Business | Economy

Optimism rules discussions on Asia

The terrific expansion in the Asia’s middle classes is a major driver

  • Francis Matthew Editor at large
  • Published: 17:49 January 25, 2013
  • Gulf News

It is always good to find people who are optimistic, but it was almost unnerving how cheerful all the speakers were at a breakfast focusing on India, hosted by Boston Consulting Group, BCG, and the Confederation of Indian Industry, CII.

Kamal Nath, India’s Minister of Urban Development and Parliamentary Affairs, led off with a very upbeat view of the opportunities in Asia which are becoming a reality, but he was followed by even more cheerful speakers including Adi Godrej, CII chairman.

“Asia is a huge global opportunity as it is home to 60 per cent of the world’s population but only 20 per cent of the world’s consumption. As wealth grows, demand will soar,” said Nath.

The terrific expansion in the Asia’s middle classes is a major driver in all this. “Today Asia’s middle classes total around 525 million, which is about 25 per cent of the world’s middle class. But in less than a decade the growth of Asia’s middle class will mean that Asia will be home to 50 per cent of the world’s middle class, making it five times as large as the middle class in the USA”, said Nath.

Nath listed three factors which will make this major shift more beneficial. “First, development imbalances need to be avoided, and growth should be inclusive growth, covering all classes and areas.

“Second, the distinction between India’s urban and rural youth is not longer valid. Cellphones and greater connectivity have erased what was a sharp divide in the past. And thirdly, we need more regional agreements between countries so even if Asean and WTO talks have stalled, we need to continue with our bilateral agreements to help a huge trade bloc emerge across Asia,” said Nath.

His optimism was supported by his two hosts. “India is going through a time of huge growth”, said Godrej. “The markets are about of explode yet again as consumption goes up by four times, and India is expected to become the fifth largest market in the world by 2025”.

But these two seasoned commentators were far outdone in optimism by Janmejaya Sinha of Boston Consulting Group, who blithely announced that “We are lucky to be living in the best time in the world” as he listed the advantages of the present day. “Despite the headlines, we are in the most peaceful time for generations with no major wars underway, and violent deaths are 50 per cent down since the 1990. GDPs are up, and global life expectancy has risen from 62.9 to 69.6, and poverty has halved in 50 years.”

China

So it was with a sharp change of mood that I listened to a grimly realistic forecast for a more open but more nationalistic and confident Chinese leadership.

The new Chinese leadership is likely to be a more engaged global partner than the outgoing one. The incoming President Xi Jinping is a more pragmatic man, who will be more confident that the previous leader in dealing with foreign policy, said Wu Xinbo of Fudan University in China.

But he has huge domestic problems which will dominate his priorities, as he wrestles with problems like corruption and the huge income disparity in China, said Wu. China also has a population which is becoming a lot more articulate, and the new government will have to be ready to engage with the people.

Xi faces two major challenges. First, he has to build a consensus which incorporates both the very powerful military establishment and the increasingly vocal public opinion with the sprawling government agencies.

Wu gave an example of the rambling government system, saying that there are 16 separate government agencies tasked with covering different responsibilities on the Senkaka Islands which are disputed with Japan. Wu pointed out that this lack of central control is a serious problem for such a delicate area, and any local agency could suddenly trigger a crisis by an incautious action which was seen as aggression.

This might then lead to the second challenge Xi might face, which is that of American aggressive military action. China’s multilayered relations with the USA have been dominated by the close commercial and financial links between the two rivals, but this could change if America’s alliances with Korea and Japan drag it into military support for either one in their separate territorial disputes between China.

“The USA should not conduct aggressive operations against China. The situation is not like dealing with the Soviet Union 20 years ago”, said Wu, who was worried that Chinese nationalism might drive the Chinese leadership to respond so vigorously that any hopes for diplomacy would be harmed.

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