Asia: Riding a
Wave of Innovation

No longer a place where everything is produced but nothing is invented, Asia is riding a wave of homegrown innovation with long-term investment implications.


A Cashless Day
in China

It is actually possible to navigate an entire day in China's larger cities without hard currency or plastic cards.

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Riding the Innovation Wave in Asia

Asia is riding a wave of homegrown innovation with long-term investment implications.

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Taking the Lead in
Artificial Intelligence


With government backing and a tremendous
growth in big data capture from social
media, China is well-positioned to become a
global leader in AI.

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China's intelligent plan for the future

By adding artificial intelligence to a list of subsidized private companies, China's policymakers
aim to turn the industry into a US$150 billion juggernaut by 2030.

U.S.
$0 billion
2020
U.S.
$0 billion
2025
U.S.
$0 billion
2030
Shadow

Short, Medium and Long-Term Goals

By 2020
Become global innovation
center for artificial intelligence

By 2025
Have a major artificial
intelligence breakthrough

By 2030
Match other countries

Source: China Daily, April 14, 2018

There is no guarantee any estimates or projections will be realized.

China's search engines capture enough
big data to turbocharge AI applications

721 million
Combined
287 million
434 million
731 million

U.S.

Europe

China

Internet Users in 2016

Source: McKinsey Global Institute “Digital China: Powering the Economy to Global Competitiveness”,
December 2017

Last year, Chinese AI startups
attracted more funding than U.S. startups

China took the lion's share of US$15.2 billion invested in AI startups globally in 2017.

U.S. 38%
China 48%

AI Startup Funding 2017

Source: CBInsights

Where does the investment opportunity lie?

For investors, China's investment in artificial intelligence could potentially spur earnings growth in a variety of sectors including:

Information
Technology

healthcare-icon Created with Sketch.

Health Care

Industrials

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Banking on Innovation


Across Asia, companies and consumers are
bypassing the traditional banking system.
But the banks are playing catch up.

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Financial inclusion has been a challenge in Asia

Access to basic banking services and financial credit varies across Asia.

9%
13%
28%
31%
79%

Pakistan

Cambodia

Philippines

Vietnam

China

Bank Account Holders

The percentage of individuals (age 15+) who hold
an account at a financial institution

Source: World Bank, 2014

15%
9%
9%
7%
2%

Thailand

Bangladesh

China

India

Pakistan

Borrowers

The percentage of individuals (age 15+) who
borrowed from a financial institution

Source: World Bank, 2017

Innovative Chinese companies have stepped in to fill the void

Banks are slow to service individual customers at scale, making way for innovation and entrepreneurs.

1/2

China accounts for more than
half of the worldwide market in
digital payments

Source:
The Economist, 2017

3/4

…and three-quarters of the
worldwide market for online
lending

Source:
The Economist, 2017

1.4 billion customers

China's two largest cashless
payment networks now claim a
combined 1.4 billion customers

Source:
South China Morning Post, 2017

Across Asia, companies and consumers are
bypassing the traditional banking system

45 million

Borrowers served by micro-
lenders in India in 2017
 

Source:
Economic Times India, 2017

30 million

Users of Bangladesh's largest mobile peer-to-peer
payments market

80%

Representing 80% of
Bangladesh's mobile payments market

Source:
WinWin Magazine, 2018

What next?

Online financial
services expand

beyond payments and lending
into savings products,
insurance, investment
brokerage and more

Mobile reshapes the
credit system

using behavioral data from
social media and technology-
based credit scoring methods
for data-driven lending
decisions

53%
80%
2014 2017

Traditional banks
catch-up

Four-fifths of Indian adults
have opened bank accounts
by 2017 compared with just
53% in 2014

Source:
Economic Times India, 2017

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Electric Vehicles:
A Jolt to Asian Economies


The global market for electric vehicle (EV)
batteries is expected to grow tenfold in the next
20 years. Asia is poised to be the major player –
both as consumers and producers.

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EV producers: Asia dominates the electric battery industry

For three decades, South Korean and Japanese manufacturers have dominated the global
battery market, but China is catching up, backed by aggressive government policies.

3%
18%
22%
57%
Other
SouthS. Korea
Japan
China

Global Battery Cell Manufacturing Market Share

Source: Bloomberg New Energy Finance; data as of February. 6, 2017

EV consumers: Soaring sales in Asia

Electric vehicle sales have soared thanks to a combination of government policies, fiscal incentives,
subsidies and improved infrastructure.

Thousands annually

700

600

500

400

300

200

100

0

Asia

U.S.

Europe

2012

2013

2014

2015

2016

2017

Note: Asia includes China, Japan and South Korea

Source: International Energy Agency; National Automobile Manufacturer’s Associations

Focus on South Korea: Producers

Top 3

Two South Korean companies
rank among the top 3 producers
of EV batteries

Source:
SNE research, 2018

30%

Group Created with Sketch.

These companies account for
30% of EV shipments globally
(excluding China)

Source:
SNE research, 2018

US$40 billion

One of these companies has
reported an order backlog
totaling more than US$40 billion

Source:
Korea Joonang Daily, 2018

Focus on South Korea: Consumers

$16,000

Government subsidy for pre-ordering
an electric vehicle from South Korea's
biggest car companies

Source: Korea Herald 2018


2017

2020

15,000

250,000


Ambitious target to grow number of EVs to
250,000 by 2020 from just 15,000 in 2017

Source: South Korean Ministry of Land,
Infrastructure and Transport

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