Hitting the sweet spot

The upward mobility of the Asian middle class has the power to change the global economy and bring about vital local societal changes

From Alice in Wonderland to Mickey Mouse: all the favorites were there to welcome visitors to the sprawling new $5.5 billion Shanghai Disney Resort when it opened in June. Tickets for the first weeks at the company’s largest ever theme park, the first on mainland China, were sold out. Just two weeks earlier, China’s richest man, Wang Jianlin, had cut the ribbon on the impressive $3 billion Wanda City in Nanchang, home to a host of rides, shows, hotels, shopping outlets and a huge aquarium. Another 15 entertainment parks will open before, Wang says, and they will be joined by dozens of others built by Chinese firms and international names like Universal Studios and DreamWorks.

Theme parks are just one of the many battlegrounds in the global fight for the attention – and money – of the fastest growing consumer group in the world: the Asian middle class. From 525 million in, the number of Asians earning between $10 and $100 a day – seen as the “global middle class” threshold – will increase to just over 3.2 billion in, says the OECD. By then, Asia will be home to two thirds of the world’s middle-class population. This growth could reduce global trade imbalances, and bring better healthcare, education and equality to countries in the region. Leading this shift is China, where middle-class expansion is well underway. A study by McKinsey suggests that by, more than 75% of China’s urban consumers will earn between $9,000 and $34,000 a year: it was a mere 4%.

China is in the midst of a “growth sweet spot,” after per-capita income reached the $6,000-a-year mark in, believes Ernst & Young. “History has shown that this level of income tends to trigger an acceleration in domestic private consumption,” it says in Hitting the Sweet Spot: The growth of the middle class in emerging markets. While other developing Asian countries are yet to reach this state, they are heading in a similar direction. Natalie Chun, an economist at the Development Indicators and Policy Research Division of the Asian Development Bank, pinpoints Thailand as being on the right track. Vietnam also has a young population and a per-capita disposable income set to rise by 150% to $3,400 per year by.

But what of Asia’s second monster market, India? While it, too, boasts favorable demographics, medium-term prospects remain mixed. So far, India has struggled to increase the size of its middle class. It grew from 1% of the population to 3% – “small by any measure,” concluded a Pew Research study.

“I believe it still struggles from infrastructural issues,” adds Chun. “The differences across states are so large, and policies are less clear and coordinated compared to China.” Nevertheless, Ernst and Young believes India is primed to hit its sweet spot in the, with 475 million people belonging to the middle class.

ONLINE AND SWITCHED ON

Over the last century, many countries have seen their populations reaching levels of disposable income that enable them to buy more than the bare essentials. But widespread Internet access is now making a difference in this process. When the middle class came to prominence in America or Japan, it wasn’t possible to see Facebook adverts or go shopping on Amazon. This change has resulted in a huge spike in demand for “western” products: in, General Motors sold one car in China for every 10 in the United States, but by this had reached parity. Last year, Apple reported that for the first time it had sold more iPhones in China than in the US. Asia may still be known as the world’s low-cost manufacturing center, but companies are increasingly seeing it as a dynamic, rapidly growing consumer market.

Beyond material aspirations, the growing Asian middle class is also changing its eating and drinking habits – with mixed results. After a number of domestic food scandals in recent years, affluent Chinese consumers are increasingly willing to not only eat more Western-style food, but to pay to import it. According to a study by the Australian Bureau of Agricultural and Resource Economics and Sciences, the country’s meat imports are expected to grow by a staggering 3,500% to $150 billion a year by.

In a bid to meet this demand – and as a sign of its global reach – the Chinese company Shuanghui International acquired Smithfields Food, one of America’s flagship food companies and the world’s biggest pork producer, for $4.7 billion. Western fast-food chains are also profiting: Domino’s, the largest pizza delivery company, now sells more pizzas in India than anywhere else outside the United States.

But what’s good for business isn’t necessarily good for the health of Asia’s young consumers. Diabetes is “growing alarmingly” in India, according to the International Diabetes Federation, and obesity is reaching “epidemic proportions among India’s middle-class children and adolescents, as young people choose Western fast food over traditional cuisine,” it says.

BETTER FOR SOCIETY AND FOR GROWTH

But a growing middle class isn’t all rampant consumerism. Greater prosperity can also bring progress to many parts of society. “The middle class tends to invest more in education and healthcare,” says Chun. “It can also create change in terms of the political climate and prevalent attitudes and values. Women’s roles will change as increasing numbers receive better education and seek more professional work. Ultimately, these changes have a positive feedback effect on local economies, which helps generate further growth.”

Hitting the sweet spot

The upward mobility of the Asian middle class has the power to change the global economy and bring about vital local societal changes

Hitting the sweet spot

The upward mobility of the Asian middle class has the power to change the global economy and bring about vital local societal changes

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