But retail sales growth has rebounded sharply in China and India. One force driving this turnaround is consumer credit; younger populations in Asia are more amenable to buying on credit than their parents are, and as aspirations and incomes grow, people recognize the value of credit in allowing them to make purchases they would have otherwise put off for years. Levi Strauss & Company has just announced the first consumer credit program for low-ticket items in India, offering jeans on an interest-free, “buy now, pay later” installment plan. In an experiment conducted over two months in company stores in Bangalore, consumers spent 50 percent more than usual when offered the installment option. The number of credit cards issued annually in China, meanwhile, was about 140 million in 2008, and it’s growing more than 50 percent per year.
Another factor affecting spending patterns is the gradual change in government-supported social benefits that is planned in countries such as China. Improvements in health insurance and pensions, although still in their early stages, may free consumers from the need to save as much as they have traditionally saved for their old age.
As global consumer products companies turn to this Asian consumer base, they find themselves welcomed. China is already Adidas’s second-largest market after the United States. Mattel’s Barbie brand is a big hit in Shanghai. Retailers such as Walmart, Tesco, Carrefour, and Metro, and consumer products companies such as Unilever, Procter & Gamble, PepsiCo, and Coca-Cola have credibly ambitious growth plans for the region. Indonesia, with a population of nearly 240 million, has generated attractive profits for local companies such as Ramayana and multinationals such as Unilever. In India, government policies still hobble foreign companies, to some extent. But the government is steadily liberalizing, and a 2009 global survey conducted by KPMG International of corporate investment plans predicted that “India will...become the world leader for investment in manufacturing in five years.”
Companies based in Asia are finding ample opportunities as well. Because they escaped the economic crisis relatively quickly, many leading Chinese and Indian companies gained prominence on the global stage in 2009. By market value, five of the top 20 banks in the world, including the two largest, are Chinese. (See “What Banking Needs to Become,” by Vanessa Wallace and Andrew Herrick, s+b, Winter 2009.) As consumers in the U.S. and Europe retrench, Asian companies are looking elsewhere for sales growth. For example, China’s trade relations with Latin America, Africa, and the Middle East are growing rapidly; Brazil–China trade alone has shown a 12-fold increase since 2001.
The crisis has also made the connections among Asian companies stronger. Japan and Korea have begun to relocate their manufacturing and customer service sites to lower-cost nations in their backyards. Nissan Motor Company plans to produce the next-generation version of its super-mini, the March, in Thailand in 2010. This will be the first major mass-market Japanese car to be manufactured completely outside Japan; the move will reduce costs for this vehicle by as much as 30 percent. And many Chinese companies have been explicitly mandated to “go out” (zou chuqu, in the words of the declared government policy) seeking customers and alliances across Asia.
Infrastructure: Urban and Rural
Throughout Asia, there is a large need for traditional, “hard” infrastructure: roads, bridges, airports, utilities, and rail networks. Goldman Sachs has estimated that India alone requires more than US$1.7 trillion in infrastructure investment during the next 10 years, particularly in energy, transportation, water, and sewage. China’s $600 billion government stimulus package, put into play a few months after the start of the economic crisis, is bringing a new wave of infrastructure investment to that country. The package includes support for thousands of miles of high-speed rail transit and nearly 100 new airports.