The current economic slowdown in a number of Asia-Pacific countries is mainly cyclical and therefore temporary. The region's economic dynamism will be sustained. The security problems are not expected to jeopardize the economic prospects. Relations between the United States and China have recovered from their lows of March 1996, and U.S. security commitments to the region have been reaffirmed. The status quo in the Taiwan Strait will probably continue as China seems more willing to take a long term view on reunification. The territorial disputes in the East and South China Seas are unlikely to be allowed to get out of hand because of the larger economic and strategic interests of the powers involved. However, the situation on the Korean peninsula remains dangerous and unpredictable.

Economic Dynamism and Regional Integration

The Asia-Pacific continues to be the fastest growing region in the world and its market-driven integration will continue as greater liberalization and deregulation forge more trade and investment linkages.

In 1996 economic growth slowed down in a number of Asia-Pacific countries, mainly for cyclical reasons. One factor has been the down cycle in the electronics industry, which is an important component in the manufacturing sectors of many countries. Another reason has been the need to cool down some of the economies from the hectic pace of growth of recent years, which had resulted in supply side constraints and increased inflation. Also, the anticipated recovery of growth in Japan did not materialize.

These are temporary problems. According to industry analysts, the electronics industry will recover in 1997 and economies which would have cooled down in 1996 or during the 1997–98 period will resume higher rates of growth thereafter.

The slowdowns must be seen in perspective. For instance the slowdown in 1996 in the region's fastest growing economy in recent years, that of China, still created an estimated 9.8 per cent growth compared with 10.2 per cent in 1995 and almost 12 per cent in 1994. A measure of stabilization will provide the Chinese economy with better macroeconomic conditions for accelerated growth, which the government is indeed expecting in 1997.