Asia Business Leaders Foresee Nothing but Growth

A key segment of Asia’s business leaders believes their region’s economy will continue to enjoy strong growth in 2007, but many are more excited about the growth of India than they are China, a new survey shows. The survey of 1,200 leaders of small- and mid-sized business enterprises (SME) in Asia also found wide agreement that China will surpass the United States as the world’s largest consumer economy in 10 years or less. Only five percent of those surveyed said that China’s consumer market would never grow as large as that of the United States. More than half (57 percent) said the two markets would reach parity within 10 years, with 20 percent of those respondents expecting the gap to close within five years. "These findings are significant because these small business leaders on the ground in many Asian economies say that China’s consumer market is growing faster than some leading researchers project(a),” said Alan Gershenhorn, president of UPS International. "American businesses must understand that their future customers are just as likely to hail from Beijing as from Boston.” The business executives were interviewed for the UPS Asia Business Monitor, an annual survey designed to gauge the competitiveness of small- and mid-sized enterprises in Asia. About 1,200 SME decision-makers were interviewed across 12 different markets in the region. Survey respondents ranked China as the country with the greatest prospects for economic growth, followed by India and Hong Kong. But there was ambivalence about China’s growing economic power. Asia SME leaders seemed equally divided between those viewing China’s continued dominance as a boost (34%) and those who perceive it as both a boost and a threat (34%). Many also feel they are unable to compete with Chinese companies in terms of low labor and production costs (38%), and there is a growing concern regarding increased price competition (25%). In contrast, SME leaders across Asia expressed a desire to capitalize on India’s rapid growth by leveraging its continued rise as a manufacturing base (30%) and outsourcing there (25%). In line with this growth, SME leaders also express a desire to become an outsourcing destination for India (20%), and an exporter of raw materials to India for manufacturing (19%). Eighty-five percent of respondents said that India is or has the potential to be a regional economic leader, and 81 percent said that India’s economy is certain to grow in 2007. Small business leaders in India were the most optimistic in the region, with 89 percent of respondents expecting greater economic prospects for their businesses in the year ahead. Small business leaders in India also were optimistic about their country’s trade growth, with 83 percent of leaders there saying that they project U.S.-India trade to grow strongly this year – up significantly from last year’s survey. Although bullish on the region’s growth prospects, survey respondents also warned about threats to the region’s competitiveness such as a lack of innovation, the availability of a qualified workforce and access to funding and working capital. The top three business concerns that keep small business leaders up at night in Asia are the quality of their services (50 percent), customer loyalty (48 percent) and the retention of quality employees (47 percent). Other survey highlights include: • Small business leaders said they expect intra-Asia trade growth to continue its upward climb, with 74 percent of respondents saying that regional trade will grow strongly in 2007. • Job prospects are favorable with 89 percent of respondents across all countries expecting to maintain, if not increase, the size of their workforce. • Close to three-quarters (72 percent) of business leaders in Japan said that the country’s aging population coupled with its low birth rate will have an adverse effect on business competitiveness. • A majority (85 percent) of small business leaders in India say that globalization has been a benefit to their businesses, whereas 55 percent of business leaders in Japan say it’s been a disadvantage. • Almost one-third of small business leaders (29 percent) outside of China said social inequality and environmental issues are worse in China now than one year ago. For full survey results, log onto www.ups.com/abm. UPS has a strong presence in Asia, with all of the region's major cities within four hours' flight time from the company's intra-Asia hub in the Philippines. UPS flies to more points in China than any other package delivery company and was the first carrier in the industry to acquire direct control of its operations inside China. In other recent news, UPS opened its first branded The UPS Store® outside of North America in Mumbai, India, offering customers there access to a wide range of shipping and business services. (a) According to McKinsey & Company projections, urban households in China will constitute one of the largest consumer markets in the world by 2025: "The Value of China's Emerging Middle Class." The McKinsey Quarterly, Special Edition, Serving the New Chinese Consumer. July 2006. Diana Farrell, Ulrich A. Gersch and Elizabeth Stephenson. Notes to Editors • UPS ABM series provides the latest insights into the changing opinions, attitudes and habits of business leaders from the region’s small and medium sized enterprises. • UPS ABM 2007 surveyed 1,200 decision-makers of SMEs between November 15, 2006 and January 10, 2007. Interviews were conducted by an independent research organization, TNS, in Hong Kong. SMEs are defined as companies with fewer than 250 employees. • Interviews were conducted in the following 12 markets: Australia (100 respondents), China (150), Hong Kong (100), India (100), Indonesia (50), Japan (100), Korea (100), Malaysia (100), the Philippines (100), Singapore (100), Taiwan (100) and Thailand (100). • Respondents were from a range of industries: automotive, electronics & electricals, garments & textiles, gifts & housewares, healthcare & pharmaceuticals, timepieces, jewelry & optical goods, toys & sporting goods, and others. • A majority of the SMEs interviewed had an approximate annual turnover between US$500,000 and US$10 million. The average SME has been in business for nearly 21 years. • The UPS Asia Business Monitor is available for download at www.ups.com/abm