asia-Pacific region rather than Chinese dominance.
- China's economic rebalancing from investment and exports to consumption and services will reduce benefits for commodity exporters and manufacturing hubs like Thailand and Malaysia as supply chains unshore.
- China is expected to face negative political consequences from deploying economic coercion against regional neighbors such as the Philippines, Taiwan, and South Korea.
- The People's Liberation Army will continue deploying activities beyond the first island chain into the second island chain, prompting regional countries to diversify security and trading partners.
- The U.S. administration is currently in a state of evolution with unfilled key diplomatic positions, creating discontinuity in foreign policy including the abandonment of the TPP, while Freedom of Navigation operations continue.
- Market sentiment is increasingly delinking political risks from economic fundamentals, though decoupling between developed and emerging markets may occur if U.S. growth fails to drive the region.
- The TPP-11 agreement is gaining momentum and could be finalized at APEC this year, with American companies potentially factoring membership into investment decisions to secure trade liberalization.
- Japan will strengthen security ties with the U.S., Taiwan, and ASEAN-10 by increasing defense spending on U.S. systems like F-35 aircraft to counter North Korean threats.
- China is unwilling to pressure North Korea into a choice between nuclear disarmament and survival, viewing the regime as a strategic burden it must tolerate to avoid collapse or war.
- The North Korea situation is expected to deteriorate, potentially causing China to lose out as Japan and South Korea enhance defense capabilities and U.S. military presence increases.
- Indonesia and the Philippines are insulated from regional shocks due to strong consumption-led growth, with the Philippines targeting 6.8% growth and a current account surplus.
- Southeast Asian governments must mobilize state resources and seek foreign investment to address infrastructure vulnerabilities, with ambitions expected to transform economies if realized.
- ASEAN is projected to maintain an ASEAN single window across at least five economies by September, though non-tariff barriers within the bloc have risen to between 3,000 and 6,000.
- Governments will face pressure to expand social welfare spending and debt-to-GDP ratios, creating difficult political trade-offs as inflation rises and household debt levels increase.
- Malaysia is expected to implement TPP reforms even after leaving the agreement, while other nations may face headwinds if they cannot rely solely on external demand from China.
- China will utilize military assets, such as the base in Djibouti, to protect its One Belt, One Road investments.