The Asian Century That Never Was

I remember leafing through the IMF’s April tables on a drizzly London afternoon, coffee cooling beside the laptop, and thinking: on paper, East Asia looks like the future. Most of the curves still slant up and to the right; the region’s GDP bars spring higher every year like enthusiastic seedlings. Yet, the more I stared, the more the spreadsheet felt like one of those optical illusions where the staircase climbs forever but somehow never rises. Strip away the headline figures, and you discover an uncomfortable truth: East Asia’s economic heft rests on scaffolding built elsewhere, and the boards are starting to creak.

Built for export—or bust

Take Taiwan. Its factories are the lungs of the global electronics industry, yet roughly 127 per cent of its GDP rides on trade flows. Put simply, the island sells the equivalent of more than its entire economic output to someone else every year. Singapore tops even that acrobatics act: in 2023 trade equalled a gob-smacking three times its GDP. When Western consumers sneeze, these economies contract flu.

The South Korean numbers show how quickly the fever hits. In 2023 global gadget demand softened, exports sank 7 per cent, and Seoul chalked up its first trade deficit with China in three decades. Meanwhile, China itself—supposedly the self-contained behemoth—leaned harder on foreign demand than at any point since the financial crisis. A RAND study released in June notes, with academic understatement, that “China’s external sector has become increasingly important given continued weakness in household consumption.” Translation: if American shoppers close their wallets, Beijing’s growth engine starts coughing.

Assembly lines dressed as laboratories

Fans of the “Asian Century” mantra love to cite the region’s gadget bonanza: fancy phones, wafer-thin laptops, electric SUVs. What they elide is the distinction between making and inventing. Yes, Chinese firms can stamp out more EV batteries in a month than Germany manages in a year, but much of the intellectual heavy lifting—the chemistry, the precision machinery, the lithography lasers—still arrives in crates from Europe, the United States or Japan.

China remains the world’s largest aviation market, yet its first home-grown passenger jet is still struggling to win foreign safety certification. MRI units in Chinese hospitals? Largely GE, Siemens, or Philips. In Vietnam, often hailed as the “next China,” a Lowy Institute study shows that over half the components that roll into Ho Chi Minh City from Chinese ports are simply screwed together, boxed up, and shipped on to American shelves with a Made in Vietnam sticker. That isn’t technological emancipation; it’s clever tariff gymnastics.

The missing middle class

If all that outward dependency sounds risky, optimists usually counter with the mother-of-all trump cards: 1.4 billion Chinese consumers. The slogan is so familiar that it has become background hum—like the Piccadilly line tannoy, or a podcast you stopped listening to half an hour ago. The awkward fact is that the domestic demand miracle keeps failing to materialise. Retail sales in China in late 2024 scraped along at about three per cent growth—miles below what you would expect from a country supposedly pivoting toward consumption. Even Xiaomi, once the poster-child of the aspiring urban customer, has started grumbling publicly about “weak sentiment.”

Why won’t Chinese households spend? The reasons have been rehearsed to death: a threadbare welfare net, sky-high property prices, lingering pandemic scarring, and a culture of precautionary saving. As long as those drivers remain, Beijing’s default reflex is to crank up the factories whenever the home market splutters—and ship the surplus abroad. That works beautifully until Washington starts slapping export controls on semiconductors or Europe begins muttering about carbon tariffs.

The demographic time-bomb

Numbers, again, cut through the fog. South Korea’s fertility rate now hovers around 0.7. China’s has slipped well below replacement level. Taiwan isn’t far behind. A Foreign Affairs essay from last year spells out the consequences in one neat line: “East Asia is on the cusp of the steepest age inversion in modern history.” By 2050 China could be home to more octogenarians than the United States has citizens today—a staggering prospect. Fewer workers, slower innovation, ballooning pension bills: the recipe writes itself.

Contrast that with North America, where immigration and a comparatively higher fertility rate keep the population curve gently rising. The United States may have its own political migraines, but a shrinking workforce isn’t one of them. Europe, too, confronts ageing, but at least it isn’t carrying the same export dependence or energy insecurity that haunts East Asia.

Strategic choke-points

Technological self-reliance is Beijing’s new mantra, yet the map of choke-points remains brutally clear. The Dutch firm ASML still owns the only machines that etch the tiniest transistor gates. American software licences underpin almost every advanced chip design tool. German or Japanese engineers dominate specialised bearings, carbon composites, and high-pressure pumps. Shut any one of those valves and the regional supply chain judders.

South Korean chipmakers discovered this the hard way when Washington tightened rules on fab equipment headed for the mainland. Seoul secured temporary waivers, but the message landed: the West still holds the keys to the castle. Singaporean officials, ever the pragmatic ones, publicly admit that a trade-dependent city-state cannot afford to pick sides—and yet it must, sooner or later, if U.S.–China rivalry keeps hardening.

Peaking powers and sharp elbows

History is unkind to giants who sense their peak approaching. Scholars who track so-called peaking powers note a grim pattern: slowing growth, demographic drag, a fear of encirclement—and a tendency to lash out before the window of opportunity closes. China now ticks enough of those boxes to make the region nervous. If Beijing concludes that its economic upswing is running out of runway, it may gamble abroad to secure strategic buffers or simply rally domestic support. Taiwan, the South China Sea, perhaps even supply chains in Southeast Asia—all lie within the potential blast radius.

For investors, that means factoring geopolitical tail-risk into what was once dubbed the world’s safest production playground. For local governments, it means diverting budgets from R&D into missile batteries. Neither shift bodes well for growth.

Why the twenty-first century won’t wear an Asian label

So where does that leave the grand narrative—that the baton of economic leadership would pass smoothly from West to East? A sober reading suggests it was always more marketing strapline than inevitability. East Asia’s success, dazzling as it is, stands on five fragile pillars:

1. Outsized trade dependence – spectacular in a boom, brutal in a bust.
2. Assembly over invention – high-value input still bought, not built.
3. Under-powered consumers – household demand lags far behind output.
4. Demographic headwinds – the worker base is thinning, retirees are swelling.
5. Foreign choke-points – the West retains veto power over critical tech.

None of those weaknesses is fatal on its own, but fused together they undermine any claim to regional economic primacy. By contrast, the United States and Europe—though hardly models of perfection—enjoy deeper internal markets, broader natural resources, and a decisive lead in foundational technologies.

The next ten years: grit or drift?

East Asian policymakers know the diagnosis. They talk, quite rightly, about lifting wages, thickening safety nets, and pushing up the value chain. The snag is that every cure collides with vested interests. Higher wages pinch wafer-thin export margins; turbo-charged welfare means re-wiring fiscally conservative budgets; chasing genuine innovation requires accepting a tolerance for failure that bureaucracies loathe.

If those reforms stall, the region could stumble into the 2030s with slower growth, excess capacity and rising debt—uncomfortably reminiscent of Japan’s lost decades, but without Japan’s social cohesion or low security risk. In that scenario, the real drama would not be an Asian Century but rather an Asian Adjustment: a long, uneven effort to rebalance towards domestic resilience while dodging geopolitical potholes.

Closing thought

Data can mesmerise. I’ve fallen for the tidy upward slopes myself—one too many late nights lost in Excel’s soft glow. But economies are stories as much as statistics, and the East Asian story is more brittle than the graphs suggest. The region remains an indispensable part of the global machine, yet the idea that it will dominate the century now feels like yesterday’s headline.

Perhaps the more honest outlook is one of interdependence. East Asia still needs Western demand and technology; the West still wants the region’s efficiency and talent. Neither side can easily sever the umbilical cord—but the power balance within that circuitry is tilting back towards the origins of the design. In other words: after a generation of “racing towards innovation,” East Asia may discover it has been sprinting on a treadmill powered from Silicon Valley and Munich all along.

If the coming decade proves anything, it will be whether the region can step off that treadmill, build its own motor, and set a new pace before fatigue sets in. Until then, talk of an Asian-branded era remains, at best, premature—and at worst, a mirage shimmering above an export conveyor belt that never quite leads home.