The region is set to drive global economic growth, powered by its population and tech sector.
The Asia-Pacific region (APAC) will lead global economic growth over the next 15 years thanks to several factors, some of which are already manifest and some of which have yet to emerge. APAC’s growth will stem from four key large-scale trends: urbanization, connectivity, the energy transition, and the looming “baby bust.”
These will result in innovations in labor productivity, massive investment in infrastructure as megacities blossom, new economic segments flowing from green energy, and regional hyperconnectivity.
Overall, regional demographics are favorable, with a population dynamic currently marked by young populations and a low dependency ratio of young working people supporting the aged. The UN Department of Economic and Social Affairs forecast in a 2022 paper that APAC will grow from 4.2 billion citizens to 4.6 billion by 2040 and the region will account for over 60% of global output, according to a 2024 World Bank report.
Multinational research firm BMI views the region’s young and large population as a force for growth: “in particular, Indonesia, which will see its population grow by 12 million people,” says Cedric Chehab, BMI’s chief economist. “Another structural driver will be significant investment in infrastructure related to power generation, trade, and manufacturing.”
He adds that the increasing population will improve productivity and increase urbanization rates. “Bank funding will continue to play an important role, but this will be compounded by external financing via bilateral or multilateral efforts.”
At the same time, a new financial system is emerging based on digital assets that range from those issued by regional central banks to digital currencies. The move to tokenized holdings in Hong Kong and Singapore has already upended standard bond issuance and real-world assets and has gained traction in South Korea.
Soaring consumption driven by a growing middle class will reduce the region’s reliance on exports for growth, a necessary dynamic as the global free trade model comes into question. Regional debt is below the global average (with the notable exceptions of China and Japan), and local capital markets are rapidly developing in depth and sophistication, propelled by distributed ledger technology (DLT).
This is exemplified by Vietnam, where real GDP growth averaged 6% in the decade to 2024, according to the Vietnamese General Statistics Office. However, its low fertility rate of 1.9 children per woman is lower than Southeast Asia’s average of two, although ahead of Singapore’s and Thailand’s rates of one and Malaysia’s of 1.6, respectively. This presents an impending baby bust, according to data from the General Statistics Office.
“Vietnam’s economy continues to benefit from strong manufacturing and export activities, growing foreign direct investment, and government support, particularly in improving infrastructure. We expect domestic growth to continue and wealth to rise,” says Jens Lottner, CEO of Techcombank in Hanoi. “This rising affluence, increasing digitalization, and the large potential for more product penetration across mortgages, bonds, stocks, and insurance mean Vietnam’s banking industry still has huge growth potential.”
By contrast, the populations of China, Japan, South Korea, and Singapore are forecast to shed a combined 64 million people over the next 15 years due to age-related mortality and declining fertility, but they are developing new economic models based on health care, consumption, education, and leisure to cope with higher dependency ratios.
Tony Yang, president of CTBC Bank in Taipei, notes there are three major downside risks to the region’s growth over the next 15 years: an excessive reliance on a single market, leading to dramatic fluctuations in economic growth; rising geopolitical risks, most likely dragging down investment activities and leading to a loss of orders; and increased protectionism that is not conducive to escaping the middle-income trap.
Digital Assets Bloom
Hong Kong, Singapore, and Japan are emerging as regional digital asset hubs, boosted by a fast-developing regulatory framework. Some 70% of Asian institutional investors own digital assets (compared to the low 40% range in the US and low 50% range in Europe) according to a 2024 report from SBI Digital Asset Holdings. The ballooning family office industry in the region is firing up demand for digital assets, particularly in the nascent fixed-income and real-world asset (RWA) tokenization arena.
In February 2023, the government of the Hong Kong special administrative region issued the first sovereign tokenized green bond via an HK$800 million (about $103 million), one-year offering. The SAR followed on a year later with a HK$6 billion multicurrency bond denominated in Hong Kong dollars, renminbi, dollars, and euros under the Government Green Bond Programme (since renamed the Government Sustainable Bond Programme). The deal was the largest digital bond yet issued and attracted a final book of more than 50 global investors.
Incorporating DLT into the international primary debt market is at a nascent stage, according to Tim Fang, head of Debt Capital Markets for Greater China at Credit Agricole CIB in Hong Kong.
“Hong Kong has been the standout pioneer [along with the European Investment Bank] in the use of blockchain for primary issuance,” says Fang. “The two transactions the Hong Kong government brought to market using DLT can be regarded as laying the foundations for its use by other potential issuers in the sovereign, financial, and corporate spaces there—although the market beyond the government itself is still experimenting with DLT.”
Still, many hurdles must be addressed before primary debt-market issuance can be executed solely via DLT. Due to the technical and legal complexities of such a migration, notes Fang, traditional syndication will remain favored in the short term.
Nonetheless, APAC has been leading in progressive regulation for tokenization, with the Monetary Authority of Singapore (MAS) piloting DLT-based financial projects for more than a decade, says Julian Kwan, co-founder of Singapore-licensed RWA platforms IX Swap and InvestaX and CEO of the latter.
The MAS selected InvestaX to tokenize Singapore’s new onshore investment vehicle, alongside UBS, State Street, PwC, and the Tezos Foundation.
“The past 18 months have seen a major shift, with the rise of institutional-grade issuers focusing on treasuries and other publicly traded assets. This has brought legitimacy, scale, and a clear product-market fit, driving rapid adoption,” he adds.
Last November, OCBC became the city-state’s first financial institution to offer tokenized bonds via its own paper, to a midsize manufacturer looking to diversify its treasury holdings.
“A corporate or accredited investor client [with assets of S$10 million—around $7.5 million] can subscribe to tokens in denominations of S$1,000 and can similarly liquidate investments in those denominations to meet cash-flow requirements, with OCBC acting as market maker in its bonds,” says Kenneth Lai, head of Global Markets at OCBC in Singapore. “Exit prices are determined based on market prices of the underlying bonds that the tokenized bonds reference, and it is possible to sell and settle the transactions on the same day.”
As a credit proposition, the tokens can be treated like the underlying paper they reference. In the event of a debt restructuring, they will receive the same treatment.
“We expect a surge in demand for tokenized securities that cater to the needs of institutional investors and HNWIs [high net worth individuals],” says Evy Theunis, head of Digital Assets in the Institutional Banking Group at DBS Bank in Singapore. “Institutional investors want the ability to quickly rebalance between cryptocurrencies and yield-generating assets in response to rapidly changing market conditions, without having to keep on- and off-ramping.”
She adds that DBS “could see the issuance of more tokenized private assets, like privately held shares, as HNWIs seek exposure to an asset class that is typically accessible only to institutional investors.”
Indeed, this trend was underlined in early March when Singapore-based DigiFT, a digital exchange for tokenized assets, secured a license to offer custody services for investment products. The company recently listed a tokenized version of a $6.3 billion private credit fund managed by US asset manager Invesco.
“For investors, the key factor remains the quality of the underlying asset. The token itself is merely a vehicle for value transfer—if the asset has no or low value, investor demand won’t follow. Publicly traded RWAs reflect NAV [net asset value] transparently, but private market tokenization still lacks this level of visibility,” says InvestaX’s Kwan.
