Wan Ge reports from Tokyo

With more than half of 2026 already behind us, Asia’s economy presents a picture that is both complex and increasingly clear.

In its World Economic Outlook released in July, the International Monetary Fund lowered its forecast for global economic growth to 3.0%, while raising its projection for China to 4.6%. The Asian Development Bank expects developing economies in Asia and the Pacific to grow by 4.9% in 2026, while reports from the Boao Forum for Asia indicate that Asian economies will account for 49.7% of global GDP and contribute more than 60% of worldwide economic growth.

The global economy is slowing, while Asia continues to expand. Yet the way in which Asia is growing is also undergoing a profound transformation.

This transformation can be understood through four interconnected dimensions: the restructuring of the global industrial hierarchy, China’s role as an economic engine, the growing pains confronting India and Japan, and Hong Kong’s recovery alongside the upgrading of China’s foreign trade. When these developments are viewed together, a panoramic picture of a new Asian economic landscape begins to emerge. The restructuring has only just begun, but it is already redefining Asia’s position in the world economy.

A Centre of Gravity Shifting Eastward

To understand this transformation, one must first recognise a broader trend: the centre of gravity of the global economy is moving eastward.

According to the Boao Forum for Asia, Asian economies’ share of global GDP, measured by purchasing power parity, is expected to rise from 49.2% in 2025 to 49.7% in 2026. IMF data further show that Asia now contributes more than 60% of global growth. As IMF Managing Director Kristalina Georgieva has observed, it is no longer possible to discuss the future of the world economy without discussing Asia.

This shift, however, is not evenly distributed. China remains the largest single engine, accounting for approximately 30% of global economic growth. Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, has provided a more precise estimate: every one-percentage-point increase in China’s economic growth raises growth across global emerging markets by around 0.3 percentage points.

China is not Asia’s only growth centre. ASEAN is emerging as a new manufacturing hub. Vietnam continues to lead the region with growth of 7.2%, while Malaysia has overtaken Vietnam for the first time to become Asia’s second-most competitive manufacturing economy. South Korea, Japan and India are also attempting to redefine their positions within a changing regional order.

The geography of growth is changing, and so are the rules. New sources of momentum are emerging as older models lose their effectiveness.

Four New Growth Centres Taking Shape

Restructuring also means renewal. Four new growth centres are beginning to take shape within Asia’s economic transformation.

The first is the upgrading of China’s advanced manufacturing sector. The Hamilton Index, published by the US-based Information Technology and Innovation Foundation, shows that China accounts for 24.9% of total global output across ten advanced industries, ranking first worldwide and leading in seven individual sectors. Since 1995, China’s output in these industries has increased by more than 2,200%. From a “torrent of steel” to an “electromechanical revolution,” Chinese manufacturing is moving beyond expansion in scale towards qualitative technological breakthroughs.

The second is ASEAN’s growing role in absorbing and reorganising regional supply chains. Asia’s manufacturing purchasing managers’ index reached 51.7 in June 2026 and remained above the 50-point expansion threshold for a third consecutive month. Malaysia is evolving from a beneficiary of the “China Plus One” strategy into a central node within a broader “China Plus N” production network, while Vietnam continues to lead regional growth at 7.2%. The restructuring of Asian supply chains is shifting away from a model driven primarily by cost and towards one shaped by risk management and regional coordination.

The third is Hong Kong’s transformation into a global wealth hub. Hong Kong has overtaken Switzerland for the first time to become the world’s largest centre for cross-border wealth management, with cross-border assets reaching US$2.95 trillion. The number of family offices in the city increased by approximately 680 over two years, representing growth of more than 25%. Hong Kong is evolving from an international financial centre into a global hub for private wealth.

The fourth is the emergence of a new generation of export industries. In the first half of 2026, China’s total trade in goods exceeded RMB25 trillion for the first time in any comparable period. The established “new three”—electric vehicles, lithium-ion batteries and solar cells—continued to lead export growth, while exports of AI-related infrastructure products, including integrated circuits, semiconductors and optical modules, rose by 90% year on year. Overall exports of high-technology products increased by more than 30%. China’s foreign trade is undergoing a profound transition from green industries towards intelligent technologies.

South Korea and Central Asia have also recorded notable progress during this period, although neither yet stands alongside these four as an independent new growth centre. They are better understood as important variables within Asia’s economic transformation.

South Korea is, in effect, a growth engine within the broader Asian growth system. Its AI chip industry is one of the central forces driving the expansion of Asian manufacturing, but South Korea itself has yet to develop into a fully balanced new growth region.

Central Asia, meanwhile, represents a highly promising emerging market and a new frontier for the Asian economy. Given its current stage of development and economic scale, however, it remains closer to an underdeveloped “blue-ocean” opportunity awaiting deeper investment than to a mature growth centre.

Three Old Models Losing Their Effectiveness

This transformation can properly be described as a restructuring because three models that once supported Asia’s economic rise are simultaneously losing their effectiveness.

The first is labour-cost arbitrage.

The difficulties confronting India’s IT outsourcing industry offer the clearest example. During the first nine months of the 2025–26 financial year, Tata Consultancy Services, India’s largest IT services company, recorded a net reduction of 25,816 employees. India’s five largest IT companies added a combined net total of only 17 workers during the same period, compared with 17,764 in the corresponding period of the previous financial year.

More than 1.5 million graduates in computer-related disciplines enter India’s labour market every year, yet active technology-sector vacancies have fallen to their lowest level in 28 months. Entry-level vacancies have plunged by 44% year on year.

Artificial intelligence has not eliminated programmers, but it is eliminating jobs based on repetitive, low-level technical work. The advantage once created by inexpensive labour is increasingly being replaced by access to computing power.

The second model losing its effectiveness is the strategy of following technological leaders.

Japan has become a textbook example of the failure of this approach. In 1988, Japanese companies accounted for approximately 50% of the global semiconductor market; by 2024, their share had fallen to just 7.1%. Japan was once expected to use its strengths in precision manufacturing and industrial robotics to secure an important position in the AI era. Yet when a country falls behind at the beginning of a technological cycle, it often falls further behind at every subsequent stage. In artificial intelligence and the digital economy, the network effects created by early leadership are extraordinarily difficult to overcome.

The combined net profits of Japan’s seven major automakers in fiscal 2026 are expected to decline by 48% from the historic peak reached in fiscal 2023. Honda is heading towards its first loss in nearly 70 years as a publicly listed company. The yen has at times weakened beyond ¥162 to the US dollar, while gross government debt has exceeded 204% of GDP.

Technological decline and industrial hollowing-out have formed a self-reinforcing cycle. When old advantages are eroded before new ones are established, even an economic giant can lose ground rapidly amid a new wave of global change.

The third model losing relevance is export-dependent growth.

For decades, many Asian economies relied on selling goods to Europe and the United States to drive expansion. That model is now being transformed. Intra-Asian trade has risen to 58% of the region’s total trade, while China and ASEAN have been each other’s largest trading partners for six consecutive years.

In the first half of 2026, China’s trade with countries participating in the Belt and Road Initiative increased by 13.6%, accounting for 51.2% of its total foreign trade. Trade with ASEAN rose by 18.2%. Asia is developing a more active and increasingly self-sustaining regional economic cycle.

The Restructuring Has Only Just Begun

Asia’s economic transformation is fundamentally the result of three forces converging.

The first is a generational technological leap. Artificial intelligence is reshaping global industrial value chains, from semiconductors and computing power to commercial applications. Existing divisions of labour are being disrupted and new rules are taking shape. Economies that secure positions in emerging technological industries will gain greater control over the next cycle of growth.

The second force is geopolitical restructuring. Trade tensions, supply-chain reorganisation and the eastward movement of capital are compelling Asian economies to reconsider their development models. What began as a defensive response to external pressure is gradually becoming a process of active adjustment.

The third force is the deepening of regional integration. The Regional Comprehensive Economic Partnership has entered its fifth year, and its benefits are evolving beyond tariff reductions towards deeper industrial coordination. The circulation of trade, investment and technology within Asia is accelerating, while a more coherent and self-supporting regional economic system is beginning to emerge.

The convergence of these three forces means that Asia is experiencing more than a cyclical rise or decline. It is undergoing a structural leap. Old growth models are losing their effectiveness, while new economic logic is taking shape. The winners will not necessarily be those that move fastest, but those that retain the ability to evolve continuously amid technological change.

The restructuring has only just begun. Asia’s future will depend on whether it can establish a stable and lasting position under the new rules of the global economy.

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Commentary

Positive Change Is Underway

As this series of reports comes to an end, it is necessary to draw together its central conclusions.

The restructuring of the global industrial hierarchy, the driving force of the Chinese economy, the growing pains confronting India and Japan, and Hong Kong’s recovery together reveal a new outline of Asia. The region is no longer merely a follower attempting to catch up. It is beginning to pursue a path of its own.

For the past three decades, the central narrative of Asia’s economic development was one of catching up—catching up with Europe and the United States and integrating into a system largely shaped by Western economies. Inexpensive labour, export-oriented growth and technological imitation were all effective models, but they shared one common feature: Asia remained primarily a recipient of the rules governing the world economy.

That narrative is now being rewritten.

The Hamilton Index shows that China leads seven advanced industries. Hong Kong has overtaken Switzerland to become the world’s largest cross-border wealth-management centre. ASEAN is evolving from a beneficiary of the “China Plus One” strategy into a central node within a broader “China Plus N” production network. These developments all point towards the same conclusion: Asia is gaining greater power to define the rules and direction of economic development.

Yet such power is not granted by others. It must emerge from within.

The growing pains are equally real. India’s IT outsourcing industry is being disrupted by artificial intelligence, Japan faces multiple industrial difficulties, and concerns are emerging over South Korea’s dependence on semiconductors as a single engine of growth. The failure of old models is itself part of the restructuring process. Declining industries do not disappear overnight; they are gradually displaced by changing times. New industries do not emerge instantaneously either; they grow step by step.

Asia’s prosperity should never be taken for granted. The economies that achieve lasting stability are those that continue to evolve through periods of technological transformation.

This restructuring has only just begun. Whatever direction the future may take, one point is already clear: Asia will not return to its former position. Through technology, markets and its own distinctive development models, the region is redefining its role in the world.