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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.

Taking the Lead in Artificial Intelligence

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

  • AI Industries
  • Big Data
  • AI Funding
  • Opportunities
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..

China AI industry growth chart

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
China Big Data rise chart

Source: McKinsey Global Institute "Digital China: Powering the Economy to Global Competitivenes", 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.

AI startup funding chart

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:

Investment opportunities figure

Banking on Innovation

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

  • Financial Inclusion
  • Digital Banking
  • Lending & Payments
  • What Next?
Financial inclusion has been a challenge in Asia

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

Account Holders chart

Bank Account Holders
The percentage of individuals (age 15+) who hold an account at a financial institution
Source: World Bank, 2014

Borrowers chart

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.

digital payments chart

1/2

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

Source: The Economist, 2017

Online Lending chart

3/4

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

Source: The Economist, 2017

cashless payments chart

1/4 billion customers

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

Source: Shouth China Morning Post, 2017

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

45 million

Borrowers served by micro lenders figure

Borrowers served by micro-lenders in India in 2017

Source: Economic Times India, 2017

30 million

Bangladesh peer to peer payments network

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

80%

Bangladesh's mobile payments market

Representing 80% of Bangladesh's mobile payments market

Source: WinWin Magazine, 2018

What next?
Online Financial Services Expand

Online financial services expand beyond payments and lending into savings products, insurance, investment brokerage and more

Mobile reshaping credit system

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

Traditional banks catch-up

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

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.

  • EV Producers
  • EV Consumers
  • South Korea: Producers
  • South Korea: Consumers
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.

EV Batter Producers

Global Battery Cell Manufacturing Market Share
The percentage of individuals (age 15+) who hold an account at a financial institution
Source: Bloomberg New Energy Finance; data as of February. 6, 2017

Soaring sales in Asia

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

EV consumers chart

Note: Asia includes China, Japan and South Korea

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

Focus on South Korea: Producers

Top 3

Podium

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

Source: SNE research, 2018

30%

EV shipments

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

Source: SNE research, 2018

US$ 40 billion

EV order backlog

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

Source: Korea Joongang Daily, 2018

Focus on South Korea: Consumers
EV government subsidy

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

Source: Korea Herald 2018

EV target

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

Connect With Us

Hong Kong Representative

Brown Brothers Harriman (Hong Kong) Limited

+852 3756 1755

Please contact your financial adviser for specific information and documents as disclosed in the Hong Kong Offering Document of the Matthews Asia Funds.

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