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AIPROPX ReportFortune · 2h ago
Asia drives 60% of global growth, but the region’s CEOs can’t escape geopolitics. Here’s how they can stay competitive
Between tariffs, trade disputes, and the closure and reopening of the Strait of Hormuz, “disruption” has moved from being a buzzword to a permanent fixture in the CEO lexicon.
Asia is one of the world’s most dynamic regions in the world. Its demographic scale, industrial depth, and technological capabilities puts it at the centre of future growth. According to the IMF , it drives 60% of global growth.
But even as trade continues to flourish, CEOs can’t escape geopolitics. Asian businesses are navigating the simultaneous effects of fuel price shocks, power shortages, and grid instability. Fragmentation in the form of armed conflicts, tariff disputes and the dissolution of trade blocs is at an all-time high. Geopolitical competition is reshaping trade and investment decisions, as governments try to control key inputs and technologies.
Therefore, CEOs can’t avoid disruption either. Instead, they need to figure out how to excel within it. Corporate executives need to assume that volatility will persist, rather than fade away—and use it to redesign their organizations.
So, how should APAC CEOs stay competitive in a fragmented world?
Specialize in more than one market
Asia is the world’s manufacturing backbone, thanks to dense supplier ecosystems, cost advantages, and deep networks of talent. Asian firms can iterate products, respond to signals, and scale production at a pace unmatched by Western firms.
But many companies in the region are optimized to just one market, because historically this is how they have succeeded: Operations finely tuned to local regulations, supply chains and customer bases have given many an edge. That same efficient localization impacts flexibility, however, and becomes costly when exogenous shocks hit businesses.
To sustain operational momentum, firms need to learn to specialize across multiple economies.
Many midsized firms build resilience into their operations through the China+1 strategy, in which they establish manufacturing centres outside China to mitigate the risk of tariffs or government intervention. They build true multinational networks that can absorb complex supply shocks. Firms that remain optimized for one market concentrate their risk. Any shock to their home market could spell disaster.
OEM manufacturers are vulnerable to this concentration of risk in a single market. China is an important market for many firms, but those in Japan and South Korea, for example, find it hard to expand there. Expanding to India might be a better way to capture growth, but this takes time and a willingness to accept short-term efficiency costs—a trade-off that many firms keep deferring.
To build a system that can flex under geopolitical pressure, firms should consider anchoring advanced manufacturing and high value components in markets where capabilities are strongest, often in Mainland China, Japan, Korea, or Taiwan. Labor-intensive assembly can be distributed across ASEAN, while final market localization expands in India and other growth markets.
Tap Asian sources of capital
Tap Asian sources of capital
Historically, large PE funds in North America drove Asia’s biggest deals. But now, sovereign wealth funds, domestic institutions and Asian corporates are funding manufacturing, infrastructure and technology at a scale that would have been unthinkable a decade ago.
Historically, large PE funds in North America drove Asia’s biggest deals. But now, sovereign wealth funds, domestic institutions and Asian corporates are funding manufacturing, infrastructure and technology at a scale that would have been unthinkable a decade ago.
Given this new flow of capital, corporate leaders now have more options. As funding pools within the region have grown, intraregional mergers have become a more viable path to scale than they have been in the past—one that doesn’t depend on external goodwill or favourable exchange rates.
But capital diversification presents its own risks. Spread relationships too thin and you lose the trust that comes from a deep relationship with a single funder. The real skill for executives is determining how to balance breadth against depth—and defending that decision to shareholders.
Take geopolitical risk management seriously
In a world where policy, trade, and security considerations increasingly shape markets, executives need to actively manage geopolitical risk. Business leaders may not be able to anticipate the specific nature of external shocks, but the more they optimize for resilience, the more effectively they will be able to anticipate and mitigate disruption.
Companies need to invest in functions dedicated to tracking policy developments and trade dynamics. These capabilities must then be embedded into core decision-making so that strategies are grounded in a clear understanding of government priorities and geopolitical realities.
Take energy as an example. Companies must treat energy security as a strategic domain closely tied to policy, rather than just a question of where they get their power from. CEOs will need to build flexibility through a mix of long-term contracts, diverse power sources, and backup capacity, while working with local jurisdictions to help shape and keep abreast of policy direction.
Turning fragmentation into an advantage
It is now clear that the world is not going to back to the way it used to be. Asian CEOs must therefore build resilience across three dimensions.
Operationally, they need to prioritize flexibility over pure efficiency, viewing diversification as an asset and designing systems across markets and production networks. Doing so means aligning capabilities with geography rather than optimizing for a single centre of efficiency.
Financially, building resilience means accessing capital from more sources, including those closer to home, and deploying it in ways that strengthen long term positioning. This means leveraging strategic partnerships to build scale and capability.
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