The rapid emergence of Asia’s middle class and the region’s large-scale infrastructure development are creating significant opportunities for investors.
Key Takeaways
Asia is undergoing a historic transformation. We are witnessing the rapid rise of a new Asian middle class and a boom in the region's infrastructure development and trade.
As the prosperity and purchasing power of Asia's consumers increases, demand for improved education and healthcare, new financial products and services, cutting-edge technological innovations and world-class entertainment offerings has spiked.
The BRI will provide a boon for companies in the infrastructure, construction, engineering, building materials and commodity sectors in the coming years.
It's no secret that the world's economic centre of gravity is shifting to the East, and Asia is fast becoming the main engine of growth for the global economy. By 2050, Asia's share of global GDP is forecast to double to 52 per cent or USD174 trillion1.
It's plain to see that Asia is undergoing a historic transformation. We are witnessing the rise of a new middle class in Asia, where per capita GDP is projected to reach Europe's levels today by 2050; the revolution of the region's economies, which are transitioning from investment- and export-fuelled activity to consumption-driven growth; and a boom in the region's infrastructure development, which is set to receive USD26 trillion in investment over the next 15 years2.
These changes are happening before our eyes, but what can be difficult to see - as an investor - is where the opportunities are lurking amidst Asia's rapid and dramatic transformation.
The key to identifying and unlocking opportunities in Asia is developing a deeper understanding of the underlying economic and social trends in the region.
The rise of the Asian consumer
Asia is blazing a pathway to prosperity: the region's economies are expanding at a phenomenal pace and its middle class is exploding. In the coming years, Asia will be the chief catalyst of the growth of the global middle class population, accounting for around 90 per cent of the world's next billion middle class members3. India, China and Indonesia are projected to increase their middle class populations by 506 million, 306 million and 78 million individuals respectively by 20233.
For investors, it is critical to understand how the rapid emergence of Asia's middle class (2.1MB, PDF) will transform the region from the world's biggest manufacturing base into a consumption powerhouse – fundamentally changing the dynamics of global supply and demand.
Asian consumers – who have growing disposable income, a high savings ratio, low leverage and a seemingly insatiable hunger for consumption – are fast becoming the main engine of global economic growth, taking the place of their Western counterparts who are increasingly reliant on debt to fuel their spending.
With the rise in prosperity and purchasing power of Asia's consumers, we have seen a spike in demand for improved education and healthcare, new financial products and services, cutting-edge technological innovations and world-class entertainment offerings. Companies in these industries are poised to profit from an ongoing surge in demand for their products and services from Asia's burgeoning middle-class consumer base.
A boom in Asian infrastructure development and trade
Another major macro trend that we can see evolving is Asia's ascendance as a dominant power in the new global economic order by strengthening its regional economic cooperation and connectivity.
Indeed, the backbone of today's Asian economic renaissance is the region's large-scale infrastructure development, which is being driven by the Belt and Road Initiative (BRI).
The BRI – which was launched by China in 2013 with the aim of improving the infrastructure of overland and maritime routes to boost intra-regional trade and capital flows in Asia – connects over 65 countries, 63 per cent of global population and 30 per cent of global GDP4.
The BRI is set to generate a massive influx of investment in infrastructure across Asia: China alone has pledged to invest USD800 billion in the next five years to fund BRI infrastructure projects, and – as aforementioned – USD26 trillion in investments will be required to fuel infrastructure development in the region over the next 15 years.
This funding will no doubt provide a boon for companies in the infrastructure, construction, engineering, building materials and commodity sectors in the coming years.
The BRI will also serve to further solidify Asia's position as the world's leading trade region by fostering economic integration; driving investment, trade, and growth; and delivering greater prosperity to nations along the BRI economic corridor.
Through this initiative, Asia is building bridges – literally and metaphorically – to the future, and creating enormous opportunities for companies and investors around the globe in various sectors including infrastructure, finance, trading, logistics and professional services.