It's Asia's global economy. We're just living in it

Once upon a time, rich Englishmen would head to Europe as part of the Grand Tour, frolicking in cities like Venice, Naples, Florence and Rome, admiring and being inspired by their art and architecture, and with some buying up paintings, drawings, sculptures, manuscripts and even entire contents of houses to take home with them. These were the spoils of the rising wealth and commercial and military success that turned a small island in the North Atlantic into a global super power. Now the trophies to show off are the World Cup football tournament, successfully bid for by Russia and Qatar, the Winter Olympics (held at Sochi in 2014) and magnificent art galleries— such as the new Louvre, located not in Paris but Abu Dhabi, or the new V&A museum that is not in London’s Albertopolis but in Shenzhen. Then there is the stunning Rem Koolhaas-designed Garage Museum of Modern Art in Moscow, or the Winter Sports Complex in Ashgabat, Turkmenistan, a venue that is considerably bigger than Madison Square Garden.

In the eighteenth century, one British traveller set off on his journey to Italy “being impatiently desirous of viewing a country so famous in history, which once gave laws to the world.” Today that has changed, and now it is Britain’s history that has come to be admired, its laws and its courts used to settle disputes and agree divorce settlements, and its trophies hunted and bought by the new great and good—such as football clubs or statement assets like world-famous flagship stores Harrods and Hamleys, Canary Wharf, “the Walkie-Talkie” building at 20 Fenchurch Street in the City, or media outlets like the Independent and the Evening Standard, all of which have owners with Chinese, Russian or Emirati backgrounds.

It is the same story in the United States, where the Brooklyn Nets basketball franchise, the New York Post, the Waldorf Astoria and the Plaza Hotel in New York, and Warner Music are just some of the flagship businesses and brands that have been bought outright or as partnerships by investors both from and with close links to Russia, the Middle East and China.

These also include, as it happens, Legendary Entertainment, the Hollywood studio behind Jurassic Park, which was the box-office smash of the summer of 1993—and one of the rewards I enjoyed after finishing my exams. That is now part of Wang Jianlin’s Dalian Wanda Group Company—which also owns the Odeon, UCI, Carmike and Hoyts cinema chains in Europe, the US and Australia (with a total of more than 14,000 screens), as well as Sunseeker yachts and Infront Sports and Media—which holds the exclusive broadcast rights to sporting events that include the 2018 and 2022 football World Cup.

Naturally, while some of these businesses might qualify as hobbies and passions to be indulged, many represent serious as well as big-ticket investments. They are based on a great movement of global GDP over the last twenty-five years, with more than 800 million being lifted above the poverty line since the 1980s in China alone. While the setting of what constitutes “poverty” is a matter of debate for development economists and others, there can be little doubt that the pace as well as the extent of China’s growth is astonishing. In 2001, China’s GDP was 39 per cent of that of the US (on a purchasing power parity); that rose to 62 per cent by 2008. By 2016, China’s GDP was 114 per cent that of the United States, measured on the same basis—and is likely to rise both further and sharply in the next five years.

This change is not just transformational for China; it is transformational for the rest of the world. For example, in anticipation of the further rise of the Chinese middle class, one entrepreneur based in Beijing has bought 3,000 hectares of land in central France, with the aim of providing flour for a chain of more than a thousand boulangeries that he is planning to open across China. The expectation is that Chinese tastes will evolve from rice-based food—and that, when they do, “the potential is immense,” according to Hu Keqin, the owner in question.

If that brings concerns in France about rising prices for bread, as flour is exported rather than being used in local boulangeries, then the same can be said for the wine industry—where exports to China rose by 14 per cent in 2017 alone to nearly 220 million litres. French wine exports to China are expected to be worth more than $20 billion in five years’ time, something that is better news for wine growers in France than for wine drinkers.

What also irks is not just that many of the most famous vineyards in Bordeaux have changed hands in the last few years and been bought by famous personalities like the actress Zhao Wei or the tycoon Jack Ma (who owns four, including the celebrated Chateau de Sours), but some have also changed names in order to be more appealing to drinkers in China. Chateau Senilhac in Médoc has been renamed Chateau Antilope Tibetaine (Tibetan Antelope), Chateau La Tour Saint-Pierre has become Chateau Lapin d’Or (Golden Rabbit), while Chateau Clos Bel-Air is now Chateau Grande Antilope (Big Antelope).

The changing world means changing spending patterns and living habits at home as well as abroad. These shifts are not lost on the luxury goods industry, where patterns of demand have changed beyond all recognition since the early 1990s. At that time, Chinese customers accounted for a negligible percentage of buyers of luxury goods. Now they account for a full third of the global total—and by 2025 will buy 44 per cent of all luxury goods. This is one reason why Prada Group is opening seven stores in 2018 in just one city—Xi’an. It also explains business decisions made by Chanel, for example, to buy a series of silk manufacturers in order to guarantee supply for their products, something that is not surprising given the brand’s popularity in China and elsewhere around the world.

These trends are clear too to Starbucks, the chain of coffee houses, which has set its sights on expansion in China. The scale of its ambitions shows just how big it believes the opportunities are in the world’s most populous country at a time of change. In 2017, the company announced that it would open 2,000 stores in China by 2021—or the equivalent of one new Starbucks coffee shop every fifteen hours. China is a market that not only offers the prospect of lucrative returns; it is one that cannot be ignored.

It is a similar story in India, Pakistan, Russia or the Gulf—where customers in the United Arab Emirates alone spend almost $3 billion a year on high-end cars. Getting things right in the east makes—and breaks—leading brands. The same applies to almost every sector in the economy, including music and culture. For example, when the Chinese government dropped its One Child policy at the end of 2015, shares in companies that make prams, nappies and baby formula soared—while those of popular brands of condoms fell sharply. A report by Credit Suisse suggested the surge in births would result in hundreds of billions of yuan being spent on retail goods related to babies, infants and children. There are fortunes to be made by being in the right place at the right time as spending habits change— and consequences for failing to adapt or respond in the right way.

Winners and losers in the tourism sector in the future will be determined by which locations, hotels, facilities, menus and tourist attractions most appeal to the population of Asia, which currently stands at nearly 4.5 billion and is becoming more numerous—as well as richer. To put this into perspective, judging from World Bank and Organisation for Economic Cooperation and Development (OECD) data, not one of the ten fastest-growing economies of 2017 is located in the western hemisphere, nor has one been for the last decade. Tastes, trends and appetites will be made in the east—and not in the west.

Changing aspirations, appetites and tastes will drive demand—as they always have done. But the speed of transformation is striking. A recent report by McKinsey & Company noted a shift in the way that Chinese consumers choose between products. In almost half the categories surveyed by the company, including food, electronics, personal care and beer, respondents expressed a clear preference for local brands over foreign peers. Corporate fortunes and failures will be made in the east—and not in the west.

Peter Frankopan is the author of "The New Silk Roads: The Present and Future of the World," from which this article has been excerpted.