A new phase of globalisation is unfolding – one that is likely to see Asia as one of the key pillars in a multipolar world. Therefore, PineBridge Investments believes it’s time for international investors and business leaders to view Asia through a fresh framework.
After three growth waves spanning many decades – 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 fourth growth wave now building could culminate by pulling the world’s economic centre of gravity east, just as the global balance of power is shifting to a multipolar world where technological, economic and geopolitical power is not concentrated in the hands of a single country, territory or region.
For business leaders and investors to effectively position for Asia’s long-term opportunities, PineBridge believes it will be key to understand the context and the dynamics of underlying trends in the region and how they impact the rest of the world. Here, the firm shares three consequential developments that investors and business leaders should be watching closely.
The fourth wave.
With a nearly 700 million-strong population, South-east Asia is poised to produce 140 million new young consumers, nearly a fifth of the world’s total, over the next decade.1 The rise of South-east Asia’s economies converging with China’s continued economic momentum will power the fourth wave of growth in Asia.
South-east 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, with China’s priority seemingly evolving towards more green-energy projects and technology-related investments, with talk of a “green silk road” and “digital silk road”.2,3
Asia’s Infra King: China
Infrastructure investment as a percentage of GDP (2017)
Asian tech leaving the West in its wake?
Once confined to outsourced manufacturing or accused of copying Western technology, Asian companies are increasingly category-definers. China’s largest tech companies compete internationally in artificial intelligence, cloud computing and 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 upcycle 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 in manufacturing.
Governments are also pioneering digital innovation in everything from identification to currencies. A shift to digital currencies could represent a big leap for 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 exposed cities are in Asia, as are 13 of the top 20 cities projected to suffer a major increase in losses from flooding.4,5 This makes a “green transition” an urgent priority.
According to Boston Consulting Group (BCG), Asia-Pacific investment over the next 20 years will bring 2,673GW of renewable energy online by 2040, more than double Europe’s projected installed capacity and over three times that in North America over the same period.6
China, still the largest carbon emitter in the world,7 also has the world’s largest battery electric-vehicle (EV) market and is projected to see the sharpest growth in the years ahead, with 2014-2015 marking a key turning point relative to the US market.
Number of electric or new energy vehicles sold
An Asia-centric destiny?
That’s not to say that Asia’s path is fully paved. The US-China tensions, Beijing’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 world’s two largest economies is having complex repercussions, driving investment into other countries as multinationals de-risk their China operations and forcing technology buyers and sellers to consider separate tech stacks, which could balloon everyone’s costs.
China’s heightened scrutiny of activities it deems counter to “common prosperity” may suggest a volatile business environment for investors. However, in the long run, the impact may be positive on the whole.
We can’t predict the future. However, PineBridge believes that the weight of evidence tilts towards the age of Asia, with compelling opportunities for discerning investors. This is a long-term story set to play out over a decade or more as China edges into the No. 1 spot on GDP charts and South-east Asia’s young workers, consumers and entrepreneurs push the region to become a key source of influence in a multipolar world.
- 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.
1. 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-mark…
2. 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…
3. Foreign Policy, “Coronavirus Hasn’t Killed Belt and Road”, https://foreignpolicy.com/2021/01/06/coronavirus-hasnt-killed-belt-and-r…
4. 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-asia…
5. 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-wor…
6. BCG, “Riding the Renewables Wave in Asia-Pacific”, https://www.bcg.com/en-gb/publications/2021/asia-pacific-renewable-energ…
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