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Asia Pacific emerging markets to be global FDI hotspots
16
Apr '16
Asia Pacific emerging markets to be global FDI hotspots Over the next decade, Asia Pacific is forecast to be the fastest growing region of the global economy and the region that offers the biggest potential gains for foreign direct investment with India set to outpace China for first time in over 30 years.

IHS Inc. the leading global source of critical information and insight, announced the findings from its study on Asia's top ten foreign direct investment hotspots at the company's Global Economic and Country Risk conference in Vienna.

“Over the next decade, the Asia Pacific region will grow at an average annual rate of 4.5 per cent per year, boosted by rapid growth in consumer spending in China, India and Southeast Asia,” said Rajiv Biswas Asia Pacific chief economist for IHS. “A key source of strength for Asia Pacific is the rapidly growing size of the economic region, which now accounts for around one-third of world GDP, generating strong intra-regional trade and investment flows.”

“For the Asia Pacific region, a key long-term growth driver will be China's 'One Belt, One Road' initiative,” Biswas said. “This will be catalyzed by new infrastructure financing for Asian emerging markets into sectors such as power generation and transmission, railroads, ports and highways from the recently launched Asian Infrastructure Investment Bank, the Silk Road Fund, as well as a number of Chinese bilateral infrastructure financing commitments to a number of Asian countries.”

The initiative will help to accelerate the development of many inland Chinese provinces as well as accelerating the growth of the Greater Mekong Sub-region as a new global manufacturing hub, and will benefit many countries in Southeast and Central Asia.

In China, despite the slowdown evident in the manufacturing sector, strong growth in consumer spending is driving rapid growth in service sector industries such as financial services, healthcare, retailing, e-commerce and logistics. China's service sector industries are expected to continue to show strong expansion over the medium term outlook, helped by continued rapid growth in consumer spending, with overall Chinese GDP growth forecast to average 6.4 per cent per year between 2016 and 2020.

The Indian economy is forecast to be one of the fastest growing large emerging markets over the medium term, growing at an average pace of 7.6 per cent per year between 2016 and 2020, outpacing China for the first time in over three decades.

“The strong growth outlook for India is underpinned by improving consumer spending, accelerated infrastructure development and stronger FDI inflows. The favourable impact of low global oil prices has reduced inflationary pressures and lowered the current account deficit,” Biswas said. “The Modi government's new initiatives to boost infrastructure development, develop smart cities and attract investment into Indian manufacturing are helping to lift FDI flows into India.”

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