The New Middle Class
Source: IEMS; Kharas and Gertz, 2010.
According to research conducted by the SKOLKOVO Business School’s Institute for Emerging Market Studies, by 2030 the Asia-Pacific region will account for two thirds of the world’s middle class. The report, prepared jointly with Ernst & Young, says that out of a global total of nearly 4.9 billion people in this income group, soon more than 3.2 billion will be residents of the Asia-Pacific, and the aggregate share for Europe and North America is likely to have fallen from 54% in 2009 to 21%.
The researchers proceeded on the premise that the term ‘middle class’ includes those who earn between $10 and $100 per day. Yesterday’s poor are crossing the lower threshold and starting to buy television sets, cars, and the other essential middle-class trappings considered traditional in Western countries. In China alone the number of these consumers is expected to increase from the current 150 million to one billion by 2030. India’s middle class is likely to experience the start of explosive growth at a slightly later stage, in the 2020s. However, by the end of that decade Indians will be joining the ranks of the middle-class at a much faster pace than China.
In terms of purchasing power, the newborn middle-class of the developing world will match its counterparts from the developed countries. As a result, the global balance of economic and political power will change radically. But, what is more, it is likely to create a whole host of attractive business opportunities. One example is the Chinese automotive market. During the 2000s the country’s output increased more than tenfold, reaching 10 million cars by 2009. In 2004, for every car General Motors sold in China, it sold 10 in the United States, but by 2009 this ratio had levelled off. Similar opportunities are opening up for different companies in other sectors, such as financial services and healthcare.