Asian Economic Integration Report 2017: The Era of Financial Interconnectedness

This year’s Asian Economic Integration Report (AEIR) continues to chronicle progress in regional cooperation and integration (RCI) in Asia and the Pacific. Despite an improved global economic outlook, elevated uncertainty in the international policy environment continues to weigh on global trade. Although world trade is expected to recover this year, its growth remains weaker than income growth following further deceleration in 2016. Foreign direct investment (FDI) worldwide also dropped 2% last year. Yet, the trend of RCI in Asia and the Pacific is gaining momentum, providing a buffer against the fallout from increasingly inward-looking policies around the world. Asia’s intraregional trade share—measured by value—rose to 57.3% in 2016 from 56.9% in 2015, up from an average 55.9% during 2010–2015. Intraregional FDI share also grew to 55.3% in 2016 from 47.6% in 2015. Asia’s cross-border bank claims increased to $4.4 trillion from $4.1 trillion. Asia’s international tourism receipts are increasingly sourced from other Asian economies, with more than 70% of Asia’s outbound tourists traveling within the region. To better monitor this progress, AEIR 2017 introduces the Asia-Pacific Regional Cooperation and Integration Index (ARCII), a newly created composite index that allows comparative analysis of six RCI dimensions across subregional groups and economies. Its six component indexes cover: (i) trade and investment, (ii) money and finance, (iii) regional value chains, (iv) infrastructure and connectivity, (v) movement of people, and (vi) institutional and social integration.