Great cities have proven resilient and adaptable time and again, even when faced with great challenges. As a “new normal” of daily life evolves amid the pandemic, the economic health of emerging market economies remains connected to their largest cities. From everyday necessities to consumer upgrades, we believe understanding consumer behavior within cities is crucial when investing with a long-term view in the emerging markets. The spending power of middle class urbanites provides ballast and stability to a number of sectors and industries across the broader universe of emerging markets.

Cities Remain Cultural and Economic Powerhouses

Wuhan, a metropolitan area with a population of 11 million people, was thrust into the harsh international spotlight earlier this year. Prior to the pandemic, the city gained little media attention. However, Wuhan is among nine cities exceeding 10 million inhabitants in China alone. The provincial capital was deeply bruised by the coronavirus. However, schools, businesses and government services in Wuhan have opened more quickly than other megacities worldwide. In addition, Wuhan remains a bustling commercial, manufacturing and transportation hub as well as a center for tertiary education. Despite the economic and health care challenges associated with the pandemic, it is unlikely that urban living goes out of style over longer time frames.

Any assessment of growth opportunities in emerging markets necessarily starts with their largest cities, where the vast majority of their wealth is concentrated. Based on the UN's latest data (2018), 31 of the world's 40 largest cities are located in emerging markets. Megacities are the economic engines of emerging markets. In many cases, they are also political capitals, like Mexico City, Moscow or Manila. Others, like Shanghai, Mumbai or São Paulo, are distinguished as global commercial powerhouses, international or even supra-national in character. Collectively, they represent a trend toward massive urbanization in emerging markets. By 2030, the UN projects that the urban population of the world's frontier and emerging markets will exceed 4 billion, or around 57% of these populations.