Connecting the Euro-Asian Markets

Asia‘s developing and emerging economies (Developing Asia) and the European Union (EU) are moving closer together. Not only trade relations have intensified considerably, but also financial flows as well as direct investments. There is rapidly growing awareness that both regions need to tackle similar challenges in the future, such as greater climate protection, addressing infrastructure deficits as a key obstacle to growth, and demographic changes. Economic and institutional integration has progressed further in Europe, despite the current politically motivated difficulties within the EU. But also in Asia new initiatives of he same are seen.

 

Significant Increase in Trade

Against the backdrop of a prolonged economic recovery in Asian developing and emerging markets (Developing Asia), trade in goods between these countries and the EU increased heavily over the period 2000-2014 from $ 344 million to around $ 1,250 billion; that means by 3.6 times. Apart from the trade collapse in the global crisis year of 2009 and a temporary weakness in 2012, the increase in trade was steady. In itself, this is a remarkable development. However, trade between these two economies grew even faster than world trade. The EU's main trading partner in Developing Asia is China, where a relevant share of total joint trade increased from 19% to a high of 47% between 2000 and 2014. In spite of China's increasing dominance, however, it would be inappropriate to interpret the trade relations of the two regions only (or to a large extent) narrowed to China. After all, trade without China has increased by an impressive 136% since 2000.

 

Direct Investment with Potential Upwards

Basically, there is the question of how the deficit of the developing Asia region (which is existing without China's reserve assets) has been or will be financed. One source for this is direct investment (FDI). Direct investment is considered a particularly high-quality source of financing. By nature, there are more likely to be long-term exposures that are less subject to real locations and rapid capital outflows than portfolio investment. According to the diagnosis that developing Asia requires capital inflows, in the past considerably more direct investment flowed from the EU to Asia than vice versa. Accordingly, the respective FDI stock differs significantly. Nevertheless, developing Asia's FDI positions in the EU are also notable: they have increased over time and reached over $ 100 billion.