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For a look into the future of the global economy and where the power is shifting, consider technology developments in both China and India.

In a mere decade, China’s e-commerce market has grown from less than 1% of global sales into the world’s largest market in 2016, representing more than 40% of transactions by value.1 Platforms such as Alibaba and JD.com reach nearly one billion eager shoppers in a market three times bigger than the US.

Meanwhile, India’s adoption of mobile technologies is surging at an astonishing rate as Reliance Jio—which became India’s dominant tech firm virtually overnight—brings fast connections to India’s 1.3 billion people. Even as COVID-19 continues to spread, Google and Facebook have separately invested billions in this telecom company (a highly unusual step for rival tech giants) amid projections it would hit 500 million subscribers by 2023.

These events in the world’s two most populous nations capture the dynamic of why we believe Asia will shape the 21st-century and command the attention of long-term global investors. Unprecedented energies are being unleashed through an alignment of digital innovation and the four M’s that characterize Asian consumers: Millennials, middle class, metropolitan, and mobile-enabled.


How the Four M’s Underpin a Bright Asian Future

We do, of course, live in times of uncertainty, and there is plenty that could go wrong in the narrative of Asia’s 21st century ascent. Trade frictions between China and the US, a possible fragmentation of 5G practices, regional rivalries within Asia, and uncertain coronavirus outcomes all pose threats to the continent’s future and to the global economy as a whole.

Despite this, there is no denying the social and demographic trends that are giving momentum to Asia’s rise in global economic leadership. Today’s Asian consumer is driving a transformation in the continent’s economic growth model that will play out for decades. Once the West’s manufacturing workshop, Asia has reinvented itself as an innovation leader, serving increasingly demanding and sophisticated home markets, now defined by the four M’s.

Global investors are paying heed, both through private equity and capital markets. According to CB Insights, China already has almost half the number of “unicorns” (start-ups valued at more than $1 billion) as the US, with 118 versus 238. India is quickly climbing up the global unicorn ranking as well, coming in third worldwide with 24.2 Meanwhile, global demand for Chinese assets has hit a record high during the pandemic, with foreign holdings of Chinese bonds and equities surpassing Chinese renminbi 1 trillion (approximately $150 billion) through August 2020.



The four M’s represent a convergence of positive factors that will shape the Asian century. First, let’s look at the Millennials. There are 800 million of them in Asia, compared to 66 million in the US and 60 million in the EU. Millennials are fast becoming the world’s most avid consumers, driven by optimism and ambition. Sixty-five percent of Millennials in emerging markets expect to be better off than their parents, versus the same percentage in developed countries who expect to be worse off.


Middle Class

Next, let’s consider Asia’s burgeoning middle classes. Hundreds of millions of people across Asia have recently acquired middle-class status, representing a vast pool of purchasing power. From an investment perspective, one key Chinese consumer trend has been a preference for local brands. A McKinsey survey found Chinese now prefer domestic brands for 15 of 17 selected categories, including electric appliances and personal products.3

According to the Brookings Institute, Asia will account for nearly nine in 10 of the next billion middle-class consumers.4 Most will live in China, India, and Southeast Asia, and, by 2025, consumer spending by the Asia-Pacific region’s middle classes is forecast to surpass the rest of the world combined.

Asia will account for nearly nine in 10 of the next billion middle-class consumers.

This means industries and sectors oriented toward consumption can have great growth potential. Consumption trends combine with rising health consciousness to make consumer technology and healthcare two of the most significant Asian investment opportunities today.



Now, let’s look at metropolitan clusters. Asia’s growth is enabled by growing urbanization as workers pursue their dreams in cities. Today, Asia has more than 300 cities with a population greater than one million; the US has 10 and the EU has 18. We believe Asia’s high-density populations can provide ideal conditions for companies to grow. It can foster a virtuous cycle of scale, leading to faster, cheaper, more innovative products and services. A powerful example is Chinese ride-hailing app Didi Chuxing, which has 30 million active drivers who are, today, 10 times more numerous than Uber’s.



Finally, let’s consider Asia’s eager mobile-technology adopters. Asia has more than four billion mobile phone subscriptions and more than two billion internet users, more than any other region, providing massive scalability for consumer technology.

Alibaba and other tech groups such as We Chat and Tencent are carving out innovative paths to tapping this consumer energy with super-apps that combine services such as e-commerce, ride-hailing, social messaging, and even insurance.

In India, as Reliance Jio pursues its dream of bringing affordable telecommunications services to every Indian, innovators such as Flipkart and Paytm are tapping into the farthest reaches of the subcontinent.


Will There Be an Impact on Growth and Innovation in the Post-COVID-19 Age?

The COVID-19 crisis is not dimming Asia’s bright outlook. Rather, it reinforces prevailing trends. Asia has so far rebounded, both from a health and economic perspective, faster and more robustly than western economies.

Asia has used disruptions caused by the pandemic to accelerate the development of digital innovations critical to the post-pandemic era. These include remote communications, digital healthcare, mobile payments, e-commerce, and next-generation mobility.

China, in particular, has delivered standout performance. Its economy posted 4.9% GDP growth in the third quarter, and the International Monetary Fund (IMF) projects China will be the only major economy to grow in 2020 with an estimated 1.9% expansion.

China is also experiencing continued vigor in its initial public offerings market, the process by which private companies offer shares on public markets for the first time. There were 118 new listings in the financial year up until July—even as listings elsewhere fizzle.

These trends may only be reinforced by the inclusion of China’s currency in global indices and the growth of local-currency financial markets in coming years. Moreover China’s focus on internal manufacturing growth—known as “Made in China 2025”—could help to insulate it from any escalation in trade wars.

While India has taken a far bigger health and economic hit, we think the overall outlook remains strong. India’s consumption narrative is the perfect complement to China’s industrial ascent, the two countries representing the two pillars of Asian 21st-century advances. The IMF forecasts that India will bounce back from COVID-19 with an 8.8% economic expansion in 2021.5

China and India represent the two pillars of Asian 21st century advances.

The pandemic has spurred India to embrace digital transformation even faster than in pre-COVID-19 times. According to the World Economic Forum (WEF), the crisis has inspired a “public-private push [to make] India a digital-first country, resetting the basic life experience and aspirations of more than a billion people.”6

Immense challenges lie ahead, not least the ever-present regional tensions as these increasingly assertive countries take center stage. However, with increased presence comes an increased focus and recognition of the importance of diplomacy in forums such as the UN and WEF. Additionally, the dynamism, aspiration, and innovation vigor of the four M’s make us optimistic about Asia’s potential next century.

For more insights on international investing, visit our Market Perspectives.

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1 McKinsey & Company, “China’s Digital Economy: A Leading Global Force,” August 2017

2 CB Insights, “The Complete List Of Unicorn Companies,” December 2020

3 McKinsey & Company, “China Consumer Report 2020,” December 2019

4 Brookings Institute, “A Global Tipping Point: Half the World Is Now Middle Class or Wealthier,” 9/27/18

5 International Monetary Fund, “World Economic Outlook,” October 2020

6 World Economic Forum, “COVID-19 Has Accelerated India’s Digital Reset,” 8/5/20

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