China will continue to dominate the agenda in both economic and political spheres in 2016 — as it has done for the past 25 years. While its economy is slowing, China has become a behemoth and growth in real-dollar terms remains significant.
Population drift away from rural areas will continue inexorably as the pace of urbanisation increases. This change, as permitted by the central planning authority, will fuel the growth of domestic consumer markets and provide a stimulus to the local economy, making up for the decrease in foreign direct investment (FDI) flow. Overall, we can anticipate a fundamental change in the way China views its economy and the way it functions.
Japan, meanwhile, will continue its slow economic recovery. This is partly due to its flourishing tourism industry, which is showing accelerated growth since the relaxed visa requirements implemented in 2014 and 2015 in Thailand, Malaysia and Indonesia. The attraction of Japan as a tourist destination has been enhanced by a devalued yen, making it very price-competitive, and the fact that prices have remained stagnant for 20 years.
Just across the Sea of Japan, in South Korea, some conundrums are difficult to interpret: Although all economic indicators are pointing in the right direction, businesses in Seoul share a common pessimism. This is a real paradox given the current high profile and popularity of Korean soap operas, pop groups and fashion. On balance, we should still be a bit more optimistic than the general consensus for Korea in 2016.
Moving south to Southeast Asia, we can see real opportunities for sustainable growth in 2016. With the ASEAN Free Trade Agreements officially taking effect from 31 December 2015, the outlook for the region has to be optimistic.
Indonesia, the 400-pound gorilla of Southeast Asia, should continue its newfound vigour and grow steadily at the bare minumum. Should Indonesian authorities decide to free up the funds required to build the promised infrastructure and continue to tackle corruption, the country will become much more attractive in the eyes of foreign investors. With a currency now at 13,680 rupiah to a US dollar, it has a great competitive advantage and offers many opportunities for inbound FDI. It also makes it a great place for a bargain holiday!
The Philippines, like Indonesia, finally seems to be getting its act together. With a large population, it could emerge as another attractive centre of growth in 2016. Meanwhile, Malaysia, despite its recent spate of political scandal, is likely to keep getting wealthier with median household incomes continuing to increase. Vietnam should steadily etch out a niche for itself, like Indonesia, as an alternative to China for low-cost manufacturing.
The other country to watch next year is Myanmar. Should the election results be honoured and the sanctions kept at bay, it will become the final (decent-sized) frontier market and grow rapidly — albeit from a very low base.
This leaves Singapore and Hong Kong: as the key hubs, in an area that is still one of the most interesting and dynamic in the world, you have to believe that both are going to prosper in 2016.
Overall, one issue could perhaps come to prominence in the Asia-Pacific region in 2016: the effect of ageing populations. Two of the three biggest economies in the world, China and Japan, are faced with rapidly ageing populations. This will have a major impact on the way that many goods and services are marketed and delivered in the next five years — starting now.
I arrived in Hong Kong in February 1984 and firmly believed then that Asia was the place to be. Having lived and worked all around the region in the intervening years, I am still not seeing anything that makes me any less positive than I was 32 years ago, or anything to make me change my mind. It’s still the place to be.
Peter Snell is CEO of Ipsos Business Consulting