Since the end of the Cold War, there has been strong bipartisan dedication to the idea that America's future will be written in the Asia-Pacific. The Obama administration has argued the case most forcefully. Hillary Clinton, when she was secretary of state, wrote:

"The Asia-Pacific has become a key driver of global politics. Stretching from the Indian subcontinent to the western shores of the Americas, the region spans two oceans — the Pacific and the Indian — that are increasingly linked by shipping and strategy. It boasts almost half the world's population. It includes many of the key engines of the global economy, as well as the largest emitters of greenhouse gases."

In theory, the concept of an "Asian Century" — meaning that the world's political and economic center of gravity is shifting to Asia in the 21st century — is correct. One in three people on Earth is Chinese or Indian. Northeast Asia — including China, Japan, South Korea and Taiwan — has enjoyed astonishing levels of economic growth since the latter part of the 20th century with booming export sectors and emerging middle-class consumer bases. The global production and supply networks that have taken shape in Asia produce much of what we consume so voraciously in the West. The Northeast Asian countries are also major consumers of energy imported from the Middle East, making them geopolitically important powers.

Contrary to popular opinion, however, the same Asian countries that are supposed to drive the Asian Century are in the midst of serious economic slowdowns. Asia watchers have known for years that Japan has been largely stagnant economically and rapidly aging, but so are South Korea and Taiwan.

Then there are China's troubles. While economists have accepted that China is perhaps heading toward long-term stagnation, the foreign policy community is stubbornly resisting the new reality: A Chinese slowdown is becoming a defining fact of Asian geopolitics.

So are we living in an Asian Century or aren't we? That is an open question. The economic and demographic outlooks in the region cast doubt on the robustness of Northeast Asia's future growth. The United States should look to South and Southeast Asia for the future of Asian growth. If India and the nations of Southeast Asia enact pro-market reforms, they will take off economically.

Asia's economic quagmire

The prospect for an Asian Century is based on the economic growth in the region. Yet, South Korea is rapidly aging. It faces a heavy debt burden and lives under constant threat from North Korea. And it isn't big enough to carry Northeast Asia forward by itself.

Japan is big enough to carry Asia, but has barely budged economically for a generation. Private wealth creation is occurring, but it is offset by public debt. Two-and-a-half years after Prime Minister Shinzo Abe was elected on promises to bring Japan back, deep economic reforms have not occurred.

That leaves China. Talk of an Asian Century usually implies "led by China." But economic problems have been brewing in China since 2003. Unless difficult remedies are adopted, China is also headed for stagnation.

From 1978-2002, Chinese pro-market reform was partial and uneven, but it was persistent and it created an economic miracle.

In 2003, a new government under Communist Party General Secretary Hu Jintao decided the core of the economy should be state-owned banks lending to state-owned enterprises, so that these badly-run firms could continue to invest and employ large numbers of people.

Market forces would still play an important role, but policy would tilt back to the state. The pace of investment growth jumped from 12 percent in 2001 past 26 percent in 2003, more than four-fifths by state-controlled enterprises.

At first, it seemed to work. Chinese companies borrowed, invested, produced and exported. The economy grew and the world was China's oyster. But the apparent effectiveness of this new model was a mirage.

Developing under the façade was not the greater productivity that arises from market reform but increasing dependence on domestic credit and foreign consumption. The global financial crisis exposed these economic weaknesses and inflicted a double blow.

First, foreign demand plummeted. The Communist Party responded by conducting arguably the biggest stimulus in modern times, through yet more bank loans. Credit grew 32 percent in a single year.

Many people want to borrow enormous amounts when demand falls, and some of those people live here in America. The inevitable outcome is a painful debt burden. China's could now be considered the world's worst (if not, Japan's probably is). The highest estimate has it closing on $30 trillion.

The main reason Chinese growth is slowing is because China has already spent so much, so the return on more spending is low. In addition, Chinese growth is slowing further because China's debt is so large, and a good deal of its capital is spent paying it back.

There are other reasons. In the 1980s, farm production soared, permitting extra farmers to seek higher-paying jobs in cities as manufacturing workers, which made China the world's factory. Natural resources have been savaged so that there is no potential for land to drive growth unless fundamental policies are changed, such as the right for individuals to own land.

Like Japan already and Korea now, China will rapidly move from a young to an old country, and old countries have tended to stagnate economically.

A final way to achieve growth is through innovation. China has successfully imported foreign technology, both legally and by stealing intellectual property.

But as countries climb the technological ladder, innovation becomes harder. China's attempts to spur innovation are top-down, which can work for individual projects but cannot match the ability of the private sector to innovate across many sectors.

The Chinese economy has not yet stalled, but it is on the path to stalling. According to Credit Suisse, Chinese private wealth may have actually shrunk in 2013. Constant government intervention will not reinvigorate the economy; what's needed is a resumption of market reform.

The Communist Party claims it knows this. In 2013, it offered what it considered profound reforms, supposedly giving the market the "decisive role." But the platform was flawed from the beginning, as is now becoming increasingly obvious.

China could get a huge economic boost from land, the same one the U.S. is getting from domestic energy production. China has the shale. Yet tapping it would require Beijing to mimic America by allowing private ownership of rural land, competitive energy markets, and protection of innovative technology. None of these exist in China.

There has been some progress in finance. Bank licenses are issued to private companies. But it will take decades for private banks substantially to erode the state's share of banking assets, which exceeds 90 percent.

More radical steps are needed. One under discussion would allow money to leave the country freely to pressure banks to be more responsible. But the proof will come only if this idea is fully implemented.

The clearest reform failure concerns state-owned enterprises. The 2013 reform manifesto went the wrong way by calling for private investment in these SOEs, throwing good money after bad.

Policy steps since have headed in the wrong direction. Large SOEs are being merged with each other to get even bigger, when what is needed for innovation and competition is for the state sector to shrink.

It's not certain that China will stagnate economically. But the country wandered off the right path in 2003 and, without radical change, will end up stuck well before 2023. Without China, there is no Asian century.

Tick, tock — the demographic clock

East Asia's rise is the big economic story of the past half century. China's astonishing, explosive growth since the death of Mao Zedong is unique in all economic history; no other country has ever grown that fast for that long. But the future is never a simple extrapolation of past or current trends.

Over the past two generations in East Asia, roughly the past generation in Southeast Asia and perhaps the past decade or so in India, development was abetted by what economists call "the demographic dividend," which is the once-only transition from higher to lower fertility levels. During this period, the working age population grows faster than the population as a whole. Not only does this increase the availability of manpower but, with the right policies, can also encourage higher savings and investment rates.

But East Asia's demographic dividend has already been cashed and there will be no repeat. Now the region faces increasingly heavy and adverse demographic headwinds.

The United Nations Population Division reckons fertility has plummeted over the past 50 years in most of Asia. Since the early 1960s, births per woman have fallen by 70 percent in Eastern Asia, by nearly 65 percent in Southeast Asia (i.e., Indonesia, Thailand and Vietnam) and by nearly 60 percent in South Asia (i.e. India, Bangladesh and Pakistan).

In Eastern Asia, childbearing has been sub-replacement since about 1990, and is currently estimated to be about 25 percent below the level required for long-term population stability. Southeast Asia and South Asia as a whole are still above the replacement level — albeit barely — but many countries or areas within those regions are also already below replacement levels. Under the shadow of its harsh and punitive One Child Policy, China has seen below-replacement fertility since the early 1990s — but South Korea, with no such program, has had below replacement levels since the mid-1980s, and Japan has registered almost unremitting sub-replacement fertility since the late 1950s.

Barring an influx of immigrants, three things inevitably happen to a country with a fertility rate below replacement level. The working age (15-64) population peaks, and falls into long-term decline. The same thing happens to overall national population. And third, the population starts to gray. Smaller families rather than longer lives are the principal force that drives the aging of a society. All these trends are transforming those Asian societies that have sub-replacement fertility. The pace of change depends on how steep the fertility decline is and how long it lasts.

Japan is the world's oldest society, ever — with a median age above 46 years, and more than a quarter of its people 65 or older. Japan's conventionally defined working age population began to fall in the early 1990s and is now 10 million (nearly 12 percent) smaller than in 1995. In 20 years, Japan's median age may be nearly 53 — and almost a third of its citizens may be senior citizens.

South Korea's working age population is peaking more or less today and is on course to shrink by about 13 percent over the next 20 years. The ROK's median age is already above 40, and in 20 years it may be almost 50; over those same two decades the percentage of the population who are old will double, from 13 percent to 27 percent.

Beijing's National Statistics Bureau has already reported that the China's working age population has also started to shrink. Over the next 20 years, the U.N. Population Division expects a drop in Chinese working age groups by more than 60 million (about 6 percent — but gaining speed, and shrinking by about 1 percent a year in the mid-2030s).

With shrinking workforces and old populations, economic development becomes harder. Better health, improved education, technological innovation and a better "business climate" can raise productivity. But economic math is unforgiving: Increased output comes from labor, capital or improved total factor productivity. With falling labor inputs, and greater claims on what would otherwise have been savings and investment by a growing retiree population, pressures against rapid economic growth are formidable. A pronounced deceleration may also be in store.

Demographic fundamentals suggest the "age of heroic economic growth" is probably already over. It's not fanciful to suggest that we are now witnessing the zenith of the "China Dream." In other parts of the world, including India and parts of Southeast Asia, demographic prospects look more promising. There are no guarantees, but changes in policies and institutions could unlock the economic promise of these prospective trends.

The geopolitics of a new Asian Century

Northeast Asia's prospective stagnation poses three sets of questions for America. First, what does a stagnating yet aggressive China mean for regional security? Second, how does the stagnation and aging of Japan, which is dependent on America, affect our strategic position in Asia? Third, which nations will be the new sources of global economic growth?

U.S. policy toward Asia has assumed a linear progression in China's development, with the expectation that Beijing would continue to grow at the same rates that it has for the past 30 years, while becoming more militarily powerful and diplomatically assertive. Washington hoped to "shape the choices" of an inexorably rising China.

Beijing could choose to become a responsible power, stepping into its assigned role as a provider of global public goods such as freedom of the seas, non-proliferation, etc. Or it could become a rival and aggressor in Asia and face the consequences of an American-led balancing coalition. Since the United States did not know what path China would take, it crafted a two-pillar strategy: Engage with China to increase its stake in the international system while balancing its growing power. The assumption behind this strategy was the continued "rise" of China.

Stalled Chinese growth will force strategists to rethink this assumption. We will likely face a China growing at slower rates with increasing domestic problems and with less growth in military capability. This China could take two distinct paths. It could turn inward and put aside its territorial ambitions and its challenge to U.S. leadership. This inward turn might lead to genuine social and political reforms. Alternatively, it could become more aggressive and recalcitrant.

China followed the first path in the 1990s as it undertook serious economic reforms and dealt with a host of related domestic problems. True, China was a growing security problem for the U.S., but its leaders' main focus was on economic growth and reform, joining the World Trade Organization and dismantling the state-owned enterprise structure. Asia was more peaceful as a result.

The second path has historical and contemporary precedent. Mao increased regional tension during times of great domestic stress. Sometimes he did so to rebuild "revolutionary fervor" for ambitious domestic projects. For example, he stirred up trouble in the Taiwan Straits during the Great Leap Forward. His successor Deng Xiaoping attacked Vietnam in 1979 partly to consolidate his grip on power and begin his reform program.

Xi Jinping has a contemporary model for externalizing domestic problems in Vladimir Putin. Russia is also in decline and has been more aggressive despite its long-term decay. Like Putin, Xi is consolidating power and removing his political enemies. He is engaging in Maoist-style campaigns at home to build up fervor for his politically risky anti-corruption campaign. Xi's end game seems to be centralized control unhindered by political opponents. So far, this internal campaign has not been accompanied by external passivity. Xi is both rhetorically and strategically committed to a more aggressive foreign policy.

Thus America is likely to face a China less powerful than we anticipate — yet also a more difficult and aggressive China. On one hand this could be dangerous. The project of "the great Chinese revival" will take on new importance as a means of legitimacy for Xi.

On the other hand, the United States will have more options and leverage as a result of Chinese economic stagnation. In terms of national wealth, China does not have much of a chance of catching up to the U.S. It will not become a geopolitical competitor, but rather remain a nettlesome regional challenger. If the U.S. can muster the political will, it will have many options to balance China's power and help create an Asia that fits its interests and principles.

That leads to the next challenge — Japan. Tokyo is a vital ally, with a strong leader in Prime Minister Abe who envisions a peaceful and liberal Asia. But unless Japan takes bold steps to compensate for its workforce shrinkage, and uses the Trans-Pacific Partnership to enact structural economic reform, it will have fewer resources and less manpower. A quickly graying Japan may want the U.S. military to remain in Japan, and will remain a key ally, but Tokyo may have to tend to its increasingly social burdens. The United States will have to find additional allies and bases in Asia.

We must turn our gaze to South and Southeast Asia. India, Vietnam, Malaysia, Indonesia and the Philippines all have strong demographic profiles. They are the "new Asia." They have tremendous latent economic potential. If they reform markets the way their Northeast Asian brethren did, they will drive economic growth and could be strong partners for America. The Trans-Pacific Partnership is the way to achieve this. If the final agreement is a market-oriented one, it will liberalize the economies of Vietnam and Malaysia. Indonesia will start to feel pressure to do the same. The United States can also encourage needed reforms in India's economy, too.

Fast-growing Indian and Southeast Asian economies could provide the resource base for higher defense spending. If the U.S. can knit together a coalition committed to the same interests and principles, it will be able to face Beijing better. If the United States wants an Asian century, it is time to look south.

Will it be an Indian century?

Thanks in part to China's slowdown and its unfavorable demographic future, India has a chance to carve out more space for itself in a rapidly changing Asia. A more business-friendly Indian government under Prime Minister Narendra Modi has renewed optimism about a country with more than 1 billion people.

India officially grew faster than China in the final quarter of last year (although it used a new way of measuring output). Finance Minister Arun Jaitley predicts that next year, the Indian economy will expand by more than 8 percent.

Washington has several reasons to seek a closer relationship with New Delhi. Both countries bend over backward to deny that their partnership is aimed at China, but it's no secret that they share concerns about Beijing's rising clout and willingness to throw its weight about internationally. India is also an oasis of stability in a region roiled by radical Islam. An uptick of violence in Afghanistan, as well as a surge in terrorism and sectarian killings of minority Shiite Muslims in Pakistan, underscore the relative calm of India.

As a model for Asia's smaller countries to emulate, India — democratic and pluralistic, with a large English-speaking middle class — appeals naturally to Americans. The thriving, 3 million-strong Indian-American community acts as a bridge between the two countries. Though the state continues to play too large a role in its economy, the legacy of socialist founders, India also hosts a dynamic private sector that has more in common with its counterparts in the United States and Britain than with China's opaque, state-controlled firms. Under the right circumstances and provided it follows the right policies, India could outpace its northeastern rival in coming decades. The United States should welcome this.

At its core, an American bet on India is a bet on its economy. This means the overarching goal of policy toward India should be to help economic reform. At the same time, Washington should strive to deepen trade ties to bind the two democracies more closely to each other.

Both the Indian economy and the U.S.-India economic relationship could do better. Growth in India has averaged a robust 6.4 percent since the launch of economic reforms in 1991. But the legacy of more than four decades of socialism before that means India still lags behind much of East Asia. With an annual gross domestic product of nearly $9.5 trillion, China's economy is five times as big.

In January, during President Obama's visit to New Delhi, the United States and India "elevated" their annual talks from a "strategic dialogue" to a "strategic and commercial dialogue." From now on, the annual meeting between the secretary of state and India's external-affairs minister will be matched by a meeting between the U.S. commerce secretary and her Indian counterpart.

But if the past is any indication, however, Washington often misses the forest for the trees in its relations with India. Short-term interests of individual firms are given the highest priority, but these do little to advance the strategic goal of boosting India's economy and strategic heft.

After Modi's back-to-back summit meetings with Obama in Washington and New Delhi, American officials are seeking ways to deepen economic ties; a bilateral investment treaty and Indian membership in the Asia-Pacific Economic Cooperation forum are ideas that keep resurfacing.

Others, such as exporting liquefied gas to energy-hungry India, are newer. Some of Modi's signature initiatives, including building so-called smart cities equipped with modern infrastructure, bringing high-speed Internet connections to much of the country and turning India into a manufacturing hub have attracted attention from America's private companies and its government alike. But they need to be fleshed out to determine the extent of U.S. involvement.

To prevent economic relations between India and America from stagnating, Washington ought to adopt three goals.

First, it should encourage India to become a more competitive, market-oriented economy as an end in itself, even if specific reforms offer no immediate reward for American firms. For instance, India needs better roads, but it would probably be Korean and Malaysian firms that would build them.

Second, the United States should aim to remain India's top trade partner, counting goods and services. Secretary of State John Kerry says he wants to quintuple U.S.-India trade to $500 billion over the next decade. Beyond that distant number, the United States should aim to beat China in volume of bilateral trade with India. This ought to spur more day-to-day attention to trade ties than a theoretical long-term target.

Finally, Washington should not allow individual companies to hijack the agenda. To take one prominent example, India will undoubtedly benefit from opening up its retail market to Walmart, but this is not the most pressing economic issue the country faces.

India needs to take advantage of Modi's historic mandate to liberalize its labor and land markets, slash inefficient food, fuel and fertilizer subsidies, and privatize bloated state-owned companies that drain the national exchequer. As India's economy grows and becomes more outward-looking, many of these decisions will likely benefit American firms. More importantly, they will unleash India's economic potential. Though the United States cannot make policy for India, it can provide assistance to would-be Indian reformers who look to it for ideas and expertise.

During the Cold War, the United States understood that economic development and grand strategy went together, and that it had a stake in the economic success of countries as different as Japan and Indonesia. Today, the future of Asia hinges, in no small measure, on India. If India succeeds, Asia will look dramatically different, almost certainly in a positive way, for the United States and the world.

Dan Blumenthal is a resident fellow and the director of Asian studies at the American Enterprise Institute. Alex Coblin is a research associate at AEI, focusing on international political economic issues. Sadanand Dhume is an AEI resident fellow specializing in South Asia. Nicholas Eberstadt is the Henry Wendt Chair in Political Economy at AEI, where he writes about demographic and political economic issues. Derek M. Scissors is a resident scholar at AEI, where he studies Asian economic issues and trends.