China, India moving ahead of the pack

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China, India moving ahead of the pack
       
HONG KONG - The United States, China and India will together account for more than 50% of global economic growth between 2005 and 2020, with Asia's overall share of the world economy rising to 43% from its current 35%, according to the "Foresight 2020" study conducted by the Economist Intelligence Unit (EIU) and sponsored by Nasdaq-listed Cisco Systems.
The next 15 years will see a significant outpacing by Asia, and particularly the powerhouses of China and India, of the rest of the developing world in gross domestic product (GDP), wages and consumption power. The Foresight 2020 study projects the continued rapid growth of China, with it matching the US as the world's largest consumer market in terms of purchasing power parity (PPP) by 2020.
However, the report also projects continued economic primacy for the United States, saying: "The US will remain the most important single country across all the dimensions of power as [the] result of the size of its GDP, its military might, internal cohesion and persistent technological lead."
The report also notes the United States' superior performance among developed regions of the world, predicting sustained 3% annual growth over the 15-year period, compared with 2.1% for the European Union's 25 countries and less than 1% for Japan (primarily because of an aging population).
Global real GDP will grow by 3.5% annually on average, making the world economy two-thirds bigger in 2020 than it was in 2005, the report projects, adding that China will be responsible for a significant 27% of this growth. Also, China and India will contribute 65 million and 142 million new workers to the global workforce respectively by 2020. Despite this significant new workforce entering the market, wages will increase substantially, with wages in China in 2020 expected to be 4.5 times as high as they are now. China will have at least 80 million households with an annual income in excess of US$7,500 in 2020.
Also examined at length are trends that will affect companies in the future. The study found that tailored customer experiences will play a critical role in economic success. Companies will differentiate themselves and create competitive advantage by means of "high-touch" customer experiences through customization of products and quality of customer service.
"The rapid growth of China as reflected in this survey is already apparent in the evolving and complex needs of our customers in the Greater China region," said Owen Chan, senior vice president, Asia-Pacific, of Cisco Systems.
"As production processes and transactions become more commoditized and automated, customer value will lie in hard-to-replicate personal relationships and interactions. These interactions will be heightened by collaboration, high-value services and knowledge workers all enabled by technology. Knowledge workers combined with IT [information technology] can change the customer experience. Companies that can collaborate globally to create the customer experience will win in the competitive battleground."
Other key findings of the study include:

Economic growth is expected to remain robust over the next 15 years.

Overall, both China's and India's GDP will grow at an annualized rate of 6%.

By 2020, China's economy measured at PPP exchange rates will be on par with the United States.

China's share of global consumer spending will nearly triple in the next 15 years.

Asia overall will be the largest consumer region. For example, by 2020 Asia is projected to account for 38% of all auto sales, nearly double current levels.

Some 471 million net new workers will enter the global workforce, with China alone accounting for 65 million of these. India will account for a remarkable 142 million, with the United States the third-largest contributor with 12.5 million new workers. The EU will experience growth of 8.4 million workers. The overwhelming majority of new US and EU jobs will be in the service industry.

Asia will move on from being just the manufacturing center of the world. About 66% of those surveyed in the Asia-Pacific region believe knowledge workers in complex roles requiring developed communication and judgment skills will be their most valuable employees.

To groom employees to occupy such roles, large fractions of those surveyed said they would most likely use training (38%) and IT (41%).

While price and quality will continue to matter, more than 90% of those surveyed believe the importance of the personalization of services will increase dramatically as interactions and customization become vital components of both customer service and worker behavior.

The nature of the workforce will continue to change. More than half (56%) of Asia-Pacific executives expect to focus on more efficient organizational structures, in which independent decision-making and collaborative environments will be the norm, to boost productivity. These changes will require a new approach to organizational management and human relations. Customers and suppliers will become more involved in product development and cross-functional, and cross-border teams will work together more frequently. Partnerships with other organizations will proliferate.
About the survey
The Foresight 2020 study was conducted late last year to understand long-term demographic, economic and corporate trends and assess likely changes to the global economy. The study covered eight key industries - autos, consumer goods and retailing, energy, financial services, health care and pharmaceuticals, manufacturing, the public sector, and telecommunications.
The EIU surveyed 1,656 executives in more than 100 countries and regions. Nearly a third of those surveyed were at the level of chief executive officer. Respondents were spread fairly equally among the Asia-Pacific region (30%), Western and Eastern Europe (34%), and North America (27%).