BrazilMcKinsey contends that Asia could shape the new economic order
Following the coronavirus pandemic which has rocked the globe, the countries of Asia could be the genesis of the world’s new economic order according to a new report from McKinsey.
Recently, McKinsey & Company global managing partner Kevin Sneader forwarded his opinion that nothing would be the same following the global coronavirus outbreak. Now, the firm is pointing at Asia as a potential leader in reshaping the global economy once the pandemic subsides, or what the management consulting firm describes as the ‘next normal’, noting that Asia today is home to 60 percent of the world’s population and around 35 percent of its poorest.
It’s important to remember that this crisis, above all, is a humanitarian challenge, states the firm, with Asia’s emerging economies such those in India and Southeast Asia facing unprecedented risks due to pandemics generally hitting the most vulnerable the hardest. But as a region, McKinsey adds, Asia has emerged stronger through previous crises, with the firm believing it can do so again – its nations and companies as such playing a major role in defining the future.
The first thing that McKinsey draws on is the dynamism, speed, and agility which Asian companies have demonstrated in an “increasingly volatile world”, contributing to the region’s macroeconomic stability and highlighted in a McKinsey previous study which showed that the region was home to almost all of the world’s outperforming emerging economies – those which had exceeded 3.5% GDP growth over the past 50 years or more than 5% annually during the past 20 years.
McKinsey also highlights the speedy recovery of those nations hit hard by the 1997 Asian financial crisis, most returning to positive GDP growth within a year or two, with the lessons learned better preparing the region for the global financial crisis one decade on. Today, nearly 45 percent of the world’s largest companies by revenue have their headquarters in Asia, with the region’s “well-diversified, horizontally integrated conglomerates” able to pivot quickly in a time of crisis.
“A shock of this magnitude will change business, society, and the global economic order in many ways,” the McKinsey analysts write. “Contactless commerce, for example, could become the permanent norm for consumers as enforced behavioral change becomes an everyday habit. Supply chains may be reconfigured to remove vulnerabilities that have been exposed by the pandemic. Across all aspects of business performance, the crisis will reveal both weaknesses and opportunities to improve.”
Like elsewhere, McKinsey expects that businesses in Asia will have to reimagine themselves following the crisis, but outlines four dimensions which it thinks could define the region as leading the charge, roughly; the ability to rethink social contracts, including increased public-private and inter-private sector collaboration; by shaping the future of work and consumption; by mobilising resources at speed and scale; and in leading the shift from from globalisation to regionalisation.
McKinsey notes in respect to the likely persisting changes to work and consumption, countries in Asia, already a global leader in digitalisation, have quickly escalated the adoption of new technology across all aspects of life – from e-commerce to remote working and learning tools. For example, China’s Ministry of Education was able to deploy a national cloud-based classroom platform to support remote learning for 50 million students simultaneously.
All in all, McKinsey not so long ago touted Asia as the world’s new centre of gravity – with the region set to contribute more than half of all global GDP by the end of next decade – and nothing which has occurred over the past few months has shaken that belief. Indeed (despite also recently sounding the warning over a looming regional debt crisis), the firm now suggests that we could just well look back on this pandemic as the tipping point when the Asian Century truly began.
