Reflections on Boao Forum for Asia 2024: China's role as Asia's beacon of stability

Editor's note: Jimmy Zhu is the chief strategist at Fullerton Research. The article reflects the author's opinions and not necessarily the views of CGTN.

China's economic resurgence in 2024 underscored its pivotal role in driving Asia's growth trajectory. As seen at the Boao Forum for Asia (BFA) Annual Conference 2024, the country aims to deepen its integration with the global economy and continue to drive economic expansion in Asia. Its leadership role is becoming increasingly indispensable in shaping the region's economic trajectory and contributing to global stability.

According to a report released at the BFA, global dependence on Asian trade in goods stayed stable, and the trade dependence between Asian economies remained at a high level in 2022. Both China and the Association of Southeast Asian Nations (ASEAN) continued to enjoy their status as regional hubs for trade in goods.

Fueled by robust exports and resilient domestic demand, most economies across Asia are poised to outpace their Western counterparts in terms of growth. As for China, the largest economy in the region, a slew of recent data underscores the resilience and momentum of the domestic economy, painting a picture of steady recovery and providing impetus for the broader Asian region.

Indeed, China in particular stands out as a significant driver in this regional narrative. In the initial months of 2024, China's economic momentum surged unexpectedly, laying a robust groundwork for the year. Newly unveiled figures from the National Bureau of Statistics showed a striking 7 percent upswing in industrial output during this timeframe, surpassing prognostications of a mere 5 percent increment. This acceleration was the sharpest growth spurt observed in nearly two years, signaling a remarkable resilience within China's manufacturing domain amid turbulent global conditions.

This resilience has not only bolstered China's economic stability but also reflected its capacity to adapt and innovate in the face of adversity. This robust performance not only underscores the strength of China's manufacturing sector but also bodes well for its overall economic outlook. Equally encouraging is the performance of China's retail sales, a key indicator of domestic consumption. Retail sales still managed to expand by 5.5 percent, beating expectations for a 5.2 percent gain.

Positive ramifications for broader Asian economy

The impressive domestic economic performance in the first two months of the year is poised to have positive ramifications for the broader regional economy in Asia. Robust industrial output signals increased demand for raw materials and intermediate goods from other Asian countries, particularly those that are part of China's extensive supply chain network. As Chinese industries ramp up production, they will require inputs sourced from neighboring countries, thereby stimulating trade and economic activities across the region.

For example, Chinese industries rely heavily on South Korean electronic components and machinery for production, making South Korea a crucial supplier to China's supply chain. The uptick in Chinese industrial activity will lead to higher demand for South Korean exports, driving economic growth in South Korea. In January, Korea's exports to China grew over 16 percent from a year ago, the biggest increase since early 2022.

Similarly, Vietnam has emerged as a key destination for manufacturing outsourcing, particularly in labor-intensive industries such as textiles, apparel and electronics. As Chinese industries ramp up production, demand for inputs sourced from Vietnam, such as textiles and components, is expected to increase, stimulating economic activity in Vietnam.

The strength of the retail sales sector, fueled in part by the Chinese Lunar New Year holiday, suggests sustained consumer demand within the country. This is likely to benefit Asian exporters, as China remains a key market for a wide range of consumer goods, including electronics, apparel and food products. Increased demand from Chinese consumers can boost exports from Asian countries, supporting growth in their respective economies.

Opportunities and challenges in neighboring economies

Regional economic integration continues to move forward in Asia, as reported by the BFA. Regional economic integration fosters closer economic ties among Asian countries, leading to increased trade flows, investment and collaboration in various sectors.

Asian countries often share common economic goals and interests, such as promoting trade liberalization, enhancing infrastructure development, and fostering innovation and technological advancement. Regional integration initiatives, such as free trade agreements and economic partnerships, provide platforms for countries to work together toward achieving these goals collectively.

There is some good news. The International Monetary Fund's analysis projecting a staggering $3.5 trillion addition to China's economy over the next 15 years highlights the immense potential of prioritizing domestic consumption as a driver of growth. Such a boost would not only reshape China's economic landscape but also reverberate across global markets, signaling a profound shift in the dynamics of the world's second-largest economy.

China's shift towards domestic consumption-led growth could also present opportunities for regional partners to participate in China's supply chain. As Chinese industries focus more on meeting domestic demand, there may be increased demand for inputs and intermediate goods from neighboring countries, further deepening economic ties and integration in the region.

So, there is vast untapped potential for consumption growth across various sectors, from retail and services to healthcare and leisure. By unleashing this pent-up demand, policymakers can unleash a virtuous cycle of economic activity, stimulating investment, job creation and innovation. 

Moreover, the projected $3.5 trillion addition to China's economy over the next 15 years represents more than just a numerical figure – it symbolizes a fundamental reorientation of economic priorities. As China deepens its integration with the global economy through initiatives such as the Belt and Road Initiative and regional trade agreements, its role as a driver of Asian and global economic prosperity is set to strengthen.

As China, with its massive consumer base, shifts towards greater consumption-led growth, it will create opportunities for other Asian economies to tap into its domestic market through increased trade and investment flows. This will particularly benefit countries in the region that are export-oriented and rely heavily on Chinese demand for their goods and services.