David Liao, Co-Chief Executive, Asia Pacific at HSBC
The ongoing Covid-19 pandemic, geopolitical shocks and sustained inflation are expected to persist as the main risks in 2023, but Asia is likely to be a bright spot amid intensifying headwinds as the region’s resilience is once more on display. In particular, the reopening of China’s borders and the recovery of consumption in the mainland are expected to boost the economy, while India and ASEAN will further expand their growth potential.
Here are six key trends I’ll be watching out this year:
1. Geopolitics is reshaping the global industrial chain
The on-going Russia-Ukraine war may trigger new energy and food crises, push up inflation, exacerbate supply chain bottlenecks, and expand geopolitical risks. Meanwhile, technology is now taking centre stage in the China-US trade war that erupted in 2018.
The restrictions on bilateral trade and investment between the two countries are expected to continue and expand further into core technology.
2. An opportunity to accelerate the energy transition
It’s time to accelerate the energy transition, especially the generation of sustainable energy, innovative storage solutions and more sustainable energy consumption. The transformation will require huge investment and capital markets and private investors will play an important role in augmenting government funding.
In the long run, this new green supply chain, based on new energy and new technology, is expected to bring new economic growth and employment opportunities.
3. Financial technology will drive future growth
The resilience brought to enterprises by digitalisation has been fully demonstrated during the Covid-19 pandemic and will continue to be at the core of business strategies. Global financial technology will usher in new changes, including central bank digital currencies (CBDC) and virtual assets, which will not only improve the customer service experience but also bring more business opportunities to enterprises. We welcome the recent policy statement by the Hong Kong Government calling for virtual assets to be well regulated to provide greater safety and security.
4. India and ASEAN economies will be bright spots in global growth
Driven by the transfer of manufacturing, digitalisation, energy transformation, and the upgrading of the service industry, India is expected to overtake Japan and Germany to become the world’s third largest economy by 2030. In ASEAN, auto manufacturing, consumer electronics, renewable energy, e-commerce, and financial technology will be key areas of growth in the region. This comes on the heels of Vietnam becoming the second largest e-commerce market in Southeast Asia, after Indonesia in 2022.
5. China’s economy expected to recover gradually
Although there are still variables in the waves of Covid-19, the reopening of mainland China and more comprehensive policies to support the real estate industry will be driving forces supporting the recovery of growth. In December, the Central Economic Work Conference regarded “expanding domestic demand” as the top priority, including increasing the income of urban and rural residents, improving housing and elderly care services, and, producing more electronic vehicles. This will help restore consumer confidence, ease supply chain bottlenecks, and boost economic activity.
The rebound in mainland consumer demand is expected to further boost major exporters such as Indonesia, Malaysia, Thailand, and Singapore. The RCEP will drive increased trade between China and ASEAN, and the digital economy will also become a backbone for trade.
6. More intense competition for talent
The “Great Resignation” that has emerged since COVID-19, is not just focused on the the financial sector but is a common challenge faced by sectors and countries around the world.
In 2023, many multinational companies will aim to expand their global business, and different economies will launch preferential policies to attract these companies and their talents.