A new phase of globalisation is unfolding — one that is likely to see Asia as one of the key pillars in a multipolar world. The time has come for international investors and business leaders to view Asia through a fresh lens.
After three growth waves spanning more than half a century — from post-war Japan to the industrialisation of the East Asian Tigers and, more recently, China’s rise — Asia is now moving away from supply chain-based economies. Like never before, its young and growing consumer class is leveraging converging trends as digital technology combines with demographic advantages and policy improvements.
The burgeoning fourth growth wave could culminate by pulling the global economy’s centre of gravity east, resulting in a multipolar world where technological, economic, and geopolitical power is not concentrated in the hands of a single country or region.
For business leaders and investors to effectively position themselves for Asia’s long-term opportunities, they will need to understand the context and dynamics of the underlying trends in the region and how they impact the rest of the world. There are three consequential developments that investors and business leaders should be watching closely.
THE FOURTH WAVE
With a nearly 700 million-strong population, Southeast Asia is poised to produce 140 million new young consumers, nearly a fifth of the world’s total, over the next decade. The rise of Southeast Asian economies converging with China’s continued economic momentum will power the fourth wave of growth in Asia.
Southeast Asia is benefiting from previous growth waves and from Chinese investments. Despite Covid-19-induced challenges, the Beijing-led Belt and Road Initiative continues to provide a platform for upgrading critical infrastructure in the region. The talk of a ‘green silk road’ and ‘digital silk road’ , also underlines China’s priority to boost green-energy projects and technology-related investments.
Asia's Infra King: China
Infrastructure investment as a percentage of GDP in 2017
Source: Asian Infrastructure Investment Bank/Economist Intelligence Unit. For illustrative purposes only. We are not soliciting or recommending any action based on this material.
ASIAN TECH BECOMING DEFINERS
Once confined to outsourced manufacturing or accused of copying Western technology, Asian companies are increasingly becoming category-definers. China’s largest tech companies compete internationally in artificial intelligence, cloud computing and online entertainment. While Chinese regulators have recently stepped up scrutiny on some tech business models, causing short-term uncertainty for the sector, the long-term arc still looks to bend in China’s economic favour.
The world was already in an up-cycle of digitalisation and automation pre-Covid-19, and that transition could further benefit Asia. Singapore, South Korea, and Japan, for example, already lead the world in robot density.
Governments are also pioneering digital innovation in everything from identification to currencies. A shift to digital currencies could represent a big leap towards greater financial inclusion and consumer spending — again bolstering the region’s overall economic clout.
THE GREEN ENERGY REVOLUTION
Ninety-nine of the world’s 100 most environmentally vulnerable cities are located in Asia, among them 13 of the top 20 cities are projected to suffer more often from flooding . These demonstrate the urgency of the transition to a green economy.
According to Boston Consulting Group (BCG), Asia-Pacific investment over the next 20 years will bring 2,673 gigawatts of renewable energy online by 2040, more than double Europe’s projected installed capacity and over three times of that in North America over the same period.
China, while still the largest carbon emitter in the world, also has the world’s largest battery-electric vehicle market and is projected to see the sharpest growth in the years ahead, after the key turning point relative to the rival US market in 2014 and 2015.
Exponential Electric Vehicles
Number of electric or new-energy vehicles sold
Source: IEA.org, 31 December 2020. For illustrative purposes only. We are not soliciting or recommending any action based on this material.
AN ASIA-CENTRIC DESTINY?
That’s not to say that Asia’s path is fully paved. The US-China tensions, China’s own regulatory reforms to promote greater social equality, Covid-19’s continued threat, and climate change are all sources of uncertainty.
The geopolitical flare-up between the US and China is having complex repercussions, driving investments into other countries as multinationals de-risk their China operations, and forcing technology buyers and sellers to consider separate tech stacks, which could drive up everyone’s costs.
China’s heightened scrutiny of activities it deems counter to ‘common prosperity’ may suggest a volatile business environment for investors. However, the measures are expected to benefit the economy in the long run.
For a deeper discussion of Asia’s evolving place in the global economy and what it means for investors and business leaders, read Age of Asia: Rise of a Multipolar World, published in partnership with Economist Impact.
 Bain & Company and the World Economic Forum, “Future of Consumption in Fast-Growth Consumer Markets: ASEAN 2030”, https://www.bain.com/insights/future-of-consumption-in-fast-growing-markets-asean-2030/
 Oxford Business Group, “Has Covid-19 prompted the Belt and Road Initiative to go green?” https://oxfordbusinessgroup.com/news/has-covid-19-prompted-belt-and-road-initiative-go-green
 Foreign Policy, “Coronavirus Hasn’t Killed Belt and Road”, https://foreignpolicy.com/2021/01/06/coronavirus-hasnt-killed-belt-and-road/
 The Economist, “Climate change is forcing Asian cities to rethink their flood defences", https://www.economist.com/asia/2019/09/21/climate-change-is-forcing-asian-cities-to-rethink-their-flood-defences
 The Guardian, “Asia is home to 99 of world’s 100 most vulnerable cities”, https://www.theguardian.com/cities/2021/may/13/asia-is-home-to-99-of-worlds-100-most-vulnerable-cities
 BCG, “Riding the Renewables Wave in Asia-Pacific”, https://www.bcg.com/en-gb/publications/2021/asia-pacific-renewable-energy-opportunities
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