With market turmoil recently capturing headlines, it is easy to lose sight of the long-term forces which have been shaping Asia’s development. While Asian markets, especially Japan, experienced sharp losses in recent weeks, a positive tipping point has been reached as well: For the first time, more than half of Asia’s 4.8 billion people are part of the global consumer class, defined by the World Data Lab as those spending more than US$12 per day in purchasing power parity prices.
The importance of this milestone can hardly be overstated. It marks the transition from poverty to a more typical middle-class lifestyle, where individuals start engaging in discretionary spending on items such as motorcycles, gas stoves and beauty products.
The dominance of Asians in the global consumer class is a relatively recent development. Until 2000, the global consumer class was predominantly Western, totaling 1.7 billion people.
In 1980, more than 70 percent of the consumer class was in wealthy Organisation for Economic Co-operation and Development countries. Today, almost 60 percent of the global consumer class is Asian, World Data Lab estimates showed. Asia has 2.4 billion consumers and would add 1 billion more in the next decade, implying that it would account for 65 percent of the global consumer class. However, the Asian consumer is mostly an entry-level consumer, spending on average US$20 per day. That means that Asia’s total spending power is US$19 trillion, roughly 30 percent of global consumer spending.
The dichotomy of rapid growth in Asia’s consumer class and only moderately strong growth in consumer spending would continue.
The latest World Consumer Outlook projects that Asia would continue to lead global consumer class growth, contributing 110 million of the 134 million new consumers expected next year. Additionally, one-third of every additional US dollar spent globally would come from Asia.
World Data Lab projected that India would surpass China in adding people to the consumer class next year, with India contributing 47 million new consumers compared with China’s 33 million. Following them are five often overlooked Asian economies: Indonesia (6 million), Bangladesh (4 million), Vietnam (4 million), the Philippines (3 million) and Pakistan (2.5 million). In Olympic terms, Asia would dominate the top seven positions among the global consumer class leaders for the year, followed by the US, Brazil and Egypt respectively.
There are still 2.4 billion people in Asia who have yet to enter the consumer class, along with an additional 330 million newborns by 2034. This represents more than half of the world’s future consumers.
Asia would add 1 billion new consumers and US$15 trillion in additional consumer spending by 2034, World Data Lab said. However, most countries in emerging Asia have yet to reach the tipping point.
China and Vietnam did in the past decade, and India, Indonesia and the Philippines would soon (in 2027, 2028 and 2029, respectively), World Data Lab projected. Bangladesh, Pakistan and Nepal would become majority consumer markets only in the 2030s.
While the growth momentum of Asia’s consumer class is strong, the economic environment is volatile. Recent market turbulence in Asia has raised concerns about investor confidence and the stability of financial markets in the region. However, these risks are likely only to delay, rather than derail, the expansion of Asia’s consumer base. Like the COVID-19 pandemic, which similarly interrupted the growth of Asia’s consumer class, these challenges would not stop Asia’s long-term rise in consumer power. The underlying factors driving this growth — longer life expectancy, better education and urbanization — have been put in place over the last decades, and these long-term shifts would influence Asia’s trajectory more than any short-term shock could undo.
Trendlines would prevail over headlines. It is safe to say that China would remain the world’s largest consumer market for seniors, at 122 million and growing to 178 million by 2030. By contrast, India would be the largest market for young Gen Z consumers, growing from 150 million today, about as large as in China, to 215 million in 2030. Global consumer goods companies should bet on Asia. If you bet against demographics, you typically lose.
Juan Caballero is a senior data scientist at World Data Lab, where he leads the insights and analytics team. Wolfgang Fengler, a former lead economist at the World Bank, is CEO of World Data Lab. Copyright: Project Syndicate
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