beyondbrics

For many businesses, Asia’s middle class represents the future. But today the Asian Development Bank quietly called for a reality check.

In a generally upbeat statement released on Thursday, the ADB warned that many members of Asia’s emergent middle class are still in a relatively precarious economic position – potentially just one economic shock away from sliding back into poverty – and need further support to strengthen their economic position.

True, middle class people now account for 56 per cent of the Asia’s population – or 1.9bn people – up from around 21 per cent of the population two decades ago. But that’s only part of the story.

“The Asian middle class remains very vulnerable,” Jong-Wha Lee, the ADB’s chief economist, said. “If there are any major shocks, they can easily slip into poverty.”

It’s easy to see why. The ADB defines the middle class as anyone spending from $2 to $20 a day, and it further breaks down this group into the ‘lower middle,’ the ‘middle middle’ and the ‘upper middle.’

According to the ADB, most of Asia’s new middle class is still in the bottom bracket of the middle class, with a daily expenditure of just $2 to $4 per day, leaving them just a notch above the poverty level.

For example, out of India’s 416 million-strong ‘middle class,’ more than half – 244m – are in the ‘lower middle’ bracket, just slightly better off than the 651m Indians still classified as poor. China, however, has fared far better at improving the economic fortunes of citizens, with a middle class estimated at 1.1bn, of whom just 303m fall in the lower bracket.

Indonesia’s middle class, meanwhile, has roughly doubled in the last ten years.

Potentially, Asia’s new consumers could have transformative effect on the global economy, providing a new source of demand to counter the slowdown in developed countries, and help redress global economic imbalances in the years ahead.

Consumption in developing Asia – excluding Japan – reached around $4.3 trillion in 2008, which was about a third of the private consumption levels of the developed world, by 2030 could hit $32trillion, accounting for 43 per cent of world consumption.

But much will depend on whether countries like India can do more to give its struggling lower middle class a better leg up.

Related reading:
Asia’s Expanding Middle Class Presents Huge Opportunity for Region, World – ADB

[Hey Bric Spender series]

Chinese brands step up their game – beyondbrics
Guest post: India’s consumer juggernaut – beyondbrics
The politics of Chinese consumption – beyondbrics
A healthier Ramadan in Dubai – beyondbrics
Moscow: open for business 24 hours – beyondbrics
Low-cost treadmills for Brazilian joggers – beyondbrics
Guest post: Consumers are trading up – beyondbrics
Russians click their way to bargains – beyondbrics
Scrambling for eggs – beyondbrics
Asia’s middle class: growing but fragile – beyondbrics
LatAm airlines fly high on consumer demand – beyondbrics
Gadget-loving Vietnam goes shopping – beyondbrics
Indian bachelors seek eternal youth – beyondbrics
Buying security in South Africa’s townships – beyondbrics
Beyond the frontier: war to beer – beyondbrics
Building Brics – In depth, FT