Businesses must become "Asia-literate" or miss the growth opportunities of the Asian century, according to the Australian government.
That was the message of its Australia in the Asian Century1 whitepaper released in October 2012, which urged the nation to plan for the future.
"Within only a few years, Asia will not only be the world's largest producer of goods and services, it will also be the world's largest consumer of them," the report said. "It is already the most populous region in the world. In the future, it will also be home to the majority of the world's middle class."
Yet, while Asia represents a massive market with two of the world's three biggest economies in China and Japan, business owners would be remiss to ignore the world's biggest economy: the United States. According to the World Bank2, US gross domestic product in 2011 totalled nearly US$15 trillion from its population of 311 million, with gross national income (GNI) per capita of US$48,620.
By contrast, China's GDP was less than half at US$7.3 trillion, with GNI of only US$4,940 for its 1.3 billion citizens. Neighbouring Japan, the world's third-biggest economy, had GDP of US$5.9 trillion with GNI per capita of US$44,900 for its 128 million people.
US stronger for longer?
Despite China's rapid rise, a December 2012 report by the Centre for Economics and Business Research (CEBR)3 predicted that the big three economies would maintain their current rankings for at least another 10 years.
Barring unforeseen economic mishaps and currency fluctuations, the United States is expected to remain the world's biggest economy through to 2022, although China is forecast to narrow the gap to reach 83 per cent of US GDP. However, Asia's rise is set to continue, with India expected to overtake the British economy in 2017 and secure fourth spot from Germany by 2022. Despite becoming the world's 12th-biggest economy in 2012, Australia is forecast to drop two places, falling behind South Korea and Italy.
CEBR's findings contradict research by the Organisation for Economic Co-operation and Development (OECD)4, which predicted in November 2012 that China would overtake the eurozone that year and the United States within four years to become the world's largest economy. Nevertheless, the Asia-Pacific region now has more millionaires than those living in the United States or Europe. According to a study by consultants Capgemini and RBC Wealth Management5, the Asia-Pacific region had 3.37 million millionaires in 2011, eclipsing the 3.35 million residing in the United States.
The number of such individuals in the Asia-Pacific region with investable assets of more than US$1 million grew by 0.8 per cent in 2011, twice the global average. Japan made up more than half, with China accounting for 17 per cent and Australia 5 per cent. Yet, while fewer in number, the total investable wealth of rich Americans still outstripped the Asia-Pacific region by US$11.4 trillion to US$10.7 trillion.
Choosing the right market
For small business owners, depending on the product or service, a better option may be to test the waters first in a similar English-speaking country, such as New Zealand or the United Kingdom.
In Asia, Singapore has become a hub for multinationals due to its attractive incentives and location as a gateway to Chinese markets, while Japan's demanding consumers make it an excellent market to refine products.
Export consultant Peter May says the competition in China is intensifying, with Australian businesses needing a unique product or service to succeed.
"The first trap is to assume that because you're in a big market like China, all you have to do is grab 0.1 per cent of a market segment and you've made millions," says May. "In reality, it's a highly regulated market with strong competition in all the attractive segments, and foreign companies can be required to meet standards which aren't always applied to the locals."
Choosing the right overseas market for business growth can be challenging. By doing your homework and seeking advice from trade advisors such as Austrade, it is possible to reduce the risks and seize the benefits of going global.
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This article represents the views of the author only and not those of American Express.
Anthony is a communication consultant at BWH Communication and a freelance writer with 15 years' experience in the stockbroking and media industries of Australia and Asia. He is a regular writer on business and other issues for publications in Australia and Japan. He consults on communication strategy to businesses ranging from private enterprises to professional service firms and publicly listed companies, with a particular interest in entrepreneurship in all its forms.