With our clients rapidly expanding their operations across China, we’ve taken a quick look at the structure of the national market, identifying six regions that make sense from a macro-economic perspective, each with a unique set of growth drivers. These distinctive drivers typically play an important role in driving business results. Moreover, China’s regional characteristics may become more defined as the national market grows. 

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Asia looks forward to more balanced growth in 2013 after a tough 2012 when growth stalled in countries driven by global trade and finance while China kept its foot on the brake in cooling housing and infrastructure, and India was forced to accept sub-6% growth. Southeast Asia sidestepped the downturn due to a burst of domestic demand growth driven by a mix of fiscal stimulus, record low interest rates, and a decline in macro-risks. In 2013, domestic factors are set to lift growth in China, Japan, and India while the rest of Asia gains from a lift in export manufacturing.

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It seems likely that 2013 will be like 2012 in reverse, with a weak start clouded by risk and a stronger finish to the year. By Q2’13, risk in the US and China should be much reduced and the upturns in both markets should be firmer. This will help lift Asia’s export manufacturing sector in 2H’13 and see deflationary risk replaced with a mild but growing tendency to inflation. Capital flows into Asia will accelerate putting upward pressure on currencies and asset prices.

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