The Asian Century

Asia is well positioned for the coming decades. A benchmark in innovation, consumption and the value associated with the growth of its economies, it opens up a wide range of opportunities that investors cannot ignore.

© leungchopan - stock.adobe.com

A decade ago, the Chinese e-commerce market represented less than 1% of global online sales. In 2016, it became the largest in the world, with more than 40% of total transactions in value. Companies like Alibaba and JD.com have gained close to XNUMX billion customers, which is equivalent to three times American consumers.

In India, the adoption of mobile technologies is growing at a surprising rate and catapulted the business of operator Reliance Jio, which bet on accessible services. Already in the middle of a pandemic, Google and Facebook individually invested many millions in this company - something unusual between the two rivals - to anticipate projections that the operator could reach 500 million subscribers by 2023.

These examples from the two most populous nations in the world give us clues about their dynamism and illustrate the potential of emerging markets in the coming decades, namely that of Asian countries.

4 reasons that contribute to make XXI the Asian century

There are, in particular, four reasons for the XNUMXst century to consolidate itself as the Asian century:

  1. Numerous Millennial generation: about 800 million Asians who are part of the millennial generation, a colossal number compared to the USA and the European Union, where this generation stands, respectively, at 66 million and 60 million. 65% of these millennials in emerging markets expect to be able to live better than their parents, against an equivalent percentage that, in developed countries, sees worse living conditions. This means that we have a huge number of consumers in Asia, young adults and active people, driven by ambition and optimism.
  2. Growing middle class: out of ten million middle-class consumers, nine million will be in Asia, estimated the Brookings Institute, and most will live in China, India and Southeast Asia. In 2025, spending by this middle class in the Asia-Pacific region is expected to exceed that of the rest of the world. And there are clues that domestic brands are increasingly valuing more: out of 17 categories analyzed by Mckinsey, the Chinese prefer national brands in 15, including personal consumption and household appliances.
  3. High density in large cities: Asian growth has been supported by the “birth” of large cities. Asia has more than 300 cities with more than one million inhabitants, an incomparable number at 10 in the USA or 18 in the European Union. These high-density metropolises support business growth and a virtuous circle of scale, which brings consumers more products, services and innovation, faster and cheaper. Take the example of the Chinese app Didi Chuxing, with an offer similar to Uber, but with ten times more active drivers (in this case, 30 million).
  4. More connected by mobile: Asia has more than 4 billion mobile phone subscribers and more than 2 million internet users - more than anywhere else in the world. This is a massive basis for the scalability of technologies to the consumer and several technologies - We Chat and Tencent, for example - are promoting innovative ways to cross services and applications that combine from e-commerce and shared transport to social networks and even insurance.

These trends translate into growth and value that some shareholders are already capturing - both in the capital market and in private assets (private equity, for example). However, the history of Asian ascension is not without risks - trade wars, possible fragmentation of 5G practices, regional rivalries, impacts of the current pandemic are some of the uncertainties to be considered.

Even so, there is no doubt that Asia is managing to reinvent itself in innovation and benefits from the benign context of the four factors mentioned above. It is enough to realize that China and India are already in second and third places in the global ranking of unicorns - start-ups valued at more than one billion dollars - and that the global demand for Chinese assets reached a new record in the middle of the pandemic - in August - with foreign participation in shares and bonds to exceed (in local currency) the equivalent of US $ 150 billion.

Note: The content and references to companies are made for informational purposes only and do not constitute a recommendation to buy or sell assets.

 

This sponsored content was produced in collaboration with Schroders.

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