What drives the Asian consumer? – Urbanization

Cities are important engines of economic growth. Increased population density leads to more transactions, higher levels of information and interactions, which leads to greater efficiency and productivity.

Indian cities, for example, despite accounting for only 35% of the country’s population, generate 75% of its GDP. If we take out more developed economies like Korea and Singapore, urbanization rates in most parts of Asia are low compared with the global average, leaving ample room for further expansion.

According to the United Nations, India and China are projected to add 671 million to their urban populations between 2018 and 2050, which represents more than a quarter of the global increase in urban population during this period.

We believe there are multiple ways companies can ride this trend and create true financial impacts. In China, we see companies developing differentiated and targeted strategies towards consumers in lower-tier cities. The income gap is narrowing across Chinese cities, with lower-tier cities contributing two-third of China’s consumption by 2030. We believe this to be the driver of the next leg of revenue growth.

In India, we have exposures to a number of private financial institutions. We believe they will be key beneficiaries as people increasingly accessfinancial products and services when they move to cities. Moving to cities tends to lead to a deeper banking relationship and clients become more open to exploring financial products.