The Shift of Economic Power
Napoléon Bonaparte is often quoted to have said, “China is a sleeping giant. Let her sleep, for when she wakes she will move the world.” Regardless of whether he did say that, China and most of the so-called emerging markets are wide awake and changing the economic and political equilibrium.
A PricewaterhouseCooper report, “The Long View – How will the global economic order change by 2050?”, tries to predict changes to the world economic order in the next 30 years. What looks like a big challenge can be turned into new opportunities for financial advisors with the right partners who have deep knowledge of the local regions.
How the World May Look in 2050
By 2050, will the economic power have shifted to Asia and the emerging markets? Current political and economic uncertainties are now challenging the further integration of the world market. This would suggest long-term challenges to growth in the emerging market economies. Although some of these concerns may be true in the short-term, the long-term prognosis of PricewaterhouseCooper differs. Personally, as somebody with strong ties to Asia and Europe and a work history spanning the globe, the strength and vibrancy of emerging economies is obvious to me. The following forecasts from the PricewaterhouseCoopers study supports my view:
- The United States of America and Europe will steadily lose economic ground to China and India.
- By 2050, the ten biggest world economies will be (ranked in order of Gross Domestic Product (GDP) per capita in Purchasing Power Standards (PPS)): 1. China, 2. India, 3. USA, 4. Indonesia, 5. Brazil, 6. Russia, 7. Mexico, 8. Japan, 9. Germany, and 10. UK.
- China’s share of the world’s GDP (PPPs) from 2016 to 2030 will grow from 18% to 20% and the United States’ and Europe’s will drop from 16% to 12% and 15% to 9%, respectively. India’s share will almost double from 7% to 15%.
- Vietnam, India and Bangladesh will be the fastest growing economies in this time period.
- Incomes in advanced economies still will be higher for some time, but the gap will progressively close by 2050.
The rise of high-net-worth, affluent and retail investors in Asia and other emerging markets has sparked the need for new financial products. Among the most popular are those that reflect strong consumer protection rules and can be sold across jurisdictions. For some time, USCITS funds governed by European Union regulations have been very popular in parts of Asia. According to the journal, Asia Asset Management, more than 60% of funds sold in the jurisdictions of Hong Kong, Singapore and Taiwan in 2015 were USCITS regulated funds. Meanwhile, the Asian Region Funds Passport (ARFP), which was developed by the 21-member nation Asia-Pacific Economic Cooperation (APEC) continues to advance. When fully-established, it will give more fund choices to investors, while building the participating nations’ funds industries (https://migam-global.com/asian-region-funds-passport-opportunities-and-challenges/).
With robustly growing household incomes in rapidly growing Asian and other emerging economies, the future for financial advisors that deploy sound strategies and align themselves with the right partners looks bright.
As always, I am eager to hear what you think. Please reach out at Michael.Welter@migam-global.com.