News Release

China to contribute 27% to global economic growth by 2020

Study Conducted by Economist Intelligence Unit (EIU) shows China will have closed the gap with the US as the largest consumer market in the world
Jun 22, 2006

Hong Kong, June 22, 2006 - By the year 2020 China, India and the US will jointly contribute USD 1 trillion to the global economy, according to a study conducted by the Economist Intelligence Unit and sponsored by Cisco Systems. The next fifteen years will see significant outpacing by Asia and particularly the powerhouses of China and India of the rest of the world in gross domestic product (GDP), wages and consuming power.

The Foresight 2020 study projects the continued rapid growth of China with it matching the US as the world's largest consumer market in purchasing power parity (PPP) terms by 2020. Global real GDP will grow by 3.5% annually on average, making the world economy two-thirds bigger in 2020 than it was in 2005. China will be responsible for a significant 27% of this growth.

China and India will contribute 65 million and 142 million new workers to the global workforce respectively by 2020. Despite this significant new workforce entering the market, wages will increase substantially, with wages in China in 2020 expected to be 4.5 times higher than they are presently. China will have at least 80 million households with an annual income in excess of USD7500.

Looking at the company of the future, the study found that tailored customer experiences will play a critical role in economic success. Companies will differentiate themselves and create competitive advantage by means of high touch customer experiences through customization of products and quality of customer service.

"The rapid growth of China as reflected in this survey is already apparent in the evolving and complex needs of our customers in the Greater China region," said Owen Chan, Senior Vice President, Asia Pacific, Cisco Systems. "As production processes and transactions become more commoditized and automated, customer value will lie in hard-to-replicate personal relationships and interactions. These interactions will be heightened by collaboration, high-value services and knowledge workers all enabled by technology."

"Knowledge workers combined with IT can change the customer experience. Companies that can collaborate globally to create the customer experience will win in the competitive battleground."

The EIU surveyed 1,656 executives from 100 countries and conducted in-depth interviews with executives, analysts and policy makers in late 2005.

Key findings of the study include:

  • Economic growth is expected to remain robust over the next 15 years with China, India and the United States accounting for more than 50 percent of all new growth. Overall, both China and India's gross domestic product (GDP) will grow at an annualized rate of 6.0 percent.
  • By 2020, China's economy measured at purchasing power parity (PPP) exchange rates will be on par with the United States and Asia's overall share of the global economy will rise to 43 percent from 35 percent currently.
  • China's share of global consumer spending will nearly triple in the next 15 years. Asia overall will be the largest consumer region. For example, by 2020 Asia is projected to account for 38 percent of all car sales, nearly double current levels.
  • 471 million net new workers will enter the global workforce, with China accounting for 65 million. India will account for a remarkable 142 million, with the United States the third-largest contributor with 12.5 million new workers. The European Union (EU) will experience growth of 8.4 million workers. The overwhelming majority of new US and EU jobs will be in the service industry.
  • Asia will move on from being just the manufacturing center of the world. About 66 percent of those surveyed in the Asia Pacific region believe that knowledge workers in complex roles that required developed communication and judgment skills will be their most valuable employees. In order to groom employees to occupy such roles, those surveyed said they would most likely use training (38%) and IT (41%).
  • While price and quality will continue to matter, more than 90 percent of those surveyed believe the importance of the personalization of services will increase dramatically as interactions and customization become vital components of both customer service and worker behavior.
  • The nature of the workforce will continue to change. 56% of executives in Asia Pacific expect to focus on more efficient organizational structures, in which independent decision-making and collaborative environments will be the norm, in order to boost productivity. These changes will require a new approach to organizational management and human relations. Customers and suppliers will become more involved in product development, cross-functional and cross border teams will work together more frequently and partnerships with other organizations will proliferate.