While the beginning of the 21st century will likely be recalled as the period of Asia’s rise to economic parity with the West, the same will not be true for the year 2021. The world’s most populous and fastest-growing region has suffered setbacks to its prodigious development over the last twelve months. Slow progress in the vaccine rollout across south and southeast Asia has held back its economic recovery. Meanwhile, a harsh and far-reaching regulatory crackdown in China has shaken the confidence of global investors in the development model of the world’s second largest economy.

Despite 2021’s setbacks, we believe that Asia’s future remains bright. The multi-decade forces driving the shift in economic power towards the region have not changed. By 2030, over 1 billion more people are likely to have joined the ranks of the Asian middle class. Ongoing urbanization – particularly in India and Indonesia – may add 100 more names to the list of global cities with populations of over one million.¹¹

China has been the main engine for the rise in Asian middle class wealth. The policy crackdowns on the internet and property sectors this year was disruptive but could potentially allow for greater development of middle class consumption. The regulatory tightening on education and housing has likely enabled those on the lower end of the middle class to stay.

Meanwhile, rural development, liberalizing household registration and improving social welfare may lift more from the lower income. Assuming 5% average GDP growth and a moderate narrowing in the wealth gap, the number of middle income population may rise by 150-200 million in the coming decade. Currently, the middle income amount to just over 400 million, which already account for one half of China’s household consumption.¹²

We thus believe that the unstoppable trend of the rise of Asia remains fully intact.

Short-term snapback, long-term services boom

We see both short- and long-term potential opportunities emerging from the pandemic in Asia. The first concerns economic recovery, which has been restrained by the region’s relatively slow aggregate vaccine rollout. Supplies were initially insufficient, given that the leading countries in vaccine development naturally prioritized themselves. Since the third quarter of 2021, though, supplies have begun reaching Asia in large quantities. This are not likely to be sufficient, however, to forestall a second slow down due to the rise of the Omicron variant.