Gambling on Asia’ Middle Classes
There were 15 Asian companies represented in the GBGC 50 index of the largest listed gambling companies in 2011. 5 of the top 10 were Asian based companies. This performance mirrors the elevation of Asia, and China in particular, in the global economic arena. It is also symptomatic of the rise of the new Asian middle classes.
The World Bank estimates the global middle class (those earning between $4500 and $22,000, a range of income between Brazil and Italy) will increase from 430 million in 2000 to 1.2 billion in 2030. China and India will account for two-thirds of the expansion.
While the middle classes in Europe and the US are suffering due to the overhang of the financial crisis and maxed out credit cards, middle class households in China and India are discovering a new way of life because for the first time they have disposable income.
The expansion of the Indian middle class has been slower than in China. Using the World Bank’ parameter, the number of Indian middle class households increased from 10.7 million in 2001 to 28.4 million in 2010. However, in 2010 there were 140.7 million who had incomes between $1,000 and $4,000. With the present growth rate of the Indian economy, a large portion of these households will reach the “middle class” category in the next 10 years.
The growth of China’ middle class has followed a more energetic trajectory compared to India’. According to studies conducted by Renmin University of China, Hong Kong University of Science and Technology and Euromonitor International, China’ middle class has grown from 65.5 million individuals in 2005 to 80 million in 2007. It is forecast to reach 700 million by 2020.
Nevertheless, there is no doubt that the Chinese middle class is expanding at a rapid rate. McKinsey, the global management consultants, adjusted estimates put Chinese middle class households at 80 million by 2015, which is equivalent to 29% of households.
The importance of middle class expansion is its impact on consumption patterns. The 2011 Credit Suisse Consumer Survey of Seven Emerging Markets reports that China’ consumption is already $ 1.773 billion (36% of GDP) and India’ consumption is $574 billion (44% of GDP). Both economies are forecast to grow by an average of over 6% until the end of the decade. Interestingly, the Credit Suisse survey asked 2,585 Chinese consumers what services have they used on Internet in the previous six months. 57% replied gaming and 2% replied gambling.
A study (2010) conducted by the Asian Development Bank forecasts that Asian middle class spending power will increase by eight times in the next twenty years. The elevation of such monumental numbers of people from subsistence into the category of “middle class” offers a gigantic opportunity for the global gambling and gaming industry.
“I was struck by the gambling. People were betting even under a statue of Marx and Engels in a Shanghai park. In a state betting shop in Beijing, dead-eyed middle-aged men – exactly the same types who populate British bookmakers in mid-afternoon – were staring at screens full of numbers. Then there’ all the illegal gambling that you don’t see.”
Las Vegas Sands, MGM Resorts and Wynn Resorts put a multi-billion bet on the Asian gambling market by investing in Macau and Singapore, and they are winning beyond their expectations. But they are servicing the upper and middle classes that have already come of age.
The future lies with the highly-educated and technological-savvy upcoming middle classes.