A combination of the so-called ‘Zoom Boom’, the ratification of a new region-wide FTA and news that Japan’s economy had bounced back from recession after a very difficult nine months has put the Asia Pacific region firmly in the driving seat as the world makes the long journey back to economic normality.
Asian economies are among the largest producers of laptops, communication equipment and other electronics and have been the first to benefit from the Zoom Boom, the term being used to describe increased demand for personal ICT hardware and software triggered by the exponential growth in the number of people working from home. Six of the world’s ten largest tech hardware manufactures – Samsung, HNHPF, Sony, Panasonic, Leonovo and LG – are based in the Asia Pacific, and most of the remainder outsource significant proportions of their production there as well. Along with China and India, Malaysia is now also fast emerging as a key player in the software outsourcing market and now counts companies like HP, DELL, and HSBC as recent or current clients.
This will have certainly helped Japan post a 5% quarterly growth for the three months ending in September compared to a record Q2 slump of 8.2%. Key factors in this impressive recovery were in turn 4.7% and 7% rises in domestic consumption and exports respectively, compared to vertiginous declines of 8.1% and 17.4% in Q2. This performance will be seen as a vindication of the $2.2 trillion that former Prime Minister pumped into the economy in two stimulus packages before he stepped down in August.
It will also give some encouragement to his successor Yoshihide Suga, who has already instructed his cabinet to come up with another package to boost Japan’s pandemic-hit economy. Many believe that the respite may be short lived, however; the Japanese economy is still expected to shrink by 5.6% for its full fiscal year, which ends in March 2021.
The Zoom Boom, too, may turn out to be a fleeting phenomenon. On the other hand, the RCEP, the newly formed pan-regional FTA that was formally ratified – by Zoom, appropriately – at the ASEAN summit last week should have a more enduring effect. Over the next 20 years, the RCEP (which is short for the Regional Comprehensive Economic Partnership) will push the relatively low industrial and agricultural tariffs currently agreed by member countries even lower. Its mandate also includes provisions on intellectual property, telecommunications, financial services, e-commerce and professional services.Its footprint will cover 30% of both the global economy and population, thereby creating a consumer base of 2.2 billion stretching from Japan to New Zealand.
The authorities in Beijing have spent the best part of a decade lobbying to get the RCEP put in place and sinophobes now worry that China, home to 1.3 billion people and therefore by far its biggest member, will use it for its own soft-power purposes. They will surely have taken Chinese Premier Li Keqiang’s assertion that the agreement represented “a victory of multilateralism and free trade” with a liberal handful of salt.