Asia Should Focus on its Own Markets
Stephen Roach | McKinsey Quarterly | November 2009
Asia faces dramatic economic change in the coming decades. In order to preserve economic growth, Asian markets need to abandon their excessive export orientation and reliance on foreign markets such as the American and European ones. As a result of the global financial crisis, demand for Asian products has fallen worldwide, in particular in the United States. Asia must find new arenas to market its products and thus guarantee future economic growth. Asia should concentrate to a far greater extent on its regional markets, where the buying power of Asian consumers represent enormous untapped potential.
In the past 30 years, economic growth in Asia, in particular in China, played an important role in raising living standards throughout the region. Exports constituted the driving force behind this development. Following the Asian financial crisis of 1997, Asia had the chance to re-orient its markets but failed to do so and quickly fell back upon pre-crisis export-oriented and government-supported economic strategies. The present global financial crisis forces Asia to rethink these approaches and reduce its dependency on foreign markets. The strong external demand, which fed export-supported growth up to now, simply vanished. If Asia desires to boost growth and raise living standards in the future, it will have to concentrate more on internal demand within the region and further the cooperation and integration of various Asian markets and industries. Besides China, the development of India is gaining in importance for the region. India is considered a sleeper among the Asian economies that could awaken precisely at the moment when all eyes are on China. Global companies, which in the past have regarded Asia nearly exclusively as a production platform, are now beginning to rethink their strategies. They are increasingly paying attention to the economic potential of the region and the buying power of 3.5 billion Asian consumers.
All major Asian economic powers from Japan to Korea to Taiwan already depend heavily on exports to China, more so than even to the U.S. and Europe. Asia needs to concentrate more on internal and less on external demand in order to promote the synergy of Asian consumers and producers. If Asia succeeds, this could well finally herald the much anticipated "Asian century."
This summary was prepared by the Atlantic Community editorial team from "Preparing For the Next Asia" published here by McKinsey Quarterly.