The big tilt: The rise of the East and what it means for business is an Economist Intelligence Unit special report.
The East has been rising since the 1950s, and its economic ascent is entering a new phase, following the Great Recession. There are likely to be a number of differences in its evolution in the next decade compared with the ones that preceded it. All have profound implications for global business. Companies large and small should develop their strategies by bearing in mind the following themes:
Economic leadership. Asia is leading the world economy out of a deep, global recession; the region will comprise 45% of global economic growth in 2010, according to the Economist Intelligence Unit. China and India, the two most promising Asian economies, also have the world’s largest populations.
Consumption. The old way for Asia to grow rapidly was to sell more to Western consumers, in particular to increasingly indebted American ones. In the future, Asian—and Western—fi rms will rely more on Asian consumers to do the heavy lifting. The European and North American markets will remain immense; in this decade, the Asian consumer market will become massive, too.
Savings. The heavily protected fi nancial markets of China and India will slowly liberalise, leading to a more effi cient allocation of capital. Full convertibility of their currencies is on the cards in the next decade. (The average estimate of our survey panellists for China is the year 2018 .) Even if it does not happen in the next ten years, Shanghai is likely to become a signifi cant international fi nancial centre in which companies from all over the world will be able to tap into China’s impressive nest egg. The renminbi is likely to climb in value. As an infl ation-dampener, it may need to.
Competition. Western and emerging Asian companies will increasingly compete directly against each other and buy control of each other. Cheap Asian component suppliers will continue to vie with one another for the favour of assemblers in the developed world. But in addition, Asian manufacturers will bemaking fi nished goods and competing against their European and US counterparts. In the process, Asian and Western companies will begin to resemble each other more than before.
National governance. India is a democracy but China’s communist party shows little sign of sharing power. Politics and culture tincture economics. Asian brands of capitalism are different from the Anglo-Saxon variety. The Chinese state continues to own large swathes of corporate China. Apart from politicalinterference and corruption, the main business risks in Asia are intellectual property theft, pollution and poor infrastructure.
Globalisation. The next decade may see the emergence of the fi rst truly global corporations, possibly with headquarters located in more than one region and with executive suites comprising people who refl ect the diverse markets that companies serve. Even if this does not happen, the trend is clear: more and more fi rms will tap global pools of talent and innovate all over the world. The biggest challenge is to develop a global corporate culture that may become the most important source of competitive advantage in the future.
