Asia is entering a new era that could pave the way for a meaningful expansion of its global influence. By 2040, Asia could contribute 42 percent of global GDP, be home to 60 percent of the Fortune Global 500 companies, and have 55 percent of the world’s total workforce, our analysis shows. The continent could become the engine of global trade while making strides in domestic investments, R&D, innovation, and AI adoption (see sidebar, “Asia’s potential by the numbers”).
Asian companies have an opportunity to lead this advance. The region’s technological prowess, industrial strength, and sheer size, coupled with its increasing domestic savings and investment potential, are likely to boost the momentum of numerous industries in which Asia already holds sway, particularly semiconductors, e-commerce, cloud services, and renewable energy.
To succeed, CEOs will likely need to recalibrate their strategies and operations in alignment with four themes that, in our view, could characterize Asia’s next era. The continent has the potential to produce a new set of global titans. At the same time, it is set to significantly increase its domestic investments, become a leading innovator in AI and other transformational technologies, and witness significant wealth creation driven by today’s digitally savvy youth. In this article, we explore the opportunities and challenges presented by each theme and how CEOs can seize the moment.
Emergence of new Asian global players
Asian companies are making rapid advances in fast-growing global industries such as digital services, fintech, healthcare, advanced manufacturing, and clean energy—and their success can be increasingly attributed to leadership, innovation, and influence. Indeed, regional business models are rapidly scaling globally. Consider South Korea’s SK hynix and Taiwan Semiconductor Manufacturing Company, which exemplify technological leadership in advanced manufacturing, and Japan’s Rakuten and Singapore’s DBS Bank, which are making strides in revolutionizing the fintech sector.
As more regional firms emerge as global leaders, their influence will magnify. From 2004 to 2024, about 80 Asian companies entered the Fortune Global 500, a ranking of the largest corporations by revenue. McKinsey analysis indicates that if current trends persist, roughly 80 to 100 more Asian companies could join the top 500 list by 2040.
CEO imperative: Prioritize strategy and scenario planning
Different industries will experience varying challenges as they navigate geopolitical uncertainties. The aerospace sector, for example, may face more challenges given its dependence on a complex, multilayered network of suppliers and manufacturers across different regions, while the consumer goods industry may enjoy greater flexibility.
Scenario planning can empower Asian companies to navigate geopolitical complexities effectively. Leaders of both public and private companies should stay abreast of trends and maintain robust balance sheets to weather potential external shocks. To do this well, CEOs should transition their scenario-planning strategy from one that focuses on trend-driven opportunities to an approach that balances trends against potential shocks.
CEOs have the option to engage with various scenario-planning frameworks, including “black swans” (unpredictable, high-impact events), “grey rhinos” (likely, high-impact events), and “silver linings” (opportunities emerging from uncertainty). For instance, consumer goods companies could address a black swan event by securing backup suppliers for essential raw materials, manage a grey rhino scenario by regionalizing production and distribution to mitigate anticipated disruptions, and seize a silver lining opportunity by swiftly launching new products to meet evolving consumer demands.
CEO imperative: Develop a leading global presence
In our experience, countries that have created global champions do three things right. First, they develop a robust ecosystem that sets companies on the right course. Second, they focus on developing two to three sectors by ensuring a steady supply of talent with international experience, a performance-driven culture that emphasizes value creation, access to best-in-class technology, a clear and fair regulatory framework, and active encouragement of a high-value-add economy. Indeed, a concerted national effort is often required for the government to effectively serve as an enabler, sector developer, regulator, and investor. Third, the leaders of these companies have active shareholders, serial transformational transactions, and a deep bench of global executives.
To secure a leading global position in this evolving era, Asian CEOs could focus on four strategic themes.
Make strategic, focused bets. Simplify the portfolio by prioritizing investments in core technologies, such as AI-driven semiconductors, and set up R&D centers in key Asian innovation hubs like Shenzhen and Bengaluru. This strategy concentrates resources on areas with the greatest potential impact.
Build a resilient future. Bolster global positioning by leveraging scale advantages and partnering with regional governments to create robust supply chain ecosystems. This collaboration can create enduring access to critical resources like rare earth elements essential for semiconductor production.
Build or acquire growth-enabling capabilities. Strengthen the innovation pipeline by acquiring firms with advanced intellectual property (for example, AI-focused start-ups in Singapore or clean-energy companies in Vietnam) to gain a competitive edge. In parallel, develop the company’s employee value proposition to attract and retain top talent and build a truly pan-Asian talent model.
Balance global goals with local ambitions. Even as the company expands globally, continue to maintain or grow a local presence (this could mean rethinking the hiring strategy, for example, by employing more local professionals).
Asia’s new investment era
Asia’s investment landscape is experiencing a profound change—it is moving from a dependence on foreign direct investment (FDI) toward bolstering domestic capital mobilization—that may influence the region’s global competitiveness over the coming decade.
Between 2019 and 2023, Asia absorbed 30 to 54 percent of the global FDI. In the coming decade, fixed investments in Asia could increase to $140 trillion, surpassing the combined investment forecast of $89 trillion for the United States and the European Union. China’s fixed-asset investments increased to $7 trillion in 2023. Meanwhile, over the past five years, India has funneled $800 billion into infrastructure projects to boost employment and establish itself as a global manufacturing nexus. Theoretically, most of Asia’s fixed-investment requirements could be met by high domestic savings, which could add as much as $155 trillion between 2022 and 2030, assuming current savings rates continue.
However, improving Asian companies’ ROIC performance remains crucial. At present, Asia’s ROIC trails other regions. In 2023, the top 1,000 companies in Asia reported an average ROIC of approximately 9 percent, in contrast with the 20 percent average ROIC reported by the top 1,000 companies globally, excluding Asia. Consider China, for example: Over the past ten years, the country has benefited from almost $10 trillion in investment, 80 percent of which went to capital goods, domestic services, and energy and materials—sectors that earned less than their cost of capital.
Asian countries need a more dynamic and efficient financial system that allocates capital to productive uses and helps attract more foreign capital. Indeed, we believe that in the next ten years, Asian investors will likely sharpen their focus on capital effectiveness and efficiency, which could have significant implications for how Asian companies raise and deploy capital.
CEO imperative: Realign financial strategy with Asia’s economic shift
As Asian economies boost domestic investments and decrease reliance on FDI, CEOs may need to rethink their financial strategies—for example, strengthening ties with domestic and pan-Asian investors and adapting their investor relations focus to Asia’s unique market conditions and preferences. In our experience, leaders can adopt four approaches to optimize capital allocation toward high-return prospects, where growth outpaces risk.
Move beyond FDI reliance. Take a proactive approach to capital deployment. Rather than wait for external investments, direct internal capital into rapidly growing sectors such as logistics automation and renewable-energy parks in India or Southeast Asia.
Simplify existing portfolios. In an era in which productivity gains are critical, enhanced financial discipline is essential. McKinsey analysis shows that from 2012 to 2022, 64 percent of companies that increased focus on their core business outperformed companies that increased their portfolio complexity. The former generated excess TSR of 0.8 percent versus 0.2 percent against benchmark.
Globally, large companies (valued at over $25 billion) are driving a surge in mergers and acquisitions by breaking up their businesses. By shedding noncore assets, these companies aim to unlock hidden value, streamline operations, and sharpen their geographic focus. This move away from the conglomerate model prioritizes strategic clarity and efficiency to boost shareholder value.
Prioritize and simplify investment profitability. Shape future portfolios for enduring profitability. For example, consider establishing dedicated investment divisions—such as a venture capital fund—to target high-growth sectors aligned with regional megatrends such as green hydrogen. This strategy could help large logistics companies capitalize on transformative infrastructure developments by deploying automated solutions along vital trade routes for sustained returns.
Strengthen corporate governance, communications, and investor relations. As domestic investment grows, focus on strengthening governance, improving transparency, and building a strong public relations and communications function. Foster trust, enhance your organization’s reputation, and attract long-term investors by articulating the rationale behind investments, highlighting long-term value potential, and sharing success stories.
Leading in AI
Asia is making strides toward becoming a global standard setter in integrating AI, which could revolutionize industries and create scalable and cost-effective business models. In 2022, the region accounted for 75 percent of AI patents globally. AI investments in the region are projected to reach $110 billion by 2028, reflecting a 24 percent compounded annual growth rate from 2023 to 2028.
Many regional players are at the forefront of using AI innovations to transform industries such as healthcare, telecom, insurance, fintech, e-commerce, and logistics. They are establishing international benchmarks in cost reduction and customer experience improvements. Consider these three examples of Asian AI innovations, each with the potential for global replication:
- India’s Flipkart. The company’s AI-driven inventory management and language chatbots help tailor consumer experiences internationally.
- South Korea’s Coupang. The e-commerce player’s AI-powered demand forecasting leads to rapid product delivery and efficient inventory.
- Singapore’s DBS Bank. The bank integrated AI across its operations to improve customer experience, optimize decision-making, and support workforce development, leading to a 50 percent reduction in the cost-income ratio relative to serving digital versus traditional customers.
CEO imperative: Develop differentiated AI capabilities
Leaders can adopt three steps to enhance operational efficiency with AI and related technologies.
Reimagine key businesses with AI at the core. To boost productivity, move beyond incremental AI-based improvements and restructure your operational model around AI capabilities. For example, retailers can use AI for dynamic pricing and inventory in order to respond faster to market changes. Manufacturers can implement predictive maintenance and automated quality control through AI-powered analytics, minimizing disruptions.
Tap into fast-growing customer segments through AI-centric models. Use AI-driven channels to tailor products to individual preferences, deliver instant service via chatbots, and proactively suggest offerings based on predictive analyses in consumer-facing industries. Personalization could help attract previously underserved segments such as rural customers new to digital commerce or demographic groups with specific cultural, linguistic, or financial needs. Deploy data-driven models to enhance service delivery, diversify revenue, and lower customer acquisition costs.
Build AI capabilities. Pursue AI-focused capability building to equip employees with skills in advanced analytics, machine learning, and human-centered design. Partner with educational institutions, tech providers, and online platforms to craft immersive training programs that incorporate AI into daily workflows. Finally, foster a culture of experimentation, digital agility, and continuous learning to boost operational resilience and strengthen employee engagement.
Wealth boom powered by Asia’s digitally savvy youth
Demographic shifts, driven by a burgeoning digital-native youth cohort and affluent digital-first consumers, are accelerating wealth creation across Asia. By 2040, Asia could be home to approximately 52 percent of the global population aged 18 to 24, which could add about 470 million new people to the workforce. This would concentrate about 55 percent of the global workforce in Asia by 2040. Governments around the region are investing in boosting the digital capabilities of these future workers.
Consumers in Asia are becoming increasingly wealthier, are digitally savvy, and have a penchant for luxury goods. By 2030, Asia could account for 65 percent of the global middle class, with 700 million new people added between 2025 and 2030. Many Asian companies are using digital platforms to provide interactive, convenient, and community-driven experiences for these consumers. Indonesia’s telecom giant Telkomsel, for example, engages digital-native youth through its platform by.U, which allows users to manage their mobile services entirely online.
CEO imperative: Engage the digitally savvy youth cohort through hyperpersonalization
To engage the growing young consumer demographic and become their preferred brand, companies should connect with them in their favorite environments—online, on social media platforms, or through unique, interactive experiences. Here are three ways to develop those connections.
Innovate channels. Move beyond physical storefronts by creating direct-to-consumer digital offerings such as online marketplaces or social-commerce platforms. This approach can enhance consumer convenience, provide data-driven insights, and open new revenue streams while significantly reducing operational costs.
Create unique, gamified experiences. Shift focus away from just selling and move toward providing entertainment by incorporating video games and other game elements, live streaming product launches, and organizing collective buying opportunities. For example, telecom operators could bundle mobile plans with music, gaming, and e-learning content that appeal to the youth cohort.
Build future-ready capabilities and talent. Partner with governments and educational institutions to develop training programs to cultivate the next generation of tech-savvy professionals.
Seizing the opportunity
As Asia redefines its global economic influence, CEOs will likely encounter a number of challenges and opportunities that necessitate strategic response and bold leadership. The imperatives outlined in this article, tailored to Asia’s unique trends, can help executives develop robust business strategies to succeed in this new era.
Asia’s transformation could reshape the global economic order in the years to come. CEOs who aspire to seize this opportunity and become global leaders should recalibrate their strategies and operations, as well as their approaches to investment, technology, and talent.
