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Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Since September 2017 | Week 315 | September 22-28, 2023

Asia on the cusp of a new era

By Jeongmin Seong et al., | McKinsey & Company | September 22, 2023

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Today’s cluster of disruptions, both economic and political, in many ways have Asia at the epicenter. These may be triggers for a new era in which Asia will play a leading role.

Today’s challenging conditions are not unique. McKinsey Global Institute’s global research has identified other periods of disruption since 1945.  Each triggered the start of a prolonged new era that was relatively stable in the structures and norms that frame the global economy and international relations, but transformational change occurred within that stability.

During the most recent era, which MGI has dubbed the Era of Markets (1989–2019), the asia region’s economies collectively emerged as the world’s new majority, accounting for more than half the global total of key metrics the authors use to measure the world economy. As such, Asia is now a prominent player in all major domains measuring the world economy.

This majority position gives Asia an opportunity to influence and shape a new era not only for its own economies but for the world. But even if from a position of strength, by being at the nexus, it will face a heightened version of the world’s new global challenges in the five domains.  The domains and the underlying questions are:

1. World order. Asia is the world’s trade crossroads but could find itself in the crosshairs of trade tensions. Can Asia retain its commercially pragmatic model, keeping the benefits of trade amid growing geopolitical tension, and continuing to make its complementarity a strength?
2. Technology platforms. The value created by tech is shifting beyond manufacturing, where Asia excels. Can Asia reinvent itself as a technology creator rather than (mostly) a technology manufacturer and consumer in a world where key frontier technologies may be more contestable?
3. Demographic forces. Asia has the people to fuel growth, but the headwinds of aging are fiercest in the higher-productivity economies of the Pacific Rim. Can Asia deal with the pressing challenges of rapid aging in its highest-productivity economies by shifting its value chains and boosting productivity everywhere?
4. Resource and energy systems. Asia’s net-zero transition is simply bigger because it remains the world’s industrial base and has surging energy demands. Can Asia manage its dual challenge of securing rapidly growing energy needs and reducing the world’s largest carbon emissions?
5. Capitalization. Asia’s lower capital returns are not sustainable if the cost of capital and balance sheet stresses rise at a time when the region will demand the majority of global capital to continue growing. Can Asia mobilize all the capital it needs to power growth, deepening its financial markets to improve capital allocation while shoring up resilience amid balance sheet stress?

Asian countries constitute a complementary and interlinked ecosystem, largely through mutual trade interests.

3 key takeaways from the article

1. Today’s cluster of disruptions, both economic and political, in many ways have Asia at the epicenter. These may be triggers for a new era in which Asia will play a leading role.
2. During the most recent era, which MGI has dubbed the Era of Markets (1989–2019), the Asia region’s economies collectively emerged as the world’s new majority, accounting for more than half the global total of key metrics the authors use to measure the world economy. As such, Asia is now a prominent player in all five domains underlying this research: world order, technology platforms, demographic forces, resource and energy systems, and capitalization.
3. This majority position gives Asia an opportunity to influence and shape a new era not only for its own economies but for the world. But even if from a position of strength, by being at the nexus, it will face a heightened version of the world’s new global challenges in the five domains.

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Topics:  Asia, Global Economy, Poverty, Development