Why Asia’s time is now: what's fueling Asian growth and what does it mean for the rest of the world?

One of the more enduring narratives of globalization has been Asia’s rise. “The dawn of the Asian century” as former UN Security Council president Kishore Mahbubani called it, has been a long time coming, but significant changes in the world order are seldom point-in-time events. They evolve gradually, emerging from a tapestry of diverse factors.

In the past, the Asian growth story was dominated by the Asian Tiger economies of Japan, South Korea, Singapore and, at the turn of the century, China. Today, India, Vietnam and Indonesia are also emerging as important players in the regional economy and global value chains.

Asia is now at a crucial juncture at which the progress of the last few decades has come together to add a new chapter to the region’s history. What is fueling Asia’s rise? Let’s connect the dots.

The Indian economy is expected to grow at 6.8% this year. Its nominal GDP is set to outpace Japan’s by 2025, and by 2030 India is expected to overtake Germany to become the world’s third largest economy with a projected $7 trillion GDP. External trade is likely to grow by over $393 billion over the next decade as India benefits from shifting geopolitical dynamics.

India is also emerging as a leader in the development of digital public infrastructure. Its biometric identity system, Aadhaar, is the world’s largest, and several countries have expressed interest in replicating it. The country’s large, diversified and fast-growing consumer story is equally compelling. Recent BCG research indicates that, by 2030, average household income in India will grow, with an increase in the number of affluent households in particular.

China also continues to be an Asian growth story. In May, the IMF upgraded its forecast for China’s economic growth by 0.4 percentage points to 5% for 2024. Even if growth slows to 3%, China’s 2030 GDP will still be around $5 trillion more than in 2022.

As the world’s second largest economy, China also continues to redefine global standards and push the boundaries of innovative global industries such as electric vehicles, renewable energy and the digital economy.

Elsewhere in the region, trade among the Association of Southeast Asian Nations (ASEAN) is forecast to grow by $1.2 trillion over the next decade. By 2031, ASEAN exports are expected to surge by nearly 90% versus overall global trade growth of less than 30%.

Asia is experiencing an era of increased intraregional connectivity and cooperation. Global businesses, as well as East Asian multinationals (including those based in China) are moving manufacturing and sourcing to Southeast Asia. These nations are well connected – both with each other and to major markets around the world – which has created opportunities for companies to build integrated supply chains and tap markets across the region.

New trade agreements are reinforcing this change. The Regional Comprehensive Economic Partnership (RCEP), a free trade agreement between Asia-Pacific countries, will give ASEAN companies duty-free access to a combined market of 2.2 billion people. Further, the ratification of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CP-TPP) means the region has competitive trade access with countries that together account for more than 40% of global GDP.

Asia is also becoming a hub for global tech and innovation. By 2030, Asia’s fintech revenues are expected to be bigger than North America’s. A Boston Consulting Group survey of 21,000 consumers from 21 countries revealed Asian consumers are more positively inclined towards artificial intelligence (AI) than those in the West. This indicates Asia is likely to offer more near-term opportunities in this sector.

Global supply chains have faced unprecedented stresses over recent years: the COVID-19 pandemic, geopolitical tensions, rising protectionism and tightening restrictions on technology products. Supply chain resilience is now top of mind for corporate decision makers.

Once known only for its outsourcing centres and factories, Asian people are now running some of the the biggest global companies. This allows the continent’s countries to find more opportunities within the region, rather than having to look outside. This also translates into more intra-regional influence and impact.

The Asian story continues to be marked by contrasts, however. The region faces challenges that are often more pressing than the rest of the world. Nearly 50% of global CO2 emissions are produced in the Asia Pacific region. Four South-East Asian nations—Myanmar, the Philippines, Vietnam and Thailand—are among the top 10 countries most affected by climate change in the past 20 years. Further, 37% of ASEAN GDP is predicted to be at risk if temperatures increase by 3.2°C.

Financial inclusion also remains a challenge – nearly 44% of adults in the ASEAN region are unbanked. And just as Covid-19 and its aftermath has exposed the cracks in healthcare systems around the world, the same goes for Asia. There is wide disparity in access to healthcare in the region: there are between 2.6 and 2.8 hospital beds per 1,000 people on average across upper-middle, lower-middle and low-income APAC countries and territories, respectively. This is less than the OECD average of 4.6 and the high-income Asia-Pacific countries and territories average of 5.4 beds. This is particularly significant because several Asian countries have ageing populations.

But what makes today’s Asia different from the past is the arsenal of scalable and innovative solutions it is developing to meet these challenges. While it is true that Asia has a lot to lose from rising temperatures, for example, it also has the most to gain from climate action. Asia is projected to unlock 43% ($4.3 trillion) of the $10.1 trillion revenue opportunity available by 2030 from activities like the expansion of renewable power, energy efficiency in buildings, transportation and agriculture, and greater circularity in producing industries.

The fintech sector is also expected to reach $1.5 trillion in annual revenue by 2030, accounting for almost 25% of all banking valuations worldwide. With 42% of all incremental revenues, the largest market is projected to be Asia-Pacific (APAC), especially emerging Asia (China, India, and Southeast Asia), where fintechs will help expand financial inclusion.

The pandemic has also accelerated digital adoption in healthcare, with markets like India seeing a $2.5 billion upswing in healthcare investments in 2021, followed by more than a $1 billion in 2022. According to BCG research, these investments were spread across mature segments such as e-pharmacy, e-diagnostics, fitness and wellness, and emerging segments such as specialty care, healthcare financing and healthcare SaaS.

More importantly, these solutions will not only help Asia, they could be replicated globally to help the whole world.