Global Risk Indexes (13-03-2025)

Global 96 (0 —)
MENA 99 ( —)
APAC 97 (-1 ▼)
Europe 98 ( —)
Africa 96 (+1 ▲)
AMERs 88 (+1 ▲)
Markets 99 (+1 ▲)
Mei Ling, Asia Pacific region analyst at Worldwise Analytica

Mei Ling

Empowering minds, shaping decisions: Insights from the heart of geopolitics

Asia-Pacific Confronts Mounting Security and Economic Risks: South China Sea Tensions Escalate, North Korea Tests Missile, and China’s Economic Woes Persist

The Asia-Pacific is experiencing heightened geopolitical and economic turbulence, as regional security challenges intensify and economic uncertainties deepen. The South China Sea remains a major flashpoint, with the Philippines and China locked in a new confrontation, while North Korea's latest missile test adds to growing military tensions in Northeast Asia. At the same time, China's economic downturn continues, posing risks to global supply chains and regional stability.

South China Sea Tensions: The Risk of Military Escalation Grows

The South China Sea remains a critical flashpoint as Philippine and Chinese vessels engage in another maritime standoff. Manila has accused Beijing of aggressive maneuvers near disputed waters, escalating the already volatile situation.

With the Philippines strengthening military ties with the U.S., Japan, and Canada, Beijing sees these developments as an attempt to contain its regional influence. If China continues its assertive actions, the risk of a military clash in the South China Sea will increase, potentially drawing in other regional players and intensifying geopolitical rivalries.

North Korea’s Missile Test: Strategic Messaging or Military Provocation?

North Korea has conducted another missile test, reinforcing its aggressive posture amid ongoing U.S.-South Korea joint military exercises. Pyongyang’s rhetoric suggests a willingness to escalate tensions, viewing military drills as a direct provocation.

While the test appears aimed at domestic and international signaling, it could prompt a stronger military response from Seoul and Washington, increasing the risk of further escalation. Japan’s growing role in regional security adds another layer of complexity, as Tokyo has pledged to expand its defense capabilities in response to North Korean threats.

China’s Economic Struggles Continue: Domestic Demand Remains Weak

Despite ongoing stimulus efforts, China's economy continues to show signs of strain, with weak domestic consumption and declining investor confidence. Beijing's efforts to stabilize growth through state intervention are facing increasing limitations, raising concerns over long-term economic sustainability.

If China fails to reverse these trends, the regional economic landscape could shift significantly, forcing Asian economies to diversify their trade dependencies and reconfigure supply chains.

India’s Energy Partnership with Russia: A Diplomatic Balancing Act

India’s deepening energy ties with Russia are drawing increased scrutiny from Western allies, particularly as Washington continues to push for a reduction in global reliance on Russian energy exports.

While India remains committed to maintaining strategic autonomy, continued energy cooperation with Moscow could strain diplomatic relations with the U.S. and Europe, potentially affecting broader trade and security partnerships.

Pakistan’s Economic Struggles: Rising Inflation and Financial Constraints

Pakistan’s economic crisis is worsening, with rising inflation and foreign exchange shortages threatening stability. Islamabad's reliance on external financial assistance, particularly from China and the IMF, underscores the fragility of its economic position.

If Pakistan fails to implement structural reforms, it risks prolonged financial instability, which could have regional security implications given its geopolitical positioning.

Looking Ahead: A Region Facing Geopolitical and Economic Uncertainty

The Asia-Pacific is facing a complex mix of security risks and economic pressures. As tensions in the South China Sea and the Korean Peninsula rise, and economic instability continues in China and Pakistan, the region is at risk of further geopolitical fragmentation. The next few months will be critical in determining whether these crises escalate or stabilize.

Geopolitical Risk Assessment for the Asia Pacific
(13-03-2025)

The Asia-Pacific remains in a state of heightened volatility, with deepening security challenges, economic pressures, and shifting diplomatic alignments. Tensions in the South China Sea are escalating as the Philippines and China engage in a new round of maritime confrontations, increasing the risk of military miscalculation. North Korea's latest missile test and Pyongyang’s threats against joint U.S.-South Korea military exercises further destabilize regional security, drawing stronger responses from Seoul, Washington, and Tokyo. Meanwhile, China's economic struggles persist, with new data pointing to weak domestic demand despite government stimulus efforts. In Southeast Asia, Thailand is pushing forward with digital currency initiatives, while Vietnam faces mounting pressure to maintain export competitiveness amid shifting global supply chains. In South Asia, Pakistan’s economic crisis is deepening, with inflation and foreign exchange constraints posing critical risks to stability. Additionally, India’s growing energy cooperation with Russia is drawing scrutiny from Western allies, creating potential diplomatic frictions. With multiple security and economic flashpoints converging, the region faces continued geopolitical fragmentation and long-term strategic realignments.

Geopolitical Risk Index

Developments to Follow for the Asia Pacific (See All Global)

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