We are living in unprecedented times. The COVID-19 global pandemic is leading to the largest decline in economic growth since the Great Depression as lockdowns in the Western world take effect. According to McKinsey simulations, real GDP growth may decline by 4.9 percent to 6.2 percent from the fourth quarter of 2019 to the second quarter of 2020. The World Bank’s latest report paints a bleak picture: under a worst-case scenario, East Asian economies would contract by 0.5 percent, China’s projected growth would slow to 0.1 percent, and 11 million people across the region would be forced into poverty.
From the 2019 World Bank Data, Asia is home to around 60 percent of the world’s population, and to around 35 percent of the world’s poorest people. In an increasingly volatile world, Asian companies have demonstrated dynamism, speed, and agility, which have all contributed to the region’s macroeconomic stability. Asian companies have to be resilient: they operate in highly dynamic, fast-growing markets, against the same backdrop of digital disruption and rapidly evolving consumer demands that every organization currently faces. Today, 43 percent of the world’s largest companies (by revenue) have their headquarters in Asia.
This “black swan” moment will test the resolve and resilience of all businesses. Digital innovation will now become the new gold standard, and commercial entities will need to re-imagine themselves and prepare for reform. In times of crisis, governments play an essential role in protecting people and prioritizing a nation’s resources for the people. Countries like Australia are taking the lead in ensuring workers can stay employed. For example, the supermarket leader Woolworths is working with Qantas to provide up to 20,000 new jobs for airline employees laid off during the grounding of the airline industry, as well as other retail and hospitality workers. Woolworths has also been given the go-ahead to coordinate its supply chain efforts with its biggest rivals, Coles and Aldi, to ensure a fair distribution of fresh food and other groceries and household essentials to Australian consumers.
In China, the adoption of Alibaba’s DingTalk, WeChat Work, and Tencent Meeting to connect physically distanced teams and friends has increased rapidly. DingTalk had to add 20,000 cloud servers to support the traffic. China’s Ministry of Education deployed a national cloud-based classroom platform to support remote learning for 50 million students simultaneously. Digital consumption has taken off as well. In South Korea, the online retailer Coupang shipped a record high 3.3 million items on January 28, and SSG.com’s food-delivery sales rose by 98 percent. Sales of the delivery business of China’s Meituan soared by 400 percent during the outbreak.
Governments have had to implement policies quickly. The ability to direct resources to healthcare systems has been paramount. To leverage data, other Asian governments have also invested in the digital ecosystem, mapping clusters and controlling transmission through apps such as Singapore’s TraceTogether, South Korea’s Corona 100m, and India’s chatbot, MyGov Corona Helpdesk. Governments around the world have also implemented other extraordinary fiscal and monetary measures.
Going forward, companies may accelerate their supply-chain transition from China to other parts of Asia. According to a 2019 AmCham survey, about 17 percent of companies have considered or actively relocated their supply chains away from China. By 2040, Asia is expected to represent around 40 percent of global consumption and 52 percent of GDP. This pandemic is probably where the Asian Century truly began.
Source: McKinsey & Company
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