SHIFT TO THE EAST

PREPARING FOR THE SHIFT TO THE EAST

Western investors must pay attention to Asia’s increasing share of a range of global activities

Philip Coggan

FT Adviser, March 12, 2012

When you are investing for the long term, you need to think about long-term trends.

And the likeliest long-term trend is the continued rise of Asia.

In 1970, developing Asia (everything but Japan) produced just 9 per cent of world GDP. By 1990, its share had risen to 14 per cent. Now it is 28 per cent. By 2030, its share is expected to be 40 per cent and by 2050, almost 50 per cent, according to forecasts from the Economist Intelligence Unit.

Currently North America (the US and Canada) has 21.5 per cent of world GDP and western Europe 18.7 per cent. By 2050, their respective shares will be 12.3 per cent and 8.9 per cent. In other words, their contribution will be less than half that of Asia.

Just think about that in terms of world markets. American oil consumption is 19m barrels a day. China consumes just 9m barrels, even with four times as many people. If China’s consumption per capita rose to just half US levels, its total consumption would be 38m barrels a day. The extra 29m barrels a day China would consume is the equivalent of a third of current oil production. And that is before we think about the extra oil that will be needed by the rest of the world. There will be 9bn people on the planet, compared with just 7bn today.

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