Governor Rhee warns Asia's growth engine role faces new challenges
Bank of Korea Governor Chang Yong Rhee delivered a keynote speech on Asia's economic future, warning that its role as a global growth engine faces significant new challenges. Speaking at the IMF-BOT Asia in 2050 Conference in Bangkok on March 5, 2026, Rhee outlined shifts in globalization, industrial policy, and technology.
Asia's ascent and shifting growth drivers
Asia has transformed dramatically since 1991, with its per capita GDP growing nearly eightfold and lifting over 1.2 billion people out of poverty.
Its contribution to global growth surged from approximately 20% in the 1970s to 60% today.
While China was a major driver, its share is now projected to decline due to geopolitical tensions, population aging, and real estate deleveraging.
However, other regions like India are rapidly filling this gap, now accounting for over 15% of global growth.
Asia's success was largely attributed to export-led manufacturing within a favorable globalizing environment, fostering "Factory Asia" – vertical production networks centered on China.
This model created numerous quality blue-collar jobs, expanding the middle class and significantly reversing global income inequality trends.
New headwinds for export-led growth
Asia's export-led manufacturing model faces three new global challenges.
First, "reglobalization" is reorganizing supply chains geopolitically, meaning price competitiveness alone no longer guarantees market access.
Second, advanced economies are increasingly adopting industrial policies for manufacturing self-reliance, shifting the global trade landscape.
Third, technological changes, especially automation and AI, are causing "premature deindustrialization" in emerging Asia, where manufacturing employment has stalled below historical high-income thresholds.
The potential for service exports as a new growth engine is uncertain, as advanced economies hold strong advantages in high value-added services.
Beyond picking winners
Asian policymakers must recalibrate their expectations of government's role, moving past the "picking winners" strategy.
As economies near the technological frontier, direct state intervention in specific industries proves less effective, requiring a shift towards fostering innovation and risk-sharing with the private sector.
Korea's experience emphasizes that future industrial policy demands adaptability, prioritizing agility over imitation for sustained growth.