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Will Asia’s rising middle class buy less globally?

3/1/2022

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Between 2020 and 2030, the middle-class population in Asia Pacific is forecast to swell from 2.0bn to 3.5bn people – an increase of 73% and accounting for 89% of the global growth1. At the same time, consumers in Asia are consuming more of the product made in Asia (see figure below), with China being the leading example. This means the balance of trade for goods manufactured in the region is moving towards servicing growing consumer demand in the region. The amount of trade taking place within the region will therefore grow and have significant ramifications on the design of supply chain and logistics networks in Asia. This trend is supported by the reversal in loosening of trade barriers which are now increasing across the globe, highlighted by the ongoing trade tensions between the US and China. However, this brings new opportunities as companies seek to implement new solutions. 

With the growing importance in intraregional trade in Asia – Asia for Asia – corporations are having to reconfigure and build-out their logistics and industrial networks in the region. Asia’s role in global trade is changing and this needs to be factored into the design of flexible, responsive and efficient supply chain networks for the region including within domestic markets. This includes the rebalancing of supply chain networks in Asia to include onshoring and nearshoring much in the same way that these concepts are talked about in relation to the US and Europe. 

Consequently, decisions about the location of manufacturing and logistics assets in close proximity to growing markets will become even more critical. In addition, speed to market will be a key differentiator, though this needs to be balanced against closeness to suppliers of raw materials and components.

Critical decisions need to be made around the configuration of supply chains and the location of logistics and industrial real estate to service growing demand while optimising speed-to-market, logistics costs and inventory holdings. Full consideration needs to include proximity to the sources of supply of materials and labour along with ease and cost of cross-border movements. Finally, flexibility and resilience will need to rely on collaborative partnerships and interconnected ecosystems enabled by the free and secure exchange of data to not only synchronise supply chain and logistics processes but also to proactively manage risk.

Growth of trade flows within Asia Pacific

Blog 1 Chart

1 Brookings Institute

Download our paper – “The role of Asia Pacific in global supply chains”.

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