Asia’s almighty mid­dle class

Financial Mirror (Cyprus) - - FRONT PAGE -

De­spite re­cent eco­nomic un­cer­tainty, Asia’s mid­dle class is grow­ing fast. In the com­ing decades, this bur­geon­ing de­mo­graphic seg­ment will serve as a keystone for eco­nomic and po­lit­i­cal devel­op­ment in the re­gion, with sig­nif­i­cant im­pli­ca­tions for the rest of the world.

The OECD es­ti­mates that the global mid­dle class (de­fined as house­holds with daily ex­pen­di­tures of $10-100 per per­son, in 2005 pur­chas­ing power par­ity terms) will swell to 4.9 bil­lion peo­ple by 2030, from 1.8 bil­lion in 2009. Two-thirds are ex­pected to re­side in Asia, up from 28% in 2009, with China home to the largest share. In­deed, if China pur­sues the struc­tural re­forms and tech­no­log­i­cal up­grad­ing needed to main­tain rapid eco­nomic growth, its mid­dle class should ex­ceed one bil­lion peo­ple in 2030, up from 157 mil­lion in 2009. The rapid emer­gence of Asia’s mid­dle class will bring far-reach­ing eco­nomic change, cre­at­ing new mar­ket op­por­tu­ni­ties for do­mes­tic and in­ter­na­tional com­pa­nies. Al­ready, de­mand for con­sumer durables has in­creased in the re­gion, with China be­com­ing the world’s largest mar­ket for au­to­mo­biles and mo­bile phones. But there re­mains sub­stan­tial room for more con­sump­tion in luxury goods and tech­no­log­i­cal prod­ucts, as the pur­chas­ing power of the de­vel­op­ing world’s mid­dle class catches up to that in the ad­vanced coun­tries.

This con­ver­gence will con­trib­ute to more sus­tain­able eco­nomic growth, with Asia’s economies re­bal­anc­ing to­ward do­mes­tic de­mand, es­pe­cially house­hold con­sump­tion, and thereby be­com­ing less vul­ner­a­ble to ex­ter­nal shocks. Given the decline in ex­port de­mand since the global eco­nomic cri­sis, this shift could not be time­lier. And the benefits will not be con­fined to Asia; as im­ports to the re­gion in­crease, global trade im­bal­ances will decline, im­prov­ing the sus­tain­abil­ity of eco­nomic growth world­wide.

In­deed, Asia’s grow­ing mid­dle class will trans­form a re­gion known as a global man­u­fac­tur­ing hub into a con­sump­tion pow­er­house. As de­mand rises, more and bet­ter jobs will be cre­ated not only in Asia, but also glob­ally, along sup­ply chains and across pro­duc­tion net­works.

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