Asia-Pacific: Key Themes To Watch In 2024


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As the world continues its geopolitical rebalancing, the Asia-Pacific region faces potentially significant risks across the economic and political arenas in 2024.
The indicators for these risks include the path of mainland China’s economic recovery and Japan’s normalization of monetary policy, as well as key elections across the region and developments in critical conflict theaters.
Supply chain shifts in manufacturing and critical minerals will increasingly be shaped by national security concerns, reflective of key bilateral and multilateral relations among governments.
Key themes and forecasts for 2024
1. Mainland China’s economy will recover gradually.
The government’s enhanced stimulus measures, which began in mid-2023, and its pro-market policy pivot will further boost household and private business confidence.
Mainland China’s import demand will bounce back in 2024, especially in commodities and capital equipment, following the continuation of gradual recovery in the broad economy.
2. Fiscal recovery in Bangladesh, Pakistan and Sri Lanka will rely on IMF assistance.
The ability of each economy to improve fiscal and external sustainability will depend on political stability, with elections due in Bangladesh, Pakistan and Sri Lanka in 2024.
All three countries are working with the International Monetary Fund (IMF) to develop sustainable long-term fiscal positions.
Progress will depend on the ability and willingness of both the incumbent and subsequent governments to implement revenue-raising and expense-reducing measures during 2024 and beyond.
3. The Bank of Japan is likely to begin normalizing its monetary policy in 2024.
We expect the Bank of Japan (BoJ) to raise its short-term reference rate to zero and to end yield curve control in 2024 – in April at the earliest – after sustained wage increases are confirmed by annual wage negotiations and other indicators.
While consumer price index (CPI) inflation is expected to moderate through 2024, sustained sufficient wage growth is the last piece of the jigsaw for the BoJ to make the final call.
4. Some Asia-Pacific currencies will likely appreciate moderately against the US dollar in 2024.
In 2024, the Japanese yen, the Chinese yuan, the Australian dollar and the Malaysian ringgit are likely to appreciate modestly due to narrowing interest rate differentials against the US dollar.
The yen is also expected to be helped by a shift in the BoJ’s monetary policy during 2024 to exit from negative policy rates.
5. Relocations from mainland China to India and Southeast Asia are fueling wage growth in manufacturing.
Manufacturing locations across members of the Association of Southeast Asian Nations (ASEAN) and India offer lower labor costs compared with mainland China.
Stronger demand for labor – as firms deploy a “China plus one” strategy – is fueling solid wage growth in the region, putting this competitive edge at risk.
As the production of increasingly more technical products is brought to the region, the pressure on the limited supply of skilled labor will be a growing upside risk to wage growth.
6. Coal and other fossil fuels will remain key sources of power in the region.
Most major economies will likely continue to leverage conventional fossil fuels to support aggressive economic growth targets. Concerns about potential volatility in global oil markets will encourage early mitigation strategies by expanding supplier sources.
Energy transition efforts will follow guarantees of increased climate finance from advanced economies outside the region, as well as negotiations to limit disruption in trade stemming from increased environmental, social and governance (ESG) requirements.
7. Several Asia-Pacific countries will seek to develop their own critical mineral supply chains.
Australia, India, Japan and South Korea will likely seek to reduce reliance on processed minerals from mainland China, which accounted for over half of global lithium processing capacity in 2020.
Mineral-rich countries such as Australia, Indonesia and Malaysia will seek to benefit from increased foreign investment in critical minerals to further expand mining output and develop downstream processing.
8. Mainland China and the US are likely to maintain trade and regulatory barriers in strategic industries.
For mainland China, this includes an increased focus on self-sufficiency in emerging industries such as green energy, biotechnology and semiconductors, and strengthening legal tools to reduce the risk posed by US sanctions.
The administration of US President Joe Biden is likely to maintain Trump-era tariffs on Chinese goods and expand current export controls targeting mainland China’s access to advanced chipmaking technology through 2024.
9. Elections will increase policy instability and civil unrest risks.
In Bangladesh, Pakistan and Sri Lanka, the elections’ most direct impact is likely to be on the completion and implementation of IMF agreements, contingent on economic and fiscal policy.
Civil unrest risks have increased in all three of these debt-stressed countries, particularly in Bangladesh, where anti-government protests, strikes and transport blockades are causing major disruptions to cargo transport and industrial output.
10. More frequent nonmilitary confrontations are likely in the South China Sea.
The risk of nonmilitary confrontations will increase between Chinese vessels and those of other countries with which mainland China has contested claims in the South China Sea, principally the Philippines.
The Philippines, supported by the US, will continue to defend its claim and publicize those confrontations.
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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.


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