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Matthews Asia Weekly

A pedestrian walks through Beijing on a day when air pollution levels were deemed so hazardous that highways were closed and flights cancelled.

Striving for Sustainability

Week of October 17, 2014

Asia’s impressive transformation over the past few decades has, unfortunately, not been without the sort of industrialization that has exploited a variety of resources. For example, food consumption trends in China require substantial amounts of water. But fresh water resources there are meager compared to other nations. In Myanmar, the military government abused natural resources for decades with disregard for the socio-economic impact of its population. But even beyond environmental degradation, the steep price for Asia’s growth has also come in the form of many other threats to its own sustainability—social dislocation, corrupt systems and gender and rural inequalities.

In past issues of our annual AsiaNow publication, we have examined the region’s growth from a variety of perspectives. This year, Matthews’ AsiaNow The Sustainability Issue explores the elements of truly sustainable growth. What policies and controls are being implemented—or should be implemented—to try to help correct its problems, build more livable cities and resilient towns and address growing pressures to become not only more sustainable, but more competitive? Equally important, we ask: what efforts are being taken to extend benefits to a wider swath of society?

Some of the highlights from AsiaNow 2014 are:

Truly sustainable growth would incorporate energy savings, better public health, equitable growth, enhanced energy security and job creation opportunities. Reversing the negative side effects of Asia’s rapid industrialization and urbanization presents a daunting task, but also represents an enormous investment opportunity.

China has already been investing about 1.5% of its GDP in pollution control over several years. The U.S. and Japan cut their concentration of local pollutants—which affect areas closest to the sources of emission—by 30% to 65% in the first decade of their respective cleanup efforts. Energy efficiency would be the largest and lowest cost source of emissions reduction. Another way to put countries on an energy diet is to price energy at market rates.

Literacy rates among women are lower than that of men, particularly in South Asia. The disparities continue into labor force participation and, not surprisingly, into corporate boardrooms. Female representation on corporate boards appears to be improving, albeit at widely varying rates across Asia, with South Korea and Japan lagging and Thailand a surprising standout.

In India, where most diseases are still water borne, only about 25% of Indians have access to drinking water at home. Meanwhile, market forces are driving solutions to its water woes, as private, for-profit companies step in. Some firms are attempting to expand access to clean water with an innovative blending of technol¬ogy and labor for filtration plants and machines that can leverage solar power and cell phone connectivity to provide clean drinking water solutions to India’s rural and urban poor.

Rapidly aging populations will have unprecedented influence in shaping Asia’s future. In 2010, Asia’s elderly accounted for 10% of the region’s population and 55% of the global elderly population, according to the United Nations. By 2030, the elderly in Asia are expected to make up 17% of the region’s population and 60% of the elderly population worldwide. This demographic shift raises two big questions. One, how will the region adjust its growth model? Countries are seeking to transition from the “world’s factory” economic model, which is based on a supply of abundant young labor, to one driven more by innovation and productivity. The other question is: how can the elderly be better supported?

Shrinking labor and rising wages are not the only drivers of automation in Asia. Companies have recognized the need to increase throughput and efficiency to stay competitive. There is also a desire to move up the value chain—to make more sophisticated, higher-value added products on a large scale. “Robot density” is improving in China’s automotive industry but is still far below that of Japan, the global leader with over 1,500 robots per 10,000 workers.

As Asia continues to grow, there will be increasing pressure to address these important issues of sustainability. The policies that both governments and companies implement will have a bearing on how Asia’s growth rate will be sustained over the long term.

Patricia Huang
Investor Communications Manager
Matthews Asia

The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Matthews does not accept any liability for losses either direct or consequential caused by the use of this information. Investing in small- and mid-size companies is more risky than investing in large companies as they may be more volatile and less liquid than large companies.