Asia on the cusp of a new era

Asia on the cusp of a new era

Asia is a driver of global economic and political changes.

McKinsey experts analyzed the prospects and opportunities for the Asian region to take a leading position in the new era. Among the key questions is whether the socio-cultural and political diversity of the region is a factor promoting or limiting development.

Institutional and economic potential. Asia is developing due to the expansion of international trade relations. During the period 2015–2021 Asia accounted for 57% of global GDP growth. In 2021, Asia accounted for 53% of global merchandise trade. Economies are interconnected and interdependent, but geopolitical considerations can change the dynamics of trade both within and outside the region.

Technological development. The region used its industrial capacity to achieve leadership in the production of electrical equipment. Half of all internet users in the world live in Asia. Broadband penetration in several Asian countries is higher than in Europe (89% and 69%). However, technological value is shifting from hardware to software solutions and end-to-end technologies (quantum technologies and artificial intelligence). The main problem in Asia is “dependence on imported knowledge.” China and India imported three and nine times more in 2022 intellectual property than exported.

Demographic resources. Between 1990 and 2022. Labor productivity in China has increased more than 14 times, and in India - more than four times. The growth of the young working population is a key reason. However, due to population aging, by 2050 there may be 250 million fewer people of working age in developed Asia and China. The main challenge is to increase labor productivity in the new demographic situation.

Energetic resources. Asia is the world's largest consumer of energy and emitter of carbon dioxide, and is also the world's most dependent on energy imports. Asia's challenge is to increase energy supplies while reducing carbon emissions.

Financial capital. Between 2010 and 2020 fixed investment in Asia grew by 7%. Between 2000 and 2020 Asia mobilized $91 trillion. To meet the needs of Asia's growing economies, it is necessary to continue to attract and mobilize large amounts of capital. The main risks include dependence on foreign direct investment, the decline in China's economic development, the growth of government debt and the crisis in the real estate market.

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