• Daniel Lee

Asian century and investment opportunities you can consider

Recently, McKinsey published a discussion paper titled: The future of Asia, where the authors explored the past and future developments of Asia.


In this article, I will be sharing with yall one of the topics discussed within the 84-page paper.


As the discussion paper is segmented into different topics, the focus of this article will revolve around the significance of the Asian Century and what you need to know about it.


All information presented is extracted from the discussion paper itself. I am merely summarizing the findings and providing some of my inputs alongside with what was discussed in the article.

What is “Asian Century”

The Asian Century is the projected 21st-century dominance of Asian politics and culture, assuming certain demographic and economic trends persist.


By that definition, the Asian Century has begun.


Already the world’s largest regional economy, Asia is set to continue to grow in scale and influence.


This region is at the forefront of shifting patterns of globalization and is indeed shifting faster than the rest of the world, suggesting that it is Asia more than any other region of the world that will shape the next phase of globalization.


So, what changed over the years?

The following few charts summarize the changes that Asia has experienced over the decade

Over the years, Asia has made its place to become a prominent player in the global stage.


In the past decades, the bulk of the demand for Asia produced goods comes in the form of export demand.


This is due to the lower production cost between Asia and the more developed regions such as the U.S.


However, as Asia continues to develop and grow, more and more goods and services produced are starting to be consumed intra-regional rather than exported.


The trend of stronger regionalization partly reflects the fact that domestic consumption is increasingly driving growth in Asian economies, and therefore that more goods and services are being consumed within economies.


Another factor behind the increasing regionalization of Asia (and other regions) is a movement toward building domestic supply chains.


Asia’s emerging economies are developing new industrial capabilities and are starting to move into making more sophisticated products. As such, they are becoming less reliant on foreign imports of intermediate inputs and final goods.


This enables the region to create and capture supply chain value within Asia rather than exporting it to the companies in the western regions.


This trend is made possible by the support of Foreign Direct Investments within and outside of Asia that helped develop the necessary infrastructure required to provide the necessary quality of life and business environment for an economy to thrive in.


Despite the fact that Asia is growing to become more self-sufficient, Asia is still reliant on the world for capabilities and resources that – as a region – we still lack.


These come in the form of energy and knowledge from which the more developed regions have to offer.


Moving forward, we can expect Asia to:

  1. Become more integrated and more collaboration in the areas of production and consumption

  2. "Catch up” to the operational and living standards of the more developed regions/countries

  3. Become more environmentally conscious rather than just blindly chasing economic growth


Why is this happening?

To oversimplify things, the main driver behind the Asian Century is due to an increase in middle-class consumers driven by urbanization and an increase in the working-age population.


With more a larger pool of population hungry for and ready to work to meet their consumption needs, it is only natural that the bulk of the goods produced will shift towards internal consumption rather than exports.


Furthermore, as Asia develops, several countries gained the manufacturing capabilities to perform from activities along the entire value chain (procurement to manufacturing to distribution), Asia’s reliance on the manufacturing capabilities outside of Asia has severely decreased.


Granted, there are definitely more factors at play that I did not cover, if you wish to gain a better understanding, please read the discussion paper.

Why does it matter to you?

Investing is like playing a game of chess, you have to estimate and understand how your opponent will move in his next turn and position your pieces carefully to ensure your success.


The insights provided by McKinsey serve as an indication of how our opponent – the economy of Asia – is likely to behave in the near future.


The question now is not when will the Asia Century begin, but how we can benefit from the growth of the region as a whole.


Moving forward, you should focus on finding out the:

  1. WHAT should you invest in that will expose your portfolio to the potential of Asia?

  2. HOW you should go about to manage your investment portfolio


To achieve a risk-return of your portfolio to match your investment objectives, be it to pay for your children’s university tuition fees or to fund your own retirement.


Naturally speaking, that is if you have a clear understanding of your own investment objectives and financial plans in the very first place.


If you are reading this and would like to kick start your retirement or investment planning, you can reach out to me here and I’ll help you make sense of the options available at your current stage.


Do remember to share this article and subscribe to keep yourself up to date with investment insights.


My next few articles will revolve around the topics discussed within the 84-page paper so that you will not need to spend the time needed to read through the entire paper yourself.

Disclaimer:

This article is meant to be the opinion of the author and is for information purposes only.

This article should not be seen as a financial advice

This advertisement has not been reviewed by the Monetary Authority of Singapore


Source of information: https://www.mckinsey.com/featured-insights/asia-pacific/the-future-of-asia-asian-flows-and-networks-are-defining-the-next-phase-of-globalization

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