SEOUL – Despite recent economic uncertainty, Asia’s middle class is growing fast. In the coming decades, this burgeoning demographic segment will serve as a keystone for economic and political development in the region, with significant implications for the rest of the world.
The OECD estimates that the global middle class (defined as households with daily expenditures of $10-100 per person, in 2005 purchasing power parity terms) will swell to 4.9 billion people by 2030, from 1.8 billion in 2009. Two-thirds are expected to reside in Asia, up from 28% in 2009, with China home to the largest share. Indeed, if China pursues the structural reforms and technological upgrading needed to maintain rapid economic growth, its middle class should exceed one billion people in 2030, up from 157 million in 2009.
The rapid emergence of Asia’s middle class will bring far-reaching economic change, creating new market opportunities for domestic and international companies. Already, demand for consumer durables has increased in the region, with China becoming the world’s largest market for automobiles and mobile phones. But there remains substantial room for more consumption in luxury goods and technological products, as the purchasing power of the developing world’s middle class catches up to that in the advanced countries.
This convergence will contribute to more sustainable economic growth, with Asia’s economies rebalancing toward domestic demand, especially household consumption, and thereby becoming less vulnerable to external shocks. Given the decline in export demand since the global economic crisis, this shift could not be timelier. And the benefits will not be confined to Asia; as imports to the region increase, global trade imbalances will decline, improving the sustainability of economic growth worldwide.