Asia's power plays aren't just about the US and China

Over the last few years, the clear winners of the power game in Asia have been the economic and military heavyweights, the US and China. A closely watched annual report puts them at the top of the table again, showing that their influence remains unwavering, but with a significant difference: India, Japan and Indonesia are rising in importance both economically and strategically, making them significant players in the region's future.

The Asia Power Index, published annually by the Sydney-based think-tank Lowy Institute, is monitored by governments and academics and measures the resources and influence of the countries it surveys.

Power, Lowy says, can be measured in two ways: What countries have — and what they do with what they have. This year, the index is ranking 27 nations and territories. Timor-Leste is the newest entrant on the list. Washington and Beijing are in first and second place respectively, by a considerable margin. The US's lead over China is the largest since 2018, when the report was first launched.

That's because Beijing's power is plateauing. The world's second-largest economy is faltering under the burden of slower growth and a persistent crisis in its housing market. Most economists agree that China will not make its growth target of around 5% this year — even President Xi Jinping seems aware that it's unlikely. His focus on national security has come at the cost of business confidence and regional influence.

There is one area where Lowy found that Beijing is ahead of the US, though: Military capability. For the first time, experts judged that China is better able to deploy rapidly, and for a sustained period, in the event of an interstate conflict in Asia.

That battle would most likely be over Taiwan, which China claims as its own territory. The US, under the Biden administration, has vowed to defend it from an "unprecedented attack." The heightened tensions between the superpowers, and Washington's desire to deepen alliances in the region, has led to the renewed rise of nations like Japan, which is evolving from being an economic and cultural icon to one more active in defense and security cooperation, the report notes.

This is a remarkable and positive shift. Just eight decades ago, much of the region was under a brutal Japanese occupation during World War II. In the 1980s, Tokyo's relationship with Asia changed again. It has been a leading driver of investment in Southeast Asia for three decades, with an economy that was bigger than China's until 2010.

Japan now regularly participates in freedom of navigation exercises in the South China Sea, and has become an increasingly important partner to Taiwan. It also signed security agreements with Manila, with a view to pushing back against Beijing's increasingly assertive presence in waters that an international tribunal determined don't belong exclusively to China.

Asia has other rising powers, too, like India and Indonesia. New Delhi was the second-biggest gainer on the power index, followed by Jakarta. Historically, the South Asian giant hasn't been great at forging economic relationships in Asia, mostly because of domestic priorities and its seeming aversion to making trade deals (it declined to join the 15-nation Regional Comprehensive Economic Partnership, or RCEP, in 2019, for example.)

Despite this, India has overtaken Japan to become the third-ranked power in the region, but its clout remains below the potential promised by its resources. A hardline Hindu agenda under Prime Minister Narendra Modi isn't helping in parts of Muslim-majority Southeast Asia.

Meanwhile, Indonesia, with a population of 280 million, is the biggest gainer this year — surprising for a nation that is often viewed as punching below its potential. Jakarta is winning on the foreign policy front, with what Lowy's experts called a "sure-footed chairing" of the 10-member Association of Southeast Asian nations. Incoming President Prabowo Subianto, who is due to take over in October, will need to build on that success, while also steering the economy through a challenging time.

The reality is that none of these countries can rival Washington and Beijing yet — the two are still the dominant players in this part of the world, and will be for some time to come. But economic power has been shifting from west to east since the Global Financial Crisis in 2008. According to projections from the International Monetary Fund, emerging markets and developed economies will contribute more than 60% to global growth by 2029. Historically, that's largely been driven by China. But even as it slows, other countries in the region will help to define what Asia's next century looks like.

An Asia that is increasingly being driven by Asian power, besides China's? We should get behind that.

Disclaimer: This article first appeared on Bloomberg and is published by a special syndication arrangement.