Resilience of Asia Amid Global Trade Reset

 

Today’s share is based on ANZ’s research report Trade Reset: Navigating Prosperity Amid Global Fragmentation, released on September 9, 2025. The report primarily analyzes Asia’s adaptability and challenges in the context of global trade fragmentation and policy shifts.

 

Asia’s Growth Outperforms Expectations  

2025 was anticipated to be Asia’s most challenging year, but actual performance has exceeded expectations:  

• China is expected to grow by approximately 5%;  
• India’s growth exceeds 6%;  
• The rest of Asia averages about 3.5% growth, surpassing 2023 levels;  
• Regional currencies have generally strengthened.  

This reflects the resilience of Asian economies in a complex external environment.  

Tariffs Likely to Persist Long-Term  

US tariffs on Asia are no longer just temporary measures:  

• Tariff revenue could reach $300 billion in the next year;  
• US debt stands at 120% of GDP, with a fiscal deficit of about 6%;  
• Tariffs are increasingly serving trade, diplomatic, and fiscal purposes.  

In other words, tariff policies are unlikely to disappear in the short term.  

China’s Structural Challenges  

China’s growth model is undergoing a turning point:  

• Real estate loans peaked in 2017 and have since stagnated;  
• Industrial loans expanded rapidly from 2019–2023 but have recently retreated to about 10%.  

The issue lies in fierce inter-industry competition, which is compressing profit margins. Chinese firms rank among the global leaders in revenue scale but have notably declined in profitability rankings.  

Policy options are limited:  

• Industry consolidation could free up capital and labor, but insufficient consumption struggles to absorb it;  
• Further rate cuts (current rate at 1.5%) might harm bank profitability.  

Thus, exports remain a critical pillar of China’s growth strategy.  

Asia’s New Advantages  

The report highlights new “cards” Asia holds in this adjustment phase:  

 

1. Enhanced currency stability: During market volatility, Asian currencies are no longer depreciating as sharply as before, leaving room for policy stimulus.  
2. Capital inflows: Concerns over US fiscal sustainability are driving funds back to Asia.  

 

Since 2009, Asia’s holdings of US debt have doubled to $4.8 trillion. However, the long-term trend is toward diversified allocation, which will significantly impact regional liquidity, asset prices, and exchange rates.  

Australia’s Case  

Australian pension funds are playing a larger role in the US market for the first time. As the world’s fifth-largest pool of capital, their future allocations may increasingly favor Asia.  

 

Meanwhile, Australia’s net external liabilities have dropped from 63% of GDP in 2016 to 24% in 2025, significantly reducing the Australian dollar’s vulnerability to external shocks.  

Summary  

Overall, Asia demonstrates adaptability amid a fragmented global trade landscape: while China faces structural pressures, regional currency stability, capital inflows, and the rise of institutional investors are providing new support.  

 

This trend may signal a profound shift in global capital flows over the next decade.