Emerging Asia will produce more than half of global output by 2050
Emerging Asia's share of global economic output is set to reach 55 percent by 2050. The region's equity and corporate bond markets are on course to assume close to a 30 percent global share by 2030. Credit Suisse Research Institute's (CSRI) latest 'Asia in Transition' report highlights the key changes taking place in the region.
"With Asia delivering sustained and elevated growth in recent years we felt compelled to take a deeper look into the multifaceted and exciting changes taking place in the region" says Urs Rohner, Chairman of the Board of Directors of Credit Suisse Group and Chairman of the Credit Suisse Research Institute. "Our 'Asia in Transition' report delves into the vast opportunities as well as significant challenges the region faces in years ahead amidst signs of rebalancing growth and vastly improving financial inclusion through technological innovation."
A more balanced growth model
Upper-middle-income Asian economies are evolving from manufacturing export-led growth models toward greater output from service sectors, while large pools of domestic savings will progressively fund consumption as the engine of growth thus rebalancing from debt-fueled investment.
Changing export dynamics
Asia's export mix is increasingly value-added with a rise in domestic inputs and directed within the region. But rising labor costs will likely encourage a redistribution of China's dominant export share among lower-income regional economies with thriving manufacturing sectors such as Vietnam and Bangladesh. This may be compounded by supply chain diversification necessitated by potentially ongoing US-China trade frictions.
A North and South Asian demographic divide
Maturing North Asian economies are losing their demographic dividends while other less-developed neighbors will likely continue to reap the benefits for the next decade(s). Rising age-dependency ratios and the declining pace in urbanization will provide obstacles to future growth in China, South Korea and Taiwan while South Asian countries such as India, Pakistan, Bangladesh and Sri Lanka continue to reap the benefits of a growing working-age share of the population for at least two more decades.
Rising middle-class wealth
Wealth creation is rising the fastest of any global region among Asian households, with 93 million people joining the middle class (defined as having wealth in the range of USD 10,000 to USD 100,000) in the last seven years alone.
Technology is leading progress
Technological innovation has the potential to further transform Emerging Asian economies by offering lower-income economies the opportunity to accelerate their progress toward full financial inclusivity and by enabling the middle-income economies to emerge as leaders in the knowledge-based sectors of the global economy.
Focus on renewable energy
Renewable energy is key to addressing the challenges of increased energy demand and climate change. Asia's consumption of the more polluting fossil fuels (coal and oil) accounts for a disproportionate 78 percent share of its energy mix relative to the rest of the world at 52 percent.
Shifting economic and political allegiances
Asia is witnessing a geopolitical transformation as regional hegemonies jostle for influence with conflicting agendas. Smaller nations drawn into this struggle must therefore compete to protect their interests with the most favorable economic and security alliances.
Better governance will yield superior value creation
Administrative reform programs addressing labor-market inefficiencies and investment in human capital should boost productivity. In combination with enhanced governance and quality of institutions, this will serve to strengthen corporate profitability and value creation.
Institutionalization of Asian capital markets
Growing equity and fixed income supply from the deepening of Asian capital markets will increasingly be absorbed domestically as deposit-saving pools seek higher rates of return in an environment of strengthening investment culture. We expect an institutionalization of these assets toward pension, insurance and mutual funds, similar to that witnessed in the USA after the introduction of 401(k) pension schemes.