Asia was relatively rich in the ancient times. China and India alternated in being the largest economies in the world from 1 A.D to about 1800 A.D. China was a major economic power and attracted many to the east, and for many the legendary wealth and prosperity of the ancient culture of India personified South Asia, attracting European commerce, exploration and colonialism. The accidental discovery of America by Columbus in search for India demonstrates this deep fascination.

The Silk Road became the main East-West trading route in the Asian hitherland while the Straits of Malacca stood as a major sea route. In the Straits of Malacca, Malacca established itself as an important port in Asia.


Asian Economy The economy of Asia comprises more than 4 billion people (60% of the world population), living in 46 different states. In addition to this, there are six further states that lie partly in Asia, but are considered to belong to another region economically and politically. As in all world regions, the wealth of Asia differs widely between, and within, states. This is due to its vast size, meaning a huge range of differing cultures, environments, historical ties and government systems.

The largest economies in Asia in terms of nominal GDP (Gross Domestic Product) are Japan and China. This demonstrates the huge disparity in wealth in Asia, with Japan being the world's second largest economy by nominal GDP, and Cambodia being one of the poorest. In terms of GDP by purchasing power parity however, China has the largest economy in Asia and the second largest economy in the world, followed by Japan and India as the world's third and fourth largest economies respectively. South Korea also has one of the largest economies in Asia and the 11th largest in the world by nominal GDP.

Liberalization & Economic Development

After the liberalization of the economy of India, undertaken by the then finance minister and current Prime Minister of India, Dr. Manmohan Singh, the Indian economy coupled with the Chinese economy which was already booming under the economic measures undertaken by Jiang Zemin powered Asia to being one of the hotspots for world trade.

Currently, as China's Economy topped 10%, and India's Economy around 9% alongside with Pakistan's average growth of 7-8%. Although the large number of India's population living with HIV/AIDS could be a major problem for India, it is predicted that by 2015 close to 50 to 100 Million people could be infected with the HIV/AIDS virus, prompting the government to spend more money on controling the AIDS spread causing foreign investors to invest more money in Pakistan and China.

Asia has started showing its potential. One of the favorable (or unfavorable, depending upon one's point of view) factors is the sheer size of the population in this region.

Meanwhile, Thailand, Malaysia and Indonesia emerged as the new Asian tigers with their GDPs growing well above 7% per year in the 1980s and the 90s. Their economies were mainly driven by growing exports. The Philippines also considered a new Asian Tiger began to open up its economy again in the early in the 90's. Vietnam's economy began to grow in 1995, shortly after the US and Vietnam restored economic and political ties.

Throughout the 1990s, the manufacturing ability and cheap labor markets in Asian developing nations allowed companies there to establish themselves in many of the industries previously dominated by companies from developed nations. Asia became one of the largest sources of automobiles, machinery, audio equipment and other electronics.

Asian Financial Crisis

At the end of 1997, Thailand was hit by currency speculators and the value of the Baht along with its annual growth rate fell dramatically. Soon after, the crisis spread to Indonesia, Malaysia, South Korea, Hong Kong, Singapore and many other Asian economies and inflicted great economic damage on the affected countries though Japan were relatively unaffected. In fact, some of the economies, most notably those of Thailand, Indonesia, and South Korea actually contracted. This later would be known as the Asian financial crisis. By 1999, most countries had already recovered from the crisis.

In 2004, parts of Sumatra and South Asia were severely damaged by an earthquake and the subsequent tsunami. The natural disaster wiped out huge amounts of infrastructure throughout the affected area and displaced millions.

Future of Asian Ecomony

Asia faces severe disparities, which is a source of major tension in the region. While "East Asian Tigers" such as China, India, South Korea, Japan, Taiwan (ROC), and Singapore keep powering their way through, and Indonesia, Malaysia, Thailand, the Philippines, and Vietnam have entered the path to long-term growth, there are regions right next to these countries that are in need of severe assistance.

Given the large number cheap and amply available labor in the region, particularly in China and India, where their large workforce gives them an economical advantage over other countries, the rising standard of living in these countries will eventually lead to a slow-down.

Asia is also riddled with political problems that threaten not just the economies, but also the general stability of the region and world. The nuclear neighbors - China and India constantly pose a threat to each other, causing their governments to heavily invest in military spending. The Korean peninsula is also a very volatile area.

Currently, North Korea is developing a nuclear weapons program, which poses a major threat to its neighbors, particularly South Korea and Japan, and to US military forces stationed in South Korea.

Military intervention by the United States in Afghanistan and Iraq has also fanned the flames of the extremism and resulted in several terrorist attacks in a number of Asian countries. Another impending crisis is the running out of oil reserves in Arabia region. Most of these economies have traditionally been over-dependent on oil and are finding hard to establish another pillar in their economy.

Foreign Exchange Reserves

Yet another potential danger posed by the economy of Asia to the rest of the world is the growing accumulation of foreign exchange reserves. The countries with the largest foreign reserves are mostly in Asia - China (Mainland - $988 billion & Hong Kong - $130 billion, September 2006), Japan ($881 billion, September 2006), Taiwan ($261 billion, September 2006), the Republic of Korea ($228 billion, September 2006), Singapore ($129 billion, June 2005), India ($200 billion, April 2007).

This increasingly means that the interchangeability of the Euro, USD, and GBP are heavily influenced by Asian central banks. Some economists in the western countries see this as a bad thing, prompting their respective governments to take action.