When I attended the World Economic Forum’s annual gathering in Davos last month, Asia’s business executives were buzzing about the forces transforming the region. It’s a busy time: A new U.S. administration is proposing to revise the international trading system, a little-known Chinese startup is puncturing narratives about AI, and several Asian countries just reported 2024 as their warmest year on record.

The 21st century may indeed belong to Asia, and the rewards could be enormous—but only for those who are prepared. Here are a few of the major themes, born from deep discussions with my Asian executive peers, that will drive the region in the coming year.

Asia is aging–and shrinking

Asia reached a historic milestone: The region’s middle and upper classes, defined as annual household income over $10,000 in purchasing power parity terms, now make up a majority of the population. That spending power is poised to be unlocked, powering both consumer-focused companies and the manufacturers that supply them.

Asia’s share of global GDP swelled from just 24% in 2000 to 37% today, and will reach 43% in 2040 if current trends hold. That growth is reshaping trade flows, creating new corridors between Vietnam and the U.S., China and Southeast Asia, and Japan and India, to name a few.

But this positive trend comes with a more challenging transition: falling fertility. Two-thirds of the world’s population now live in countries where mortality outpaces new births. Japan and Korea in particular have some of the world’s lowest fertility rates, according to the McKinsey Global Institute.

Japan’s population may shrink by more than 30% by the end of the century; China’s decline could be even more stark, with a 50% drop by 2100.

Businesses are already making decisions on the basis of a shrinking population, with executives and startup founders in Japan and Korea already looking at overseas markets with growing populations.

And as workforces in traditional powerhouses like China shrink, forward-thinking leaders will need to identify new growth opportunities and boost productivity using AI and other technologies.

South-south trade is exploding

Asia’s businesses are now operating in a very different political environment that demands a more nuanced approach to resilience. How can businesses navigate a world where trade’s traditional defenders now attack the idea?

One such upside that Asia’s countries have is the ability to diversify, selling to both the Global South and to the West. South-to-south trade now represents 20% of global commerce, and is likely to grow rapidly. Between 2019 and 2023, Chinese trade with Indonesia, Brazil, and India grew at an annual compound rate of 15%, 12.1% and 11.4% respectively. Growth in the high-single-digits is also being reported in trade between China and other markets in the global South.

And that will foster Asian companies with a truly global footprint. Take Lenovo: technically a Hong Kong-incorporated company, the PC manufacturer has evolved over the past two decades into a global multinational, with just 25% of its business in China today.

We should expect to see more companies like this, particularly from China, that grow and sell to not just their home market, but to emerging and developed markets alike.

AI gets power hungry

AI is the trend to watch for 2025, creating both opportunities and challenges for Asia’s business executives. Around the world, companies are doubling down on using generative AI for productivity gains, with promising use cases in customer service, sales and IT.

In Asia, increasingly powerful generative AI technologies are fueling explosive growth in entertainment and gaming. These technologies give content creators a set of powerful and affordable tools to more quickly bring their ideas to market.

But AI is also drawing regulatory and legal scrutiny, particularly regarding copyright and intellectual property. The recent spate of lawsuits from media and entertainment companies against AI developers will likely lead to the emergence of new regulatory frameworks and policies.

Demand for sustainable energy is also becoming a key worry. The infrastructure that sustains AI–sprawling, power-hungry data centers—is projected to consume 5% of Europe’s entire energy output by 2030. Similar patterns of power consumption are expected across Asia and other regions.

Will AI’s insatiable appetite for energy exacerbate the sustainability problem? Or will AI instead catalyze new solutions that will bring us closer to a cleaner, healthier and more sustainable environment?

How Asia’s CEOs can survive

News comes fast in 2025. Some changes could portend a massive transformation to how we do business. Other changes may be reversed within the week (if not in even less time). Asian CEOs will need to balance their hopes and aspirations with a more pragmatic attitude.

In Davos, my peers and I put forward the six traits the CEO today needs to survive: positive energy, selfless leadership, continuous learning, resilience, a belief in stewardship and, importantly, a sense of humor.

That’s a tall order for any CEO, but the stakes have never been higher. It really can be our century here in Asia—but only for those who can navigate these stormy waters.

Joe Ngai is a senior partner and chairman of McKinsey & Company Greater China.