Corporate Press Release
Emerging Asia will produce more than half of global output by 2050
Emerging Asian economies are changing rapidly with the region’s share of global economic output set to reach 55% by 2050. The region's equity and corporate bond markets are on course to assume close to a 30% global share by 2030. Underpinning this is a shifting focus of economic activity across the region. Credit Suisse Research Institute’s (CSRI) latest ‘Asia in Transition’ report highlights the key economic, social, technological and political changes taking place in the region.
- Moving towards more balanced growth - 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.
- Exports evolving in composition, direction and global share - 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 divide appearing in demographic make-up - 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). Challenges from 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 Asian 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.
- Asia will play a leading role in disruptive technology, enhancing regional financial inclusivity –Technological innovation and adoption has the potential to 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 global leaders in the knowledge-based sectors of the economy.
- Additional focus on renewable energy will be required to alter a disproportionately negative impact of climate change - 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% share of its energy mix relative to the rest of the world at 52%.
- Shifting economic and political allegiances in an increasingly multi-polar world - Asia is witnessing a geopolitical transformation as regional hegemonies projecting both soft and hard forms of power 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.
Reform & Investment
- Improving governance will yield superior value creation via productivity gains - 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.
- The domestic 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 retail-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.
Alexander Redman, Head of Global Emerging Market Equity Strategy at Credit Suisse, said: “The changes impacting the Emerging Asian markets show immense promise for growth and development, particularly given the rebalancing toward a more sustainable model of economic output and the accompanying technological advances. Challenges posed by changing regional geopolitics and demographic composition remain but are offset by evidence of improving economic resilience. How the region embraces renewable and cleaner sources of energy to satisfy vast future demand growth will be imperative to addressing the challenges of climate change.”
Urs Rohner, Chairman of the Board of Directors of Credit Suisse Group and Chairman of the Credit Suisse Research Institute, commented: “With Emerging 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. 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.”
The report ‘Asia in Transition’ is available online at:
About the Credit Suisse Research Institute
The Credit Suisse Research Institute is Credit Suisse's in-house think tank. The Institute was established in the aftermath of the 2008 financial crisis with the objective of studying long-term economic developments, which have – or promise to have – a global impact within and beyond the financial services. Further information about the Credit Suisse Research Institute can be found at www.credit-suisse.com/researchinstitute.