Asia is the world’s growth driver and investors cannot afford to miss it.
So said Platinum Asset Management’s founder and CEO Kerr Neilson at an Asia Development Congress in Shanghai recently. He says China and India combined have a land area almost as big as the USA and Europe combined, with a population three times greater.
If economic output is measured in Purchasing Power Parity terms the output of China and India is over 80 per cent of the output of the US and Europe combined.
China and India are growing much faster. China produces eight times more steel than the US and 50 per cent more cars. It consumes nearly half the world’s annual supply of copper, aluminium, cement and stainless steel. Last year 117,000,000 Chinese took an overseas trip by air.
The economic outputs of China, India, Indonesia, Thailand, Philippines and Vietnam are all growing strongly. Asian students are excelling in maths, science and reading. Seven of the top 10 countries in the OECD’s Program for International Student assessment are Asian. Australia ranks 21st.
China produces 4.7 million STEM graduates each year (science, technology, engineering and maths) and India 2.6 million. The US produces 560,000. China registers nearly as many patents each year as Japan, which is second to the US. South Korea is close to catching Germany in new patent registrations.
China now produces 15 per cent of the world’s high-value added exports, a figure that is growing quickly. Korea’s share is also growing while the shares of Germany, the US and Japan are declining slowly.
As incomes and living standards rise in Asia it is exporting less to the developed countries and consuming more of its production in the region. Services now make up half the Chinese economy and 60 per cent of India’s.
China has many inefficient, state-owned enterprises, some of which carry heavy debts. The central government is providing subsidies to close them down. This is allowing sale prices of outputs to rise, boosting the profits of those remaining.
About 55 per cent of China’s population live in urban areas. Each year more than 20,000,000 people move from rural homes to cities. About 9,000,000 new apartments are being built each year, so prices continue to rise.
India is also developing under the Modi Government. It has introduced a GST to broaden the country’s tax base. Spending on infrastructure has been ramped up. For example, 25 kilometres of new highway are built every day.
Mr Neilson says investors need to include Asia in their portfolios.