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Showing posts sorted by relevance for query asia. Sort by date Show all posts
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Thursday, June 3, 2010

What Crisis? Asia-Europe Shipping Volume Spikes 25%

container shipLloyd's List reports that Asia-Europe container trade has continued to rebound in April. 1.1 million teu (twenty-foot equivalent units) of box volume was shipped from Asia to Europe during the month, up substantially from 878,129 teu one year ago.


For the first quarter, volume was up 21%. Asia-Europe freight rates also rose in April from March with a price index hitting 122 from 116. (base year 2008 = 100)


European demand weakness didn't materialize in April. Still, transport research firm Transport Trackers (TT) finds 'it difficult to expect Europe to magically keep up a strong demand in the face of a massive need for austerity following a long period of Debt Gone Wild.' So perhaps weakness is on the way.


Interestingly, it has been Asian demand for European goods which weakened in April. Eastbound container traffic fell 7% in April year over year, despite having gone up by 23% year over year in the first quarter.


Given the weakening euro, this data seems counter intuitive, one would have expected European demand to be the first to drop. Perhaps May will bring good news for Asia-bound traffic, given that it was the month when the euro truly collapsed, as shown below.


Chart


Transport Trackers notes separately that Asia-Europe rates fell slightly (1.4%) in May vs. April, but note that this could be a ship-supply driven response. Previously idle ships (put into lay over during the recent downturn) have been pouring back onto the market.


TT:


Idle fleet down big time (1+m TEU): According to Alphaliner, the idle boxship fleet has fallen to 263 ships or 549,000 TEU of capacity, a 17?month low, after 75 vessels or another 358,000 TEU of capacity has been re? activated in last few weeks. The reduction of almost 1m TEU of idle tonnage, since the peak of 1.52m TEU recorded in December 2009, was largely driven by the shortages in the 4,000+ TEU size ships, given also that many new services (with 4,000+TEU) were recently launched for summer peak season


Regardless, container trade activity continues to show reasonable strength, even along Asia-Europe. The threat now, as TT highlights above, is that idle capacity could come back to eagerly, and combine with an expected 9-10% 2010 fleet growth to create a new environment of overcapacity. Still, this remains to be seen, and for now the key take away is that we haven't seen significant European contagion yet via container trade data.

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Full story at http://feedproxy.google.com/~r/businessinsider/~3/ImAjyhSR_Vg/what-crisis-asia-europe-shipping-volume-spikes-25-2010-6

Saturday, October 16, 2010

The Future of a Hub: Can Singapore Stay On Top of the Game?

Viewed from abroad, historical perspective, Singapore?s position as a hub is far from inevitable or unassailable. History shows that hubs come and go. Malacca used to be the centre of the spice trade in Southeast Asia. Venice was the centre of East-West trade throughout the Middle Ages. Rangoon, now Yangon, was the aviation hub of Southeast Asia before 1962.


Is Singapore in danger of also ceding its hub status as a result of forces beyond our control? The case of Malacca is instructive. By the 16th Century, the city on the Malay peninsula had become the most important port in Southeast Asia. It served as the bridge between the spice-producing islands of Southeast Asia and the markets in Europe and Asia. Malacca became so integral to East-West trade that a Portuguese traveller and writer, Tome Pires, proclaimed that ?who is Lord of Malacca has his hand on the throat of Venice?.


Malacca was a forerunner of the free port that Singapore was to become. It welcomed foreign merchants as well as their trade. But after the Portuguese conquest of the city in 1511, it declined as the spice hub of the region, as the Portuguese ? and later the Dutch ? sought to achieve monopolistic control of the spice trade. Fierce competition from neighbouring ports such as Johor meant that traders had other options. The city soon declined and today is best known as a tourist attraction.


Half a world away from Malacca, Venice emerged as the European hub of the global trading network. For nine hundred years, Venice was a flourishing centre of trade between Europe and Asia, especially in silk, grain and spices. Geography played an important role in Venice?s rise. Its relative isolation from the mainland insulated it from the confusing and often deadly politics of the Italian states.


Venice concentrated its resources and energies on advancing its commercial interests in distant regions. By the 13th century, Venice was the second largest city in Europe after Paris, and its most prosperous. It linked the main trade routes between Europe and Asia.


But eventually Venice also declined. The fall of Constantinople to the Ottomans in 1453 disrupted the traditional overland trade route from Europe to Asia, forcing Europe to find alternative trade routes to the East. At the turn of the 16th century, Portugal?s discovery of a sea route to the East Indies undermined Venice?s monopoly. New ports emerged to become Europe?s main intermediaries in the trade with the East, striking at the very foundation of Venice?s wealth. With its centrality as a commercial hub broken, Venice declined and eventually fell to the Austrians in 1797.


The Theory of Hubs


Malacca and Venice are both examples of hubs in that first flourished and then declined as trade routes and technologies changed. Simply defined, hubs are the exceptionally well-linked nodes in a network. Malacca and Venice exploited their commanding positions in the main trade networks of their times. They consolidated their hub positions by astute diplomacy, openness to talent from elsewhere, and broadening the range of their activities beyond just trade.


Throughout history, hubs have been the main engines of economic growth and development. Network theory provides us with insights to explain why hubs acquire wealth more easily than other nodes in a network. Today, as in the past, the world?s economic geography remains dominated by hubs which are the focal points of opportunity, growth and innovation. Firms locate where skills, capabilities and markets cluster.


A recent study identified the existence of 40 mega-regions worldwide. They are defined as places that claim large populations, large markets, significant economic capacity, substantial innovative activity, and highly skilled talent. Many of these 40 mega-regions are formed by hub cities growing outward and into one another. Singapore is one of these hubs.


Today, of course, air transport plays a critical role in establishing hubs. Air hubs make previously unlinked cities accessible to one another in just one or two links. Singapore is classified as a ?connector? hub ? it is a hub within the East Asian/Southeast Asian region, with a high number of links to cities in other regions. So in 2007, while Changi Airport was ranked 19th by the Airports Council International in terms of passenger numbers, it was ranked 6th if only international passengers are considered.


If Singapore is a central node connecting different regions, what might undermine this position? Challenges could come from two directions. The first is competitors in the region, such as Kuala Lumpur, Bangkok and Hong Kong, as well as those from other regions, such as Dubai. Dubai is the largest aviation hub in the Middle East and is a fierce competitor for the Australia-Europe traffic. Another challenge is from long-haul flights. The same technology that allows Singapore Airlines to bypass Tokyo on flights to Los Angeles could one day allow Emirates to fly non-stop from Dubai to Sydney, and Qantas or British Airways to fly non-stop along the ?kangaroo route? from London to Sydney.


The more cities move away from the hub-and-spoke model of air transportation to point-to-point transportation, the more difficult it will be for Singapore to retain its status as an aviation hub. This is conceptually no different from Venice losing its hub status because alternative and more direct trade routes were found between markets in Europe and spice producers in the East.


This threat underlines the importance of constantly re-inventing Singapore as a hub. It would be fatal to assume that the density of connections that we have today and the centrality that we enjoy in today?s networks ? whether in air transportation, maritime, or other networks ? are permanent. New technologies might create new networks with their own hubs and connectors. Whether we will continue to be a hub in the networks that emerge will depend on our capabilities, on our ability to seize early mover advantages, and on how quickly the new networks emerge.


I think it is possible to distil five factors that determine the success and sustainability of hubs like Singapore.




  1. Establish your role early. Singapore built the first container port in the region. This gave us first-mover advantage. We exploited it, and Singapore was propelled to the front rank of global container ports.
  2. Ensure open access and maximum connectivity. Singapore under the British thrived because of its status as a free port. In contrast places like Jakarta languished under the Dutch policy of controlling and taxing trade. Being well-connected and plugged into dense networks confer far more advantage than efforts to monopolise production or to control access to resources.
  3. Capitalise on and exploit small initial advantages. The research on networks suggests that the economic development process is highly path-dependent: the choices we face today are largely shaped by the choices we made in the past and the capabilities that we have already built up. Singapore was able to become a leading petrochemicals hub because we were able to build on our early success in attracting oil refinery activities.
  4. Constantly re-invent and diversify the hub?s value proposition. In Singapore?s context, our status as a maritime hub gives us the opportunity to develop strengths in new areas that go beyond our traditional role as a port. These include ship financing, ship insurance and various ancillary activities that the shipping industry depends on. This diversification will also give us greater resilience in the face of uncertainties and rapid changes in the maritime industry.
  5. We need a strong sense of belonging. If people only see Singapore as ?Hotel Singapore?, then when there is an economic downturn or other problems, they will move to where the opportunities are greater. The challenge is to maintain a core that will sustain the hub through economic cycles.


Singapore?s continued success as a hub depends both on its connections to the world, as well as connections to its citizens wherever they may now live. Our strategic response to the limitations of our physical size must be to strengthen our hub position by boosting not only its physical connections to networks, but also in other domains ? an R&D hub, an intellectual hub, and even a cultural and entertainment hub.


To avoid the fate of Malacca or Venice, we must re-invent and re-position ourselves and stay ahead of the competition. This is the imperative that will determine our future as a city-state, as both a place and a nation.


Peter Ho is Senior Advisor to Singapore's Centre for Strategic Futures. Before retirement, he was the Head of Civil Service in the Singapore Government.


Photo by Storm Crypt



Full story at http://feedproxy.google.com/~r/Newgeography/~3/TH4E6yWeafk/001813-the-future-a-hub-can-singapore-stay-on-top-game

Thursday, November 11, 2010

Matthews Asia Small Cos. (MSMLX): 'Beyond Impressive'

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"For my latest recommendation, I wanted to some exposure to India and/or other Asian markets, while keeping our focus on smaller cap stocks," says Tom Bishop.



The small cap stock specialist and editor of BI Research explains, "I decided to go with Matthews Asia Small Companies Fund (MSMLX). One reason? Matthews is number one in Asian mutual funds. That?s all they do ... Asia.



"They have lots of feet on the ground staying abreast of developments in the countries and at the companies. They speak the language.They live there.They know Asia inside and out.

Continue reading Matthews Asia Small Cos. (MSMLX): 'Beyond Impressive'

Matthews Asia Small Cos. (MSMLX): 'Beyond Impressive' originally appeared on BloggingStocks on Wed, 10 Nov 2010 16:40:00 EST. Please see our terms for use of feeds.

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Tuesday, May 25, 2010

Tensions Mount in Asia; North Korea Prepares for Combat; South Korea Won Sinks to 8-Month Low; Futures Sink, Nikkei Hammered Again

Smack in the midst of a "global recovery" tensions are heating up in Asia. Please consider Kim Jong II Orders Military to Get Ready for Combat
North Korean leader Kim Jong II ordered the country?s military to get ready for combat in a message televised nationwide last week following South Korea?s announcement that North Korea torpedoed the South?s warship.

South Korea?s President Lee Myung Bak said yesterday the country will push for United Nations censure against North Korea for the March 26 sinking of a naval ship, which killed 46 sailors. A multinational team concluded on May 20 that North Korea fired a torpedo to split apart the 1,200-ton Cheonan.

Tensions are rising in the Korean peninsula following the report, with both sides threatening counter-measures should they come under attack. South Korea plans to define North Korea as its ?main enemy? when it maps out military strategy, Yonhap reported today, citing a government official it didn?t identify.
South Korea?s Won Sinks to 8-Month Low

Inquiring minds may be interested to note South Korea?s Won Sinks to 8-Month Low on Tensions With North.
South Korea?s won slumped to an eight-month low on growing hostilities with the North over the sinking of one of the South?s warships with the loss of 46 lives.

The U.S. yesterday announced plans to conduct joint anti- submarine exercises with South Korea as ?a result of the findings of this recent incident.? Japan will consider imposing financial sanctions on North Korea, Finance Minister Naoto Kan said at a news conference in Tokyo today.

?We won?t see the bottom of this fall until we hear some good news on North Korea,? said Cho Hyun Seok, a currency dealer at Kookmin Bank in Seoul. ?The won?s exchange rate can go as high as 1,260 won per dollar.?

The military exercises are among steps the U.S. and South Korea are pursuing, including possible further United Nations sanctions, in response to the March sinking of the 1,200-ton Cheonan. The U.S. and South Korea say evidence shows the explosion was caused by a North Korean torpedo.
Asian Stocks Fall to 10-Month Low, Won Dives, Commodities Drop

Please consider Asian Stocks Fall to 10-Month Low, Won Dives, Commodities Drop
The MSCI Asia Pacific Index dropped 2.2 percent to 109.82 as of 12:09 p.m. in Tokyo, set for its lowest close since July 30. Standard & Poor?s 500 stock index futures lost 1.3 percent. The won plunged to a 10-month low and the nation?s stock benchmark slumped 3.4 percent. The euro fell for a second day against the yen and the dollar. Crude oil slipped below $70 a barrel in New York and copper declined for the first day in four.

South Korea?s benchmark Kospi stock index plunged 3.7 percent to 1,546.90. The gauge has fallen 11 percent from its recent high of 1,752.20 reached on April 26 and has entered a correction, defined as a decline of more than 10 percent from a peak.
Asia Pacific

\

The above chart shows it is a sea of red in Asia.

However, close inspection of the futures market shows it is a sea of red everywhere. S&P 500 futures are down 17 points, over 1.5% as I type, and Nasdaq futures are also down 1.5%, 27 points.

This can change overnight. but right now the stock market does not seem too excited by war prospects. The beneficiary should be easy to guess. US treasuries are flying high.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Friday, December 4, 2009

The World's Smartest Cities

In today's parlance a "smart" city often refers to a place with a "green" sustainable agenda. Yet this narrow definition of intelligence ignores many other factors--notably upward mobility and economic progress--that have characterized successful cities in the past.


The green-only litmus test dictates cities should emulate either places with less-than-dynamic economies, like Portland, Ore., or Honolulu, or one of the rather homogeneous and staid Scandinavian capitals. In contrast, I have determined my "smartest" cities not only by looking at infrastructure and livability, but also economic fundamentals.



These criteria unfortunately exclude mega-cities like New York, Mexico City, Tokyo or Sao Paulo, which suffer from congenital congestion, out-of-control real estate prices and expanding income disparities--symptoms of what urban historian Lewis Mumford described as "megalopolitan elephantiasis."


Instead, today's "smart" cities tend to be smaller, compact and more efficient: places like Amsterdam; Seattle; Singapore; Curitiba, Brazil; and Monterrey, Mexico. This is not an entirely new notion: Between the 14th and 18th centuries, modest-sized cities like Venice, Italy; Antwerp, Belgium; and Amsterdam nurtured modern capitalism and created canals and vibrant urban quarters that remain wonders even today.


In the Pacific-centric modern era, smart commercial cities are increasingly found outside Europe. Indeed, the most likely 21st-century successor to 15th-century Venice is Singapore, a commercially minded island nation that, like its forebear, is run by an often enlightened authoritarian regime.


When it first achieved independence in 1965, Singapore's condition was comparable to other developing cities like Bombay, Cairo, Lagos or Calcutta. The island city's neighbors included unstable countries like Vietnam, Malaysia and Thailand. Its GDP per capita ranked well below those of Argentina, Trinidad, Greece or Mexico.


The country's first prime minister and current eminence grise, Lee Kuan Yew, was determined to change reality. Today, Singapore, with a population of less than 5 million, boasts an income level close to the wealthiest Western countries and a per-capita GDP ahead of most of Europe and all of Latin America. Once largely semi-literate, its population is now among the best-educated in Asia.


To be sure, this enviable achievement was accomplished in an authoritarian fashion, but much of what Singapore has done must be considered "smart" by any reasonable accounting. Strategic investments taking advantage of its location between the Indian and Pacific Oceans have paid off handsomely: Today Singapore Airport is Asia's fifth largest, and the city's port ranks as the largest container entrep�t and is the second biggest, after Shanghai, in terms of cargo volume in the world.


All this has made Singapore a huge lure for foreign companies, with over 6000 multinationals, including 3600 regional headquarters, now located there. For foreign managers, engineers and scientists, largely English-speaking Singapore offers a pleasant and predictable environment, particularly compared with other Asian centers.


At least one recent survey by the World Bank's International Finance Corporation rates Singapore No. 1 in the world for ease of doing business. Although its growth has been slowed by the recession, the city's close ties to the resurging economies of Southeast Asia, China and India lead many forecasters to predict a strong recovery over the next year.


Hong Kong, yet another outpost of British imperialism, has also performed well. Last year the World Bank ranked the area No. 3 for ease of doing business, compared with No. 89 for the rest of China. As long as Chinese Communists allow wider freedoms in Hong Kong than in the mainland, the area should continue to take advantage of its basic assets, including the world's third-largest container port, an excellent airport and a highly skilled entrepreneurial population.


The continuing appeal of Hong Kong was vindicated by the recent decision of Hong Kong Shanghai Bank Chief executive George Geoghegan to relocate there from London. As the center of the world economy continues to shift to Asia while Europe and America struggle, he is likely to find more company.


Not all the world's "smart" cities are trading giants like Hong Kong and Singapore. They also include well-run metropolises, such as the city of Curitiba. The south Brazilian city is regarded as an innovator in everything from bus-based rapid transit, used by some 70% of residents, and its balanced, diverse economic development strategy.


With a population of 3.5 million, Curitiba demonstrates how to achieve the evolving Brazilian dream without the mass violence, transportation dysfunction and ubiquitous grinding poverty that plague many other Latin American metro areas. The city's program of building "lighthouses"--essentially electronic libraries--for poorer residents has become a model for developing cities world wide. These are among the reasons Reader's Digest recently named Curitiba the best place to live in Brazil.


Another similarly "smart" city in the developing world is Monterrey, Mexico, which has emerged from relative obscurity and turned itself into a major industrial and engineering center over the past few decades. The city of 3.5 million sits adjacent to the dynamic U.S.-Mexico border region and has 57 industrial parks specializing in everything from chemicals and cement to telecommunications and industrial machinery.


Over the last decade, the area has consistently grown at a faster rate than the rest of Mexico--or, for that matter, the United States. Monterrey and its surrounding state, Nuevo Leon, now boast per-capita GDP roughly twice that of the rest of Mexico.


Although hard-hit by the current recession, Monterrey seems poised for an eventual recovery. Dominated by powerful industrial families, the area has long been business-friendly. It has also become a major education center, with over 82 institutions of higher learning and 125,000 students, led by the Instituto Technologico de Monterey, considered by some Mexico's equivalent of MIT or Cal Tech.


Of course, "smart" cities also exist in the advanced industrial world. Amsterdam, a longstanding financial and trading capital, is home to seven of the world's top 500 companies, including Philips and ING. Relatively low corporate taxes and income taxes on foreign workers attract individuals and companies, one reason why, in 2008, the Netherlands was largest recipient of American investment in Europe. Amsterdam's advantages include a well-educated, multilingual population and a lack of political corruption.


Amsterdam's relatively small size--740,000 in the city and 1.2 million for the entire metropolitan area--belies its strategic location in the heart of Europe and proximity to the continent's dominant port, Rotterdam. The city's Schiphol airport, Europe's third-busiest, is only 20 minutes from the center of Amsterdam, a mere jaunt compared with commutes to the major London or Paris airports. Schipol has also spawned a series of economically vibrant "edge cities" that appear like more transit-friendly versions of Houston or Orange County, Calif.


North America also has its share of smart cities. Although self-obsessed greens might see their policies as the key to the area's success, Seattle's growth really stems more from economic reality. In this sense, Seattle's boom has a lot to do with luck--it's the closest major U.S. port to the Asian Pacific, which has allowed it to foster growing trade with Asia.


Furthermore, Seattle's proximity to Washington state's vast hydropower generation resources--ironically the legacy of the pre-green era--assures access to affordable, stable electricity. The area also serves as a conduit for many of the exportable agricultural and industrial products produced both in the Pacific Northwest and in the vast, resource-rich northern Great Plains, linked to the region by highways and freight rails.


As North America's economy shifts from import and consumption toward export and production, Seattle's rise will be a model for other business-savvy cities in the West and South. Houston's close tie to the Caribbean, as well as its dominant global energy industry, thriving industrial base, huge Texas Medical Center complex and first-rate airport, all work to its long-term advantage. Arguably the healthiest economically of America's big cities, Houston is also investing in--not just talking about--its green future; last year it was the nation's largest municipal purchaser of wind energy.


Another smart town poised to take advantage of an industrial expansion is Charleston, S.C., which has expanded its port and manufacturing base while preserving its lovely historic core. Once an industrial backwater, Charleston now seems set to emerge as a major aerospace center with a new Boeing 787 assembly plant, which will bring upward of 12,000 well-paying jobs to the region.


Further inland, Huntsville, Ala., has long had a "smart" core to its economy--a legacy of its critical role in the NASA ballistic missile program. Today the area's traditional emphasis on aerospace has been joined by bold moves into such fields as biotechnology. Kiplinger recently ranked the area's economy No. 1 in the nation.


With the likely rise in commodity prices over the next decade, Canada also seems likely to produce several successful cities. Perhaps the best positioned is Calgary, Alberta. Over the past two decades, the city's share of corporate headquarters has doubled to 15%, the largest percentage of main offices per capita in Canada.


Although last year's plunge in oil prices hit hard, rising demand for commodities in Asia should help revive the Albertan economy by next year.


In their press releases, all these cities make a point of bragging about being green and environmentally conscious. Yet they have demonstrated their "intelligence" in other ways--by exploiting their locations and resources to make savvy business and development decisions. At the end of the day, it will not be their clean air but their commercial prowess--as has been the case in history--that will sustain their success in the decades ahead.


List of the World's Smartest Cities




  1. Singapore The 21st-century successor to 15th-century Venice, this once-impoverished island nation now boasts an income level comparable to the wealthiest Western countries, with a per-capita GDP ahead of most of Europe and Latin America. Singapore Airport is Asia's fifth-largest, and the city's port ranks as the largest container entrepot in the world. Over 6,000 multinational corporations, including 3,600 regional headquarters, are located there, and it was recently ranked No. 1 for ease of doing business.
  2. Hong Kong As the center of the world economy continues to shift from West to East, Hong Kong is certainly reaping the benefits. Hong Kong Shanghai Bank's chief executive recently relocated there from London. Its per-capita GDP is ranked 15th in the world. The Heritage Foundation and The Wall Street Journal have ranked Hong Kong the freest economy in the world.
  3. Curitiba, Brazil This well-run metropolis in southern Brazil is famous for its rapid bus-based transit, used by 70% of its residents, and its balanced, diverse economic development strategy. The city's program of building "lighthouses"--essentially electronic libraries--for poorer residents has become a model for developing cities worldwide. Environmental site Grist recently ranked Curitiba the third "greenest" city in the world.
  4. Monterrey, Mexico Over the past few decades Monterrey has emerged from relative obscurity into a major industrial and engineering center. The city of 3.5 million has 57 industrial parks, specializing in everything from chemicals and cement to telecommunications and industrial machinery. Monterrey and its surrounding state, Nuevo Leon, boast a per-capita GDP roughly twice that of the rest of Mexico.
  5. Amsterdam This longstanding financial and trading capital is home to seven of the world's top 500 companies, including Philips and ING. Relatively low corporate taxes and income taxes on foreign workers attract companies and individuals. Amsterdam's advantages include a well-educated, multilingual population and a lack of political corruption, as well as its location--in the heart of Europe, close to a major international airport and a short train trip to Rotterdam, the continent?s dominant port.
  6. Seattle, Wash. Seattle's location close to the Pacific Ocean has nurtured trade with Asia, and its proximity to Washington state's vast hydro-power generation station assures access to affordable, stable clean electricity. The area also serves as the conduit for many of the exportable agricultural and industrial products produced both in the Pacific Northwest and in the vast, resource-rich northern Great Plains, closely linked to the region by highways and freight trains.
  7. Houston, Texas Houston's close tie to the Caribbean, as well as its dominant global energy industry, thriving industrial base, huge Texas Medical Center complex and first-rate airport all work to its long-term advantage. Arguably the big city in the U.S. with the healthiest economy, Houston is also investing in a "green" future; last year it was the nation's largest municipal purchaser of wind energy.
  8. Charleston, S.C. Charleston has expanded its port and manufacturing base while preserving its lovely historic core. Once an industrial backwater, Charleston now seems poised to emerge as a major aerospace center, with the location of a new Boeing 787 assembly plant there, which will bring upward of 12,000 well-paying jobs to the region.
  9. Huntsville, Ala. This southern city has long had a "smart" core to its economy, a legacy of its critical role in the NASA ballistic missile program. Today the area's traditional emphasis on aerospace has been joined by bold moves into such fields as biotechnology. Kiplinger recently ranked the area's economy No. 1 in the nation.
  10. Calgary, Alberta With the likely rise in commodity prices over the next decade, Canada seems likely to produce several successful cities. Over the past two decades, Calgary's share of corporate headquarters has doubled to 15%, the largest percentage of main offices per capita in Canada. Although the plunge in oil prices hit hard, rising demand for commodities in Asia should help revive the Albertan economy by next year.




This article originally appeared at Forbes.com.


Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University. He is author of The City: A Global History. His next book, The Next Hundred Million: America in 2050, will be published by Penguin Press early next year.



Full story at http://feedproxy.google.com/~r/Newgeography/~3/T7NCmxTHhYY/001246-the-worlds-smartest-cities

Tuesday, May 24, 2011

Asia?s New Landless Peasants?

Landless people have long sparked instability in Asia. From the days of the Qin dynasty (3rd century B.C.), through the huge Taiping rebellion in the mid-19th century, to the successful Communist revolutions in China and Vietnam and a nearly successful insurrection in Malaysia during the mid-20th, the property-less have historically risen against those in power.


Today as East Asia grows more affluent, landlessness is again on the rise. Although peasants in many places remain both poor and restive, the real threat is in the region?s dynamic cities, where rapid increase in housing prices threatens to push hundreds of millions outside the property-buying market.


This boost in prices is due to the rapid economic and population growth in many Asian cities. Across China the price of housing per square meter more than doubled over the past decade, according to the National Statistical Bureau. Prices-compared-to-incomes in the diaspora hot beds of Singapore and Hong Kong are now, according to research from the consultancy group Demographia, the highest in the advanced world ? at least 50% higher than New York, San Francisco, Toronto, Sydney or London.


There are some good market-based reasons for these high prices. Most major Asian cities are thriving economically and growing far more rapidly than their Western counterparts. Over the past decade, the population of Shanghai, China?s largest city, rose 35%, or by nearly 6 million, which is more than the population of any Western European city besides London, Paris and Essen-Dusseldorf. Beijing?s population rose by 6 million in the past 10 years to nearly 20 million. And Singapore?s far more affluent population jumped 20%, a rate exceeded in the advanced world only by Atlanta, Ga., among urban areas of more than 4 million.



The recent spike in prices, particularly in the more affluent cities, also stems from high liquidity, low interest rates and rising inflation, notes Cheong Koon Hean, CEO of Singapore?s Housing and Development Board. To these factors she adds what she calls ?a herd mentality? as people rush to invest in property as a hedge against inflation.


The traditional Chinese obsession with property ownership exacerbates these factors. As  Nanjing-based blogger and social critic Lisa Gu writes, ?Owning a property is the greatest life-goal for most Chinese citizens.?


In mainland China the rush to own is bolstered by the lack of a strong social safety net or popular trust in other investment vehicles, such as stock and bonds. ?China lacks good investment channels besides housing,? says Han Hui, senior partner in prominent Beijing real estate law firm. ?People put money into real estate because they still don?t trust anything else.?


The appeal of home-ownership in China is particularly marked since it?s more of a land-use right, which in the case of residential property, expires after 70 years (40 years for commercial property). The lease begins to run out on the date that the real estate developer signs for the land, and not on the homeowner?s date of purchase.


Whatever its cause, this Asian form of irrational exuberance is clearly boosting inequality across the region?s cities.


This is becoming a key issue, particularly for the younger generation.  ?House price? ranked third on the list of the top 10 most popular phrases used by Chinese netizens, says Lisa Gu. Many young Chinese, she notes, are giving up on the ideal of owning a house before marriage and starting their lives together as renters. This is widely called ?getting married naked.?


For young professionals this now might just prove a temporary annoyance, but it could evolve into something more bothersome as they age. Some might opt to avoid very expensive cities, such as Beijing or Shanghai, for up-and-coming smaller urban centers such as Chengdu, the provincial capital of agriculturally fecund Sichuan province. This city has a growing tech center but offers housing prices as much as one third those in China?s existing megacities. Although salaries are also lower, overall affordability remains much higher than in the established urban regions.


For the many millions of poorer Chinese, including the many migrants from the countryside, the housing crunch presents a more serious issue. Most have moved to the big cities, particularly in eastern China, for better opportunities and quality of life. Virtually all the net growth in Beijing and Shanghai, according to the most recent Chinese census, came not from registered residents but among migrants ? those lacking hokou status. They constitute now over one third of the population in these megacities.


Such migrants include people of various incomes, but also a large impoverished population.  Some live in sub-standard conditions not often associated with the gleaming epicenters of Asian capitalism. Like residents of the slums of third-world cities, many are landless peasants, a group now estimated at 70 million or 80 million.


This problem of landless peasants is likely to grow as more land is set aside for urban and industrial development. Many will face difficulty finding a decent place to live even as more affluent Chinese snatch up multiple apartments for speculative investment. This has accelerated a worsening gap between rich and poor that is of major concern to the country?s Communist rulers.


Of course, no one suggests anything like a new peasant rebellion is in the offing. It is critical to recognize that, for all its imperfections, China?s astounding rise has lifted hundreds of millions of people out of the grip of unceasing poverty.


But unaddressed, the property crisis could well slow east Asian capitalism?s rapid ascent. High housing prices may already be contributing to depressed birthrates ? even in places where the ?one child? policy does not apply, such as Singapore, Taiwan and South Korea.


Such long-term problems are overshadowed by more immediate concerns. Fallout about cascading house prices led the Chinese central government earlier this year imposed new restrictions aimed at slowing rampant speculation ? such as requiring 60% payments for second homes and restricting the purchases of additional homes.


The interior city of Chongqing has taken even more drastic steps. The hardline government there has embraced a distinctly uncapitalist response to the housing crisis: a massive program to increase the supply of rental as well as state-owned apartments that would be available to poorer residents, including those from the countryside. This contrasts with programs in Singapore, where 80% of the population live in the public housing, but some 95% own flats purchased from current owners or the Housing Development Board.


In China, the failure of the housing market to find places for the poor and working class could provide a rationale for expanding the state?s role in managing the economy. It certainly provides fuel for Chongqing?s active affirmation of what is seen as a revival of ?red culture.?


Beyond such ideological implications, the housing crisis could threaten both the long-term social stability and economic growth of East Asia. Unless addressed, growing dissatisfaction among a large bloc of property-less citizens has the potential to become a politically destabilizing force and a brake against market-friendly liberalization. As East Asia remains the primary driver of the world?s economic engine, this could prove bad news not only for upwardly mobile Chinese but everyone else as well.


This piece originally appeared at Forbes.com.


Joel Kotkin is executive editor of NewGeography.com and is a distinguished presidential fellow in urban futures at Chapman University, and an adjunct fellow of the Legatum Institute in London. He is author of The City: A Global History. His newest book is The Next Hundred Million: America in 2050, released in February, 2010.


Photo by Colin Manuel



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