Rhee warns Asia's global growth engine role faces headwinds
Bank of Korea Governor Chang Yong Rhee stated that Asia's role as the engine of global growth faces significant challenges from deglobalization, industrial policy shifts, and technological change. Speaking at the Asia in 2050 Conference on March 5, 2026, he outlined the realities and policy adjustments needed.
Asia's rise: From 20% to 60% of global growth
Asia's contribution to global growth surged from roughly 20% in the 1970s to 60% today, lifting over 1.2 billion people out of poverty.
China was a primary driver, with its share climbing from 5% in the 1970s to 35% by the mid-2010s.
However, China's contribution is now projected to decline to 27% due to geopolitical tensions, population aging, and real estate deleveraging.
India is rapidly filling this gap, now accounting for over 15% of global growth, diversifying Asia's growth drivers.
This manufacturing-led expansion, particularly through 'Factory Asia' centered on China, laid the foundation for a burgeoning middle class, reversing a 200-year trend of widening global income inequality.
Three headwinds challenge export-led model
Rhee identified three major shifts challenging Asia's export-led manufacturing model.
First, 'reglobalization' is reorganizing global supply chains along geopolitical lines, affecting export-oriented Asian economies.
Second, advanced economies are increasingly adopting industrial policies for self-reliance and national security, shifting the global debate from 'whether' to 'how' to pursue such policies.
Third, rapid technological change, including automation and AI, is transforming manufacturing, leading to 'premature deindustrialization' in emerging Asia, where manufacturing employment has stalled at 13%, below the 18% threshold historically associated with high-income status.
Recalibrating government's role
Asia's policymakers must recalibrate their expectations of government's capabilities, moving beyond the 'picking winners' approach that proved effective during earlier catch-up phases.
As countries approach the technological frontier, the government's ability to guarantee commercial viability in specific industries diminishes significantly.
Instead, policies should pivot towards sharing risks with private financial institutions and providing indirect support, drawing lessons from Korea's experience in adapting to these evolving global realities.