Additional concerns over regional conflict due to competing territorial claims and the rebalancing of China’s economy

Businesses leaders across the Asia-Pacific (APAC) region believe their ageing populations pose the single biggest challenge to their future operations, according to a new report published by Grant Thornton. The threat of rising dependency ratios were greater concerns than regional conflict and the slowdown in China’s economy in the survey of 700 business leaders across the region.

The findings, from Grant Thornton’s new report, 'The future of Asia-Pacific', reveal that 42% of APAC business leaders believe ageing populations to be a major threat, ahead of the regional conflict due to competing territorial claims (40%) and the rebalancing of China’s economy (39%).

The results support the United Nations population projections which identify 2015 as a tipping point after which the proportion of the population in Asia-Pacific dependent on those in work will begin to rise. This marks the end of the ‘demographic dividend’, where people of working age are supporting relatively fewer dependents, boosting growth prospects.   

Ed Nusbaum, global CEO at Grant Thornton, commented: “The effects of an ageing population is the big issue keeping Asia-Pacific business leaders up at night. This is because – outside of India and Indonesia – birth rates are falling across the region.

“The removal of the one-child policy in China is an obvious sign that governments are aware of the challenge that rising dependency ratios pose to sustainable rates of economic growth. Relatively more elderly people puts an increased strain on public services such as health. It shrinks the talent pool available to businesses. Moreover, if demand for skilled workers outstrips supply, then labour costs will also go up, possibly resulting in the region’s competitive advantage as a low-cost base for manufacturing being eroded.”

Figures from Grant Thornton’s International Business Report support this trend. Over the year to date, 38% of APAC surveyed businesses have cited skills shortages as a threat to their future growth, up 12pp from 2010.

Clubbing together for success

Business leaders cited the Trans-Pacific Partnership (32%) and increased ASEAN economic cooperation as the key opportunities for APAC over the next five years.

Ed Nusbaum added: “The TPP covers 40% of the global economy and ASEAN economies combined would be the seventh largest in the world. These are major deals which look set to boost the competitiveness of the region and offer myriad opportunities to dynamic businesses.

“Clearly APAC faces challenges – as do other regions – but we should remember that ageing populations could boost the growth potential of sectors such as healthcare. And the growing trend of automation could help offset the labour shortages some businesses are facing. Business leaders and policymakers need to work together turn threats into opportunities to fully unlock the economic potential of a region which is home to three in five people on earth.”

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