Consisting of China, Hong Kong, Japan, Macau, South Korea and Taiwan, the East Asia market offers ample opportunities for businesses looking to expand east to explore new markets In this blog, we unpack key outlooks and statistics for each of these countries, offering valuable insights into why the East Asia market might be the next choice in your business’ global expansion plans.
The outlook for East Asia looks strong
East Asia’s GDP growth continues to be solid, largely due to continued growth in China. In 2022 China’s GDP increased by 3%. Driven by robust domestic demand and a gradual recovery in the global economy and commodity prices, the economies of East Asia are projected to expand at 4.7% in 2024. China’s growth is projected to continue rising despite recent economic difficulties, to 4.4% in 2024.
Over the last two decades, poverty has decreased dramatically across most of developing East Asia. Between 1990 and 2013, the number of people in the region living in extreme poverty fell by over 920 million. The rapid growth in labour incomes among the poor, along with low unemployment, structural transformations, and public investments contributed to this poverty decline.
Additionally, East Asia is also the largest contributor to greenhouse gas emissions, having produced 17.96 billion metric tons of carbon dioxide emissions in 2022. This was more than the combined total emissions of all other regions that year. As such, the region plays a critical role in advancing the global climate change agenda.
China remains the biggest player in the East Asia market
Since the late 1970s, China has moved from a closed, centrally planned system to a more market-oriented one that plays a major global role. China accounts for around 73% of East Asia’s GDP. According to Forbes, “China has implemented reforms in a gradualist fashion, resulting in efficiency gains that have contributed to a more than tenfold increase in GDP since 1978.”
Despite being the world’s #2 economy globally, China’s per capita GDP ($12,720 USD) still falls below the world average. This implies there are opportunities for improved productivity in China.
However, China is not the only sizeable economy in East Asia. In fact, three other countries rank amongst the world’s Top 25. These countries include Japan (#4 – USD 4,230,862 million); the Republic of Korea (#12 – USD 1,709,232 million); and Taiwan (#22 – USD 751,930 million).
Key East Asia Market Investment Opportunities
Here is an in-depth look at each of the countries in the East Asia market and the opportunities they have on offer for international businesses.
China: Despite slowing growth, significant opportunity still exists
Despite a decline in growth amidst the pandemic in 2020, China has steadily regained positive growth, reporting a GDP increase of 4.97% in Q1 2023. A bounce back in growth over the last 3 years sees China holding on to its position as a leading global economy with a GDP of $12.89 trillion USD in 2023. This is due in large part to China’s position as a world leader in manufacturing, including the following sectors:
- mining and ore processing, iron, steel, aluminium, and coal;
- machine building;
- armaments;
- textiles and apparel;
- petroleum; cement; chemicals; fertilisers;
- consumer products (including footwear, toys, and electronics);
- food processing;
- transportation equipment, including automobiles, rail cars and locomotives, ships, aircraft
- telecommunications equipment
Additionally, as a heavy exporter that continues to grow rapidly, China needs to ensure they have efficient and cost-effective logistics capabilities. According to the 2022 Agility Emerging Markets Logistics Index, China has the largest logistics market in the world, based on logistics opportunities and business fundamentals. The corresponding market value of China's logistics industry doubled in 2021, surpassing 335 trillion yuan, with the e-commerce logistics industry expanding swiftly, reaching a 2021 revenue exceeding 850 billion yuan.
As China seems committed to furthering and continuing its growth in investment with the Association of South East Asian Nations (ASEAN) member states, investments in logistics look to provide growth opportunities. Investments in logistics will help grow ASEAN markets. China has also actively been investing in high-speed rail projects in Thailand. They have also expressed interest in the Dawei Special Economic Zone in Myanmar, which is a major port expansion to open shipping lanes to South Asia.
Japan: Increasing economic growth projections
The official estimate for Japan's GDP was $5.281 trillion at the end of 2023, and forecasts for 2024 are positive. The fiscal 2024 economic growth projection is slightly higher than the previous estimate of 1.2%, now projected at 1.6%, largely due to a recovery in inbound tourism and automobile output.
Japan’s government has been keen to restart nuclear power plants that meet strict new safety standards. As of January 2022, there are 33 operable reactors in Japan, of which 10 reactors are currently operating, including the Sendai Nuclear Power Plant in Kagoshima prefecture, and several other reactors around the country. Additionally, 7 reactors have been approved for restart and a further 8 have restart applications under review. The government has identified its nuclear power capacity to produce electricity and avoid importing energy from abroad as key to fueling continued economic growth.
Japan is among the world’s largest and most technologically advanced producers of motor vehicles, electronic equipment, machine tools, steel and nonferrous metals, ships, chemicals, textiles and processed foods.
Taiwan: Economic prospects remain steady but doubt lingers
Taiwan has a dynamic capitalist economy that is driven largely by industrial manufacturing, especially exports of electronics, machinery, and petrochemicals. This heavy dependence on exports exposes the economy to fluctuations in global demand. As global economies started showing small signs of recovery, it is not too surprising that Taiwan’s economy grew to 4.5% between 2019-2021.
Since gradually loosening rules governing Chinese investment, Taiwan has also secured greater market access for its investors in the mainland. These efforts should see the country making a steady comeback from a period of recession where economic growth fell to +2.4% in 2022, then to -2.9% year-on-year in Q1 2023.
However, not everything in Taiwan is rosy. Taiwan’s population is ageing quickly, with the number of people over 65 expected to account for nearly 20% of the island’s total population by 2025. This raises the question of future labour shortages.
Expanding Globally into the East Asia Market is favourable to investors
The ASEAN region is an extremely difficult region to do business in (according to the World Bank’s Ease of Doing Business Index). Conversely, East Asia is much more business favourable, with Hong Kong (4), South Korea (5) and China (78) quite supportive of global investors interested in expanding their businesses in those countries.
If you’re considering expanding your business operations into the East Asia market, consider leveraging the expertise of a global entity and Employer of Record partner like TopSource. Primed with local experts in East Asia and across the globe, we have the know-how to help you efficiently expand, hire and conduct business in new regions, helping you to expedite your global expansion journey.
We operate in every major market across the globe. Our wealth of knowledge and expertise means you can trust our global payroll service offering and global EOR solutions in dozens of locations. Contact us at sales@topsourceworldwide.com or give us a call on +44 (0)203 691 5284 to find out how we can help.
