Asia and the World in the Asian Century

1. Introduction to course

Overview of course.

Course Format:

This course is structured around a blend of lectures, Youtube videos, student presentations, and class discussions.

Grading:

One 2000+ word paper on the following topic (worth 50% of grade):

-- China and India look like becoming Asia's great powers. Please assess both their progress and prospects for the Asian Century. Due midnight Sunday 28 July.

Class presentation, 8 minutes (30% of grade), with PowerPoint, on either of the following topics:

-- social media and/or the sharing economy in Asia's development; and

-- role of US in Asian Century.

Student presentations will take place on Thursday 18 and Friday 19 July.

Participation in class discussions, 20% of grade.

There will be no final exam.

Topics covered will include:

1. Introduction to course and Overview of Asian Century hypothesis.

2. Assessing Asia's developmental progress

3. Some aspects of human well-being in Asia

4. Economic catchup in Asia.

5. Asia's global value chains.

6. Urbanisation in Asia

7. Asia's demographic dilemmas and migration

8. Socially inclusive development

9. Focus on China

10. Democracy in Asia.

11. Focus on India

12. Well-being and happiness in Asia

13. Future of peace in Asia


Today's class.

What do we mean by the "Asian Century hypothesis"?

Asia has always had the world's largest population, and for much of history it has also had the world's largest economy. But in the 19th century, Asia slipped back and the West became the world's economic and political leader. Then, following the end of World War 2 and the Korean War, Asia began an economic renaissance. This took the form of a "flying geese" pattern, starting with Japan, then Hong Kong, Korea, Singapore and Taiwan (the "Newly Industrialising Economies), followed by Indonesia, Malaysia and Thailand, and then China, India, and Vietnam.

The 21st century could become an Asian Century if Asia continues being the fastest growing region in the world economy. The region has enormous catchup potential.

The 21st century could also belong to Asia if, in some decades time, Asia manages to have the world's biggest economy. This is very possible, if Asia continues its rapid catchup economic growth.

However, there are many challenges that Asia faces in realizing an Asian Century:

-- can the region maintain its rapid economic catch-up?

-- can Asia translate economic weight into political power?

-- can Asians cooperate together as a team? Or will they remain divided, and continue to look to the US and other Western countries for global leadership?

REFERENCES:
- Asian Development Bank, “Asia 2050”, Executive Summary
- ACI, Asian Century on Film
- Hans Rosling: Asia's rise -- how and when? TED Talks.
- ACI, How likely is an Asian Century
- ACI, Fast facts on Asia's people and economy
- Asian Century...on a Knife-edge -- Interview with Mr John West
- Asia rising -- Part 1, Youtube
- Asia rising -- Part 3, Youtube
- Kishore Mahbubani on The Asian Century: Changing Asia
- 15 MAPS THAT WILL CHANGE THE WAY YOU SEE THE WORLD

2. Assessing Asia's developmental progress

In our first class, we discussed the following points:

-- in history, Asia always accounted 60-70% of the world population and GDP.

-- in 19th century and first half of 20th century, Asia's GDP fell back -- effects of Industrial Revolution, Western colonisation, World War 2, internal problems in some Asian countries.

-- since end of World War 2, Asian economies have been returning to strength, starting with Japan. A renaissance. A process of "catchup" to the West. Economists call this economic development.

-- Asia is now in the midst of major economic, social and political transformations.

Economic transformations from:

-- low-income to high-income economies;
-- small to major economies in the global economy;
-- agricultural- to manufacturing- and then service-based economies.
-- low-tech to high-tech economies.
-- copycat to innovative economies.

Social development from:

-- low to high life expectancy;
-- rural to urban societies;
-- gender discrimination to equality;

Political transformations from:

-- authoritarian to democratic societies;
-- weak to strong rule of law;
-- corrupt to clean economies;
-- unfree to free press and Internet.

Overall conclusions:

-- economic transformations are spectacular. But no major Asian economy has caught up with world leaders, US and Germany, in terms of GDP per capita. And Asia's large economies -- China, India and Indonesia -- still have a very long way to go.

-- China, India and Indonesia have become economic superpowers. They now have market power, financial power and military power. But their power is due to large populations, not economic sophistication.

-- Social transformation has been very important in terms of life expectancy and urbanisation. But Asia is lagging behind for gender equality.

-- Political transformation has been a weak point in Asia. No full democracies. And China is becoming more authoritarian.

Overall, East Asia is Asia's most advanced region, followed by Southeast Asia and then South Asia.

REFERENCES:
- Asia’s Stunted Economic Development
- Key Indicators for Asia and the Pacific 2018. Asian Development Bank
- List of countries by number of Internet users
- Global Innovation Index
- The Global Gender Gap Report 2018. World Economic Forum.
- Democracy Index 2018. Economist Intelligence Unit
- World Justice Project Rule of Law Index
- Transparency International
- Freedom of the Press. Freedom House
- Freedom on the Net. Freedom House

3. Are Asian lives improving?

Yesterday's class. Asia's come-back or renaissance after 1945.

Asia experiencing three transformations -- economic, social and political.

Economic transformations very impressive, but still work-in-progress.

Also, no large Asian economy (like Japan or Korea) has caught up to US or Germany for GDP per capita

Social transformations are also impressive, but gender discrimination remains a big problem.

Democracy in Korea and Taiwan is commendable. But overall, political/governance indicators weak in Asia.

Issues:

Can Asia continue in its catchup to Western countries?

Will poor political/governance be a handicap for Asia's future?

Understanding China's power.

China is "backward" in that its GDP per capita is much lower than US, Japan, Korea etc. China's economy is less productive. Chinese people have a much lower standard of living, on average.

But China is big and SIZE MATTERS! By some measures, China's total GDP is bigger than the US, and biggest in the world.

1. China has market power -- everyone wants to sell to China. So we often are shy to talk about human rights etc.

2. China has financial power -- money it can use for international initiatives like creating the Asian Infrastructure Investment Bank, and the Belt and Road Initiative. They are designed to help developing countries. Demonstrate China's leadership.

3. China is using financing to strengthen its military.

Is China more powerful than the US?

Not yet! But its military is catching up. And the US is losing interest in the rest of the world.

But many people don't like China -- see Hong Kong.

Have Asian lives improved with three transformations?

Yes, a dramatic reduction in poverty. Show World Bank data. Dramatic reduction in poverty in China. Lower reductions in Indonesia and India.

But only 15% of Asians are middle class (living on more than $10). Half of Asians are caught between poverty and middle class. Lives are vulnerable.

While a greater numbers of Asians are living on $2, $3 or $5 a day. But most low-income people do not receive that amount every day. They have irregular jobs, with irregular income flows. Microfinance can be a solution. Show Youtube.

Low-income people are exposed to natural disasters -- typhoons, earthquakes, tsunamis and flooding. Such disasters add over 400 million extra people to poverty figures, more than half in China.

Many Asians lack access to clean drinking water, clean and safe toilets, education for their children, basic healthcare facilities or personal security. Today, some 1.7 billion or 42% of the region’s population still lack access to clean and safe toilets, with India being Asia’s most “toilet-poor” country -- 775 million Indians, 330 million in China, Pakistan 69 million and Bangladesh 63 million.

Income inequality in Asia. Rapid technological change requires high-skilled workers and displaces lower-skilled workers. Development favored urban areas. Unequal access to education. Also corruption.

REFERENCES:
- Asia’s Mythical Middle-Class Society
- World Bank. Poverty & Equity Data Portal.
- Stuart Rutherford on "Portfolios of the Poor". Part 3
- Inside Story - Asia and the economics of natural disasters
- Out Of Order - The State of the World's Toilets 2017 | WaterAid
- India - No toilet, no bride
- Out of Order: The State of the World's Toilets 2017 (see page 9)
- Schauer, V., Kalpana Kochhar, Shi Piao, Sonali Jain-Chandra, Tidiane Kinda. Sharing the Growth Dividend: Analysis of Inequality in Asia. IMF Working Paper No. 16/48. Figures 5, 6 and 8

4. Continuing Asia's Economic Transformation

Asia's economic transformation since 1945 has been impressive. Asian lives have been improving. But it is still work in progress. Still a long way to go to catch up with the West.

How do we continue to grow Asian economies? How can China and India avoid middle income traps?

Economic growth is driven by labor (workers), capital (investment) and productivity (innovation is key).

Labor has two dimensions -- quality and quantity.

Education is key to labor quality. Discuss OECD's PISA study which surveys education. East Asian countries like Singapore, Japan, Taiwan, Macao, Vietnam, Hong Kong, China and Korea. But how good really is their education?

Cram School (Gakushū juku)
https://www.dailymotion.com/video/x5kvxp2

In contrast, Thailand, Indonesia and India do very poorly in the PISA study.

Labor force participation is key to quantity. Following 1945, and a post-war baby boom, Japan had a rapidly increasing working age population. This drove the economy (demographic dividend). But population has been aging, and working age population has been falling since 1995.

What to do? Womenomics, seniors, immigration, productivity. But Japan reacting slowly.

China, Korea and Singapore following same trend. China's working age population now falling for seven years. China needs strong policy change -- improve productivity.

Singapore (and Hong Kong) have opened dramatically to immigration.

India and Indonesia are behind Japan and China in demographic transitions. Still have rapidly growing working age populations. But need to provide education and jobs for demographic dividend.

We will look at three aspects of capital investment -- public infrastructure. foreign investment and ease of doing business

Public infrastructure -- roads, bridges, trains, airports, ports, etc -- is critical for the economy.

But according to the World Economic Forum, while Asia has some of the world's best infrastructure, it also has some of the worst.

Hong Kong is ranked as having the world's best infrastructure. Singapore is number 2, Japan 4, Korea 8, Taiwan 15, Malaysia 22, China is not bad at 46.

But India is 66, Indonesia 52, Philippines 97, Mongolia 108, Pakistan 110, Bangladesh 111.

Foreign investment can also play an important role in economic transformation.

Singapore, Hong Kong and Vietnam are very open to foreign investment. India, Malaysia and Korea have reduced barriers in recent years. But countries like China, Indonesia and the Philippines retain very high barriers.

Entrepreneurship -- starting businesses -- is critical for driving economic transformation.

Some countries have very few barriers to doing business. Singapore, Hong Kong, South Korea, Taiwan and Malaysia score well for the ease of doing business.

Japan only scores 39 out of 190, while China is 46th. Other countries are way down the list -- Vietnam 69th, Indonesia 73rd, India 77th, Sri Lanka 100th, Philippines 124th. Myanmar 172nd.


REFERENCES:
- Asia’s Stunted Economic Development. Asian Century...on a Knife-edge
- OECD. PISA education report.
- UN. World Population Prospects. Volume II. Demographic Profiles.
- The Global Competitiveness Report 2018. World Economic Forum
- oreign Direct Investment Statistics: Data, Analysis and Forecasts
- MSNBC - How Shanghai (China) Schools Outperform The Entire World On Tests
- CNN: Are asian students smarter?
- World Bank. Doing Business
- Why do Chinese students have higher test scores than Americans?
- Indonesia education system faces emergency

5. Asia’s innovation imperative

To continue Asia's economic transformation, improving productivity is essential. And innovation can contribute greatly to improved productivity.

A number of Asian economies rank highly on the Global Innovation Index -- Singapore 5th, Korea 12th, Japan 13th, Hong Kong 14th, China 17th, India 57th.

But many debate whether China and India can really innovate?

Issues to think about:

democracy and innovation -- can authoritarian regimes be as innovative as democracies?

international partnerships -- between different companies, and between universities and companies -- are very common in successful innovation cases. But trust is essential. Can sufficient trust exist between organisations in democracies and those in authoritarian regimes?

Show Youtubes on innovation in China. Many question China's capacity to innovate. And yet companies like Alibaba are proving to be very successful.

It is never too early to become an innovation nation, and India is making great progress, especially in the IT area. And India has its own brand of innovation, known as "frugal innovation".

India's creative and innovative spirit are also evident in its leadership of international cricket, through the Indian Premier League, and also in India's very successful film industry, "Bollywood".

To succeed at innovation, requires an "innovation ecosystem" including public R&D expenditure, incentives for corporate R&D, open competitive economy, finance for innovation, risk-taking environment, education etc.

REFERENCES:
- Asia’s Stunted Economic Development. Asian Century...on a Knife-edge
- Global Innovation Index 2018.
- Designed in China: Can China innovate?
- China's challenge: Moving from copier to innovator
- Alibaba Counters the Myth That China Can’t Innovate
- Can Innovation Save China?
- India : Universe of frugal innovation - #DownToEarth (up to 6 minutes)
- Accenture Opens Groundbreaking Innovation Hub in Bengaluru
- The business of India's multibillion-dollar cricket league
- Bollywood VS Hollywood - Everything You Need To Know

6. Asia's global value chains

Asia's emerging economies need to improve their productivity to continue their economic catchup.

International trade and investment offers one means to improve productivity.

Through international trade countries: specialise in what they are good at (comparative advantage); enjoy economies of scale; and knowledge and technology transfer.

Today, most international trade and investment is conducted through "global value chains" (GVCs). Asia’s participation in GVCs for manufacturing goods an important driver of development.

Classic examples:
-- iPhone -- designed in California; components from Japan, Korea, Taiwan etc; assembled in China by Taiwanese company (Foxconn and Pergatron); branding and marketing from California.
-- Clothing designed by European brands but sewn together in China, Vietnam, Bangladesh, or Cambodia.

GVCs are characterised by lead companies (like Apple or Benetton) from "headquarter economies" and subordinate companies (some high-tech, some low-tech) from "factory economies".

Lead companies capture high value added, as do high-tech suppliers. Low-tech assemblers capture the least value. But they still benefit through their low value-added tasks.

In Asia, most emerging economies participate in GVCs:
China (electronics, toys, clothing). Bangladesh, Cambodia, Indonesia, Vietnam (clothing). Thailand (motor vehicles). Malaysia (electronics).

Japan and Korea have GVC lead-companies like Toyota, Panasonic, Uniqlo, Samsung and Hyundai.

Countries like India and the Philippines have only had limited participation in manufacturing GVCs.

How did GVCs get established?

Lead companies were motivated to establish GVCs by several factors:
-- Panasonic invested in China following Deng Xiaoping's visit to Japan in 1978.

Other factors that attract GVC investment are -- low wages, good infrastructure, educated work-force, incentives (tax breaks), open markets, cheap transport.

Information technologies enable the complex coordination.

Close proximity of Asian countries facilitate transport of components and staff.

Being at the bottom of a GVC provides many benefits: jobs for locals; contracts for local suppliers, export revenues, knowledge and technology transfers, women’s empowerment.

GVCs offer a fast track for development. You only need to be able to do one element of the GVC to benefit from GVCs.

But to succeed in economic transformation requires becoming a GVC leader. This is a challenge.

Countries like Malaysia and Thailand have not succeeded in becoming GVC leaders. They are in middle-income traps.

China making great efforts to become a GVC leader.

For example, China now first first big passenger plane, the C919. But many technologies, systems and parts are supplied by foreign companies, like engines which come from a joint venture between America’s General Electric and France’s Safran.

REFERENCES:
- Getting Better Value Out of Global Value Chains. Asian Century ... on a Knife-edge. John West
- Deng Xiaoping visits Japan Shinkansen
- Deng Xiaoping visits Panasonic in Osaka

7. Benefits and Challenges of Asia's global value chains

China is very actively trying to transform itself from a factory economy into a headquarter economy.

What efforts are China making?
-- Investing in education. Sending students overseas. Investing in R&D. Learning from GVC participation. Hiring "old boys" from Japanese and Korean companies.

-- Buying Western technology companies. Forced technology transfer. Intellectual property theft. Subsidising local companies.

-- These measures are part of “Made in China 2025” -- a state-led industrial policy that seeks to make China dominant in global high-tech manufacturing.

China is targeting “40 per cent self-sufficiency in semiconductors by 2020, rising to 70 per cent by 2025”.

This would reduce Chinese imports of US semiconductors by half in 10 years and ultimately eliminate them entirely within 20 years.

US and some European countries upset by this “Made in China 2025”. They are also upset by China’s intellectual property practices and subsidies. This is driving trade tensions between China and some Western countries.

But there is more:

-- In this GVC world, US trade deficit with China in 2018 -- $420 billion. Donald Trump is unhappy about this. But Trump's reasoning is wrong

-- US deficit with China only $150 billion when services included, and when GVCs are taken into account.

-- China’s overall current account is in balance. US investors in China do lots of business.

There is even more to the story:

China has making great progress -- notably companies like Alibaba, Xiaomi and Huawei.

And Huawei has become a world leader in 5G technology -- the fifth generation of mobile communication.

The US does not want China to be the world leader for 5G technology. It is worried about its technological leadership.

It is worried about security issues. It also wants to help US companies. It also accuses Huawei of intellectual property violations and other crimes.

Huawei is still reliant on US companies for high-tech components. Subject to sanctions from US.

So Donald Trump has launched a “trade war” against China. He is imposing tariffs (taxes) on imports from China. This adversely affects such imports by making them more expensive. Does this make sense?

Trump’s logic is that by putting pressure on China, they will surrender!! Will they really?

Many negative side-effects of Trump's trade war!!

China has retaliated by imposing tariffs on US exports. US exporters are suffering. Some US companies with GVC investments in China are being hit.

Some companies are trying to relocate GVCs to other countries like India and Vietnam. But this takes time and is not always possible.



REFERENCES:
- Getting Better Value Out of Global Value Chains. Asian Century...on a Knife-edge
- Huawei, Trump and 5G
- The US is attacking Huawei and China — without its own 5G strategy
- Trump’s trade war -- Fred Bergsten, from 2 minutes on
- Apple’s High-End iPhone Production Might Move to India

8. Benefits and Challenges of Asia's global value chains (cont)

More than a trade war. Great power technology competition:

-- China wants to dominate new emerging technologies -- AI, advanced robotics, semi-conductors, 5G etc.

-- China wants to be technologically independent from US.

The US is concerned about China’s intellectual property practices.

But the US is also concerned about technological competition from China.

So China’s successful participation in GVCs has led to a trade war and technology war.

We are in the middle of it now, and don’t know the outcome.

Likely to have long term competition between US and China.

Donald Trump does not like GVCs. He would like US manufacturing to come home.

Trump is pushing Apple and other companies to manufacture in the US. But not realistic. Skills? Costs?

But China’s GVCs are now changing. Why? Where?

When China began participating in GVCs, its strong point was lots of cheap labor.

It seemed to have an unlimited supply of cheap labor. People moved from the countryside to cities and towns to work in factories and services sector (urbanisation).

But as time went by, China’s cheap labor began to disappear.
Wages started to rise. Workers starting striking to get more benefits and better treatment.

What happened next? Some companies improved productivity, and moved to higher value added activities.

Another important impact has been shifting more GVC manufacturing to other countries like INDIA, Vietnam, Indonesia, Philippines.

Some GVC manufacturing has also been “reshored” to US and Europe. Some “near-shored”. A reassessment of benefits of GVCs.

Trump’s trade wars have also fuelled this trend.

Another factor affecting GVCs today is advanced robotics and the fourth industrial revolution.

Advanced robotics mean that labor is becoming a smaller and smaller part of production costs. This means that cheap labor countries are now less attractive.

Why outsource to Asia when you produce at home with robots?

****************

In conclusion, GVCs have been perhaps the most important driver of Asia’s development. But today at a crossroads.

Several factors -- rising labor costs; robotics; and trade wars.

Asian economies may need to rely more domestic economy for future growth.

What do Asian economies need to do?

Education, business-friendly policies, innovation.


REFERENCES:
- Student who worked in Chinese iPhone factory explains why manufacturing jobs aren’t coming back to the U.S.
- Why the iPhone Can't Be Made in the US
- Foxconn in Wisconsin
- What is the Fourth Industrial Revolution?
- Global value chains in the Asia-Pacific
- Robotics Improves the Fate of Demographic Decline in Japan

9. Benefits and Challenges of Asia's global value chains (cont)

Are GVCs socially and environmentally responsible?

Asian lives have been improving dramatically.

But many examples of companies outsourcing to take advantage of weak environmental regulations.

Also many examples of human rights abuses.

Show Youtubes.

Horror stories like collapse of the Rana Plaza factory building in Bangladesh.

In Bangladesh, clothing accounts for over 80% of exports, more than 10% of GDP. Employs some 4.2 million people, 80% are women. Indirectly supports 40 million Bangladeshis, about 25% of population. Bangladesh’s clothing industry is second to China’s in size.

In April 2013, Rana Plaza, a building housing factories, collapsed killing 1138 workers, mainly young women, 2000 injured.

Who was responsible?

Bangladeshi authorities didn’t enforce own health and safety laws. Factory owners broke law and put workers at risk. International brands turned a blind eye to glaring problems.

Some positive response. Building owner prosecuted and in jail. A fund created to compensate victims. Factories now being inspected.

Asia’s GVC successes mainly in manufacturing sector. What about services sector?

India and Philippines success in “business process outsourcing” of routine tasks. Call centres. Telemarketing. Accounting. Paralegal. Human resources. Medical transcription.

Why? How?

Thanks to English language, low cost, engineering graduates, tech-savvy youth, open markets.

One-quarter of India’s exports! Direct employment of 3 million and additional 10 million through indirect employment.

India is increasing value added, especially in software development.

But need to do more to increase value-added. This means stronger investments in human capital and infrastructure, and further opening of economy.

Co-innovation -- a new model of innovation.

How India's economy is growing at a faster pace than China.

REFERENCES:
- Getting Better Value Out of Global Value Chains. Asian Century...on a Knife-edge
- Apple factory workers in China exposed to toxic conditions
- Foxconn: An Exclusive Inside Look
- Rana Plaza Collapse Documentary
- One year on from Rana Plaza
- Infosys -- a leading Indian BPO company
- Indian outsourcing firm Infosys commits to creating 10,000 US jobs -- until 4 minutes
- How India's economy is growing at a faster pace than China

10. Free trade and GVCs

Free trade and GVCs. Opening up trade and investment is one way to stimulate GVCs.

Donald Trump is correct that many Asian countries have closed markets. He is correct to push them to open up.

But one country in Asia is leading the way to more trade and investment.

Japan!!

As part of Abenomics, Japan joined Trans Pacific Partnership trade talks, led by Obama. Brave and courageous decision, traditionally a protectionist country.

TPP a vast enterprise. More than trade liberalization. Deals with services, electronic commerce, telecommunications, competition policy, state-owned enterprises, intellectual property, government procurement, transparency, anti-corruption, labor rights and the environment.

But Donald Trump did not like TPP. So he withdrew.

In remarkable leadership, Japan picked up TPP to lead a rapid renegotiation with remaining 11 members—now known as Comprehensive and Progressive Agreement for TPP— came into force on December 30, 2018.

Creates a bloc covering 500 million people, $11 trillion in GDP (around 14 percent of world’s total GDP). Remaining signatories following withdrawal of U.S.—Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam—popularly known as “TPP-11.”

Following talks begun in 2013, EU-Japan Economic Partnership Agreement entered into force on February 1, 2019.

Fear of Trump's protectionism, pushed Abe to conclude this deal.
Also very important. Economic zone of 635 million people, 30% of world GDP, 40% of world trade.

Wide-ranging agreement -- trade in goods, services, bilateral investment. Increased access to European market for Japanese car manufacturers. European exporters benefit from dramatically reduced Japanese agricultural import tariffs.

Brussels estimates savings for EU firms of 1 billion euros a year in duties.

Overall, EU-Japan EPA removes 97 percent of tariffs that Japan applies to European goods and 99 percent of those applied by the EU.




REFERENCES:
- What is the TPP 11? | CNBC Explains
- Japan-EU Trade: EU signs largest free trade deal with Japan.

11. Urbanisation in Asia

GVCs and urbanization closely linked.

People move from country to city to work in GVC factories, as well urban services sector.

Why migrate from country to city?

Job opportunities, availability of services, bright lights and excitement, or an escape from village life. Some flee hunger and poverty, conflicts, natural disasters and environmental crises like desertification.

Asia, especially China, is in midst of biggest wave of urbanization in history. Show data.

China's urban population:
1953 -- 13%. 1990 -- 26%. 2000 -- 36%. 2010 -- 50%. 2017 -- 59%.

India’s urban population:
2005 -- 29%. 2010 -- 30%. 2017 -- 34%

China and India's urbanisation a long way to go -- Australia's urban population (87%), Japan (92%), US (80%)

Urbanisation boosts developments. People usually move from low value added agricultural work to higher value added manufacturing and services work.

Also city governments better able to provide public services, sanitation, water, education, health.

Urbanisation is good for development.

China's development driven by cheap labor. Unlimited amount of cheap labor coming from countryside.

But over the past decade or so, China's cheap labor drying up. Wages increasing. "Lewis turning point".

Time to shift from cheap labour to smart labour development.

But urbanisation also has downsides -- many people live in slums.

One-third of Asia's urban population lives in slums with poor infrastructure and high poverty.

In China 25% of urban population lives in slums. China 24%.

A slum household lacks one or more of the following: 1. Durable housing of a permanent nature that protects against extreme climate conditions. 2. Sufficient living space which means not more than three people sharing the same room. 3. Easy access to safe water in sufficient amounts at an affordable price. 4. Access to adequate sanitation in the form of a private or public toilet shared by a reasonable number of people. 5. Security of tenure that prevents forced evictions.

Slums often exposed to natural disasters, because badly planned. And many Asian cities are environmental disasters.

The world’s top ten cities in terms of exposed population to coastal flooding are :Mumbai, Guangzhou, Shanghai, Miami, Ho Chi Minh City, Kolkata, Greater New York, Osaka-Kobe, Alexandria and New Orleans.

Out of the world’s 3.3 million premature deaths due to air pollution, 1.4 million occur in China, followed by India with 645,000 and Pakistan with 110,000.

Asia has 20 of the world’s 25 most polluted cities: Patna, India (1); Xingtai, China (3); Baoding, China (4); Delhi, India (5); Shijiazhuang, China (6); Handan, China (7); Peshawar, Pakistan (8); Rawalpindi, Pakistan (9); Hengshui, China (10); Narayanganj, Bangladesh (11); Tangshan, China (13); Ahmedabad, India (14); Langfang, China (15); Chittagong, Bangladesh (16); Dhaka, Bangladesh (18); Gazipur, Bangladesh (20); Karachi, Pakistan (21); Cangzhou, China (22); Tianjin, China (23); Zhengzhou, China (25)

REFERENCES:
- China's rising wages
- 25 most polluted cities in the world
- Where Are The World’s Worst Slums?
- Welcome to China's urban slums
- The Largest Slum Being Wiped Out in Shanghai
- Kevin McCloud: Slumming It (2010) - Ep1 -- 6 minutes.
- The arm's-length flats of Tokyo

12. Asia's innovation cities

In short, Asia has some of the world’s worst cities -- Dhaka, Kolkata, Karachi, Jakarta, Manila.

But Asia also has of the world’s best cities. In our quest for innovation, what Asia needs is “innovation cities”. Because cities are where most innovation takes place.

According to “2thinknow”, there are three preconditions for innovation -- cultural assets, human infrastructure and networked markets.

Cultural assets include arts, culture, sports, music, environment, parks and spaces—they inspire new ideas.

Human infrastructure means universities and businesses which help with the development of ideas.

Networked markets through physical trade or digital communication enable the sharing of ideas with the rest of the world.

According to “2thinknow”, the world’s top ten Innovation Cities are: Tokyo, London, San Francisco, New York, Los Angeles, Singapore, Boston, Toronto, Paris, Sydney.

Beyond the top ten, Asia has a number of other innovation cities:
Seoul (12th), Hong Kong (27th), Shanghai (35th), Beijing (37th), Osaka (45th), Shenzhen (55th), Taipei (60th), Kyoto (64th), Busan (68th), Mumbai (92nd), Kuala Lumpur (99th).

Two interesting cases are Shenzhen and Bengaluru, each of which claim to be Silicon Valleys of their respective countries.



REFERENCES:
- Inside China's Silicon Valley
- Shenzhen: The Silicon Valley of Hardware - Trailer | Future Cities | WIRED
- BBC Future Bengaluru Inside India's Silicon Valley
- India's technology aims to take over the world (Part 2) until 6 minutes

13. Inclusive development -- China's hukou system

China and India excluded 300 millions

China

Under Chairman Mao Zedong, rural citizens prevented from moving to the city through a household registration (hukou) system.

Each Chinese citizen had either a “rural” or “urban” hukou, which was basically an internal passport system. Two classes of citizenship.

When China opened up to global economy in 1980s and 1990s, there was a great need for low-skilled manual labor to work in factories, construction and low-end services.

So Chinese government lifted restrictions on internal migration for rural labor. They became the backbone of China’s manufacturing GVCs .

But rural migrants did not become eligible for regular urban welfare benefits like access to schools, health-care, pensions or public housing.

Often referred to as China’s “floating population”. Even their children who were born and grew up in the city retain a rural hukou.

China’s floating population risen dramatically since early 1980s when it was only 20–30 million. By 2000, it was 130 million, 250 million in 2014. By 2020, could be close to 300 million.

So while 59% live in urban areas, only 39% do so with urban hukous (not very far ahead of India’s urbanization rate of 34%).

China’s floating population some 19% of China’s total population. In manufacturing hubs like Shenzhen and Dongguan, rural migrants represent some 70–80% of the city’s population, while about 40% of Shanghai’s population are rural migrants.

Many urban, middle-class Chinese are very happy with the hukou system.

Hukou system imposes great costs on Chinese economy. Rural migrants in low value-added activities and near-poverty. Social costs. Children “left-behind” in villages, usually staying with their grandparents. Poor education in country schools.

Over the years, much talk of reform of the hukou system, but little action. Costly to provide social services.

Overall, imposes great costs on an economy with ambitions to become a high-tech, high human-capital economy.

REFERENCES:
- China’s Urban Apartheid. Asian Century...on a Knife-edge
- On China: Hukou system
- Singapore Budget 2016: Jurong Innovation District

14. Inclusive development -- India's caste system

India’s Caste System Is Still Alive and Well

India's society was traditionally divided into four castes, namely, Brahmins (priests), Kshatriyas (warriors), Vaishyas (merchants) and Shudras (artisans).

"Dalits" or untouchables were excluded from this classification. But they are the ones who have suffered most.

In reality, thousands of sub-castes, even within the Dalit, who reportedly number around 300 million.

Traditionally, Dalits worked in “impure” occupations involving leatherwork, butchering, removal of rubbish, animal carcasses, and cleaning streets, latrines and sewers.

Discrimination against lower castes is now illegal under India’s constitution.

Since 1950, government has implemented a number of affirmative action initiatives to improve socio-economic conditions, such as college entry quotas and job reservations. Things improving especially in the cities.

Some Dalit success stories include Ram Nath Kovind who was elected as India’s 14th president in July 2017. Dalits are doing much better than before in terms of education, health and poverty. Inter-caste marriage is also increasing.

Despite some waning in India’s caste system, it is still alive and well, even in a big city like New Delhi.

Dalit poverty is twice the national average and discrimination on the ground remains endemic, especially in rural areas where most Indians live. In parts of India, Dalit communities are still denied access to community water sources, denied service by barbers, served tea in separate cups, barred from entering shops, excluded from temples and prevented from taking part in community religious and ceremonial functions.

In 2007, the UN found that “de facto segregation of Dalits persists” and highlighted systematic abuse against Dalits including torture and extrajudicial killings, an “alarming” extent of sexual violence against Dalit women, and caste discrimination in post-tsunami relief.

It continues to divide society, restricting opportunity for large numbers of Indian citizens and preventing the nation from realizing its full human potential.

For India to realize its great potential, it will be necessary to address very seriously its discrimination, prejudice and persecution of lower castes, women, indigenous people and also religious minorities, especially Muslims.



REFERENCES:
- India’s Caste System Is Still Alive and Well. Asian Century...on a Knife-edge
- Is India's Caste System Still Alive?
- 'Why Am I An Untouchable?' | Perspectives

15. Asia's demographic dilemmas

Over short periods of time, many factors affect demographics -- war, peace, natural disasters, government policies etc.

Over the longer term, for much of human history, world population fairly flat. High birth and mortality rates, little change in population.

Then came the industrial revolution. Dramatic increase in world population. Due to demographic transitions.

https://www.google.com/search?q=world+population&source=lnms&tbm=isch&sa=X&ved=0ahUKEwj_lJWZgcXjAhVhF6YKHentDr4Q_AUIESgB&biw=1440&bih=821#imgrc=-XvG6NhSAdTnFM:

First demographic transition -- decline in mortality rates thanks to nutrition and hygiene -- results in increase in youth population.

As youthful population advance to working age creates potential for a demographic dividend, if they are educated and jobs are available.

Second demographic transition -- women's fertility rates decline in tandem with urbanization, better education, improvement in women's rights and prosperity.

Third transition occurs -- demographic bulge advances into retirement age.

This reduces share of the working age population, and represents a "demographic tax".

Share of retired population is increased by higher life expectancy, thanks to improved health care and healthy lifestyles.

Then surprise, surprise, comes a fourth transition!! Many countries see fertility rates fall below the "replacement rate" of 2.1 children per woman. This exacerbates population aging. It ultimately leads to a declining population.

Japan, Korea, China, Hong Kong, Taiwan and Singapore have all gone through these transitions. But they are not the only ones. Luxembourg -- 1.47. Germany -- 1.50. Belgium -- 1.70. UK -- 1.8. US -- 1.8. Japan -- 1.4. China -- 1.62.

They benefited from a demographic dividend. But now suffering from aging populations. This is a "demographic tax", especially since life expectancies are now high.

Why are fertility rates below 2.1?

Many arguments

-- difficult to combine work and family life -- need family-friendly work policies.
-- modern women in more control of their lives.
-- China's leftover women.
-- cost of housing and education.
-- trend of irregular work.
-- decline of arranged marriages.
-- Asian boys are too shy.
-- China's one child policy.

China has now relaxed one-child policy to two-child policy. But fertility rate is not increasing very much.

Some other countries are at an early stage in demographic transitions. India's fertility rate -- 2.3. Indonesia -- 2.4. Philippines -- 2.9.

In all these cases, the working age population is still increasing. They have potential for "demographic dividend".



REFERENCES:
- Solving Asia's demographic dilemmas. Asian Century ... on a Knife-edge. John West
- The Japanese Celibacy Syndrome I The Feed
- China’s leftover women
- Japan: Looking For Love - #AsiaLive -- from 2.30
- What Japanese Think of Herbivore Men | ASIAN BOSS

16. Asia's demographic dilemmas (cont)

Japan has been the world's leading country for demographic transitions. What are its lessons?

Young countries like India must provide education and training, and jobs to reap the demographic dividend. Otherwise, risk of social instability.

Old countries like China, whose working age population has been declining for six years now:

Family-friendly companies. Womenomics. Increasing retirement age. Cut retirement benefits. Immigration. Technology like robotics. Improving productivity. Marriage migration.

Demographic transitions of China and India are very significant.

When Japan's working age population started declining, in 1995, it was already a rich country. In contrast, China is now already old before it gets rich.

Today, China has the world's biggest population, 1.4 billion, a little higher than India's 1.3 billion. India will surpass China as the world’s most populous country around 2027. And by the year 2100, India could be well ahead with a population of 1.450 billion compared with China's 1.065 billion.

Social problem skewed gender birth rates -- China 1.15 boys for 1.00. India 1.12.

Combination of ultra sound, desire for a male heir, desire for a small family.

Connecting Asia's "old" and "young" countries is potential for mutually beneficial migration. Hong Kong and Singapore have accepted large numbers of immigrants. But while skilled workers can become citizens, lower skilled workers usually treated as guest workers.

17. China and India in the Asian Century -- Part 1

Historically, Asia accounted for 60-70% of world population and GDP.

By 1950, Asia's share of world GDP fell to less than 20% of world GDP.

Now, Asia making a comeback -- 30% of world GDP in 2000, 43% of world GDP in 2017. Could be more than 50% by 2050.

So Asia’s economy is growing in importance.

Asian lives are improving.

Asian countries are becoming more politically powerful.

But at this point it is still work-in-progress. Asia has not yet caught up with the West.

Asia is dominated by China and India.

Together about 60% of Asia’s population -- China 1.4 billion and India 1.3 billion.

Together 62% of Asia’s economy

China 44% of Asia’s GDP ($23,301 billion), India 18% ($9,461 billion).

Both fast-growing and successful economies -- China 6.3%, India 7.2% in 2019.

Economic partners. China is India’s third largest trading partner. India is China’s seventh largest trading partner.

While much in common, very different in many ways.

Today, China’s GDP per capita ($16,762) much higher than India’s ($7,189), although as recently as 1991, their GDPs per capita were the same.

India is a democracy. China has an authoritarian regime.

Also political rivals as Asia's leading powers.

Some people say China may seem stronger than India today, but the future will be different.

Other people say China is so far ahead, that there is no comparison.

Some history

Ancient civilisations. But new countries.

Modern China began in 1949 when Chairman Mao Zedong and the Chinese Communist Party won China’s civil war.

Modern India began in 1947 when India achieved independence from the UK. Its first prime minister was Jawaharlal Nehru of the Indian National Congress party.

But both had similar economic systems - closed, socialist economies. Economic independence, as well as political independence, was the priority.

But very inefficient. Widespread poverty.

China's change of economic strategy

In 1978, Deng Xiaoping, Mao’s successor, was deeply worried about China’s future. But he could see the great success of neighbors like Japan, Korea, Taiwan and Hong Kong.

While they all had different strategies, what all had in common was trade, education and infrastructure.

Under Deng’s leadership, in 1978, China began opening up the economy.

Opened to foreign trade and investment through special economic zones. Private enterprise allowed, privatisation of small and medium enterprises.

China did maintain many large state-owned enterprises, in “strategic industries “, and also state-owned banks, which it has to this day. This is part of the Communist Party’s desire to maintain control over the economy and society.

China invested strongly in infrastructure. Infrastructure 46th out of 137.

China allowed students to study overseas.

China also allowed rural residents to migrate to the city, but without the social benefits of official city residents.

Deng was worried about China’s large population. So he implemented the one-child policy.

18. China and India in the Asian Century -- Part 2

India's change of economic strategy

India’s reform process started long after China.
In 1991, India suffered a financial crisis. In response, the Indian government launched a reform process to make the economy more market- and service-oriented, and expanding the role of private and foreign investment.

Specific changes include a reduction in import tariffs, deregulation of markets, reduction of taxes, and greater foreign investment.

This liberalisation has driven the high economic growth recorded in the 1990s and 2000s. The overall direction of liberalisation has since remained the same, irrespective of the ruling party.

China's rapid economic development

After 1978, China enjoyed very rapid economic development.

Enormous foreign investment from Japan, Taiwan and Hong Kong established GVCs for manufacturing -- iPhone and other electronics, clothing and textiles, toys.

GVCs became a big driver of growth.

But GVCs not always socially responsible.

The US is China’s largest trading partner.

The rapid development of China’s GVCs was facilitated by massive migration from the countryside to the city. China’s urban population -- 13% in 1953, 26% in 1990, 36% in 2000, 50% in 2010, 59% in 2017.

But 25% live in slums. Many cities are environmental disasters due to energy consumption. Vulnerable to natural disasters.

And about 300 million are floating population (no hukou).

China’s seemingly endless supply of cheap labor has been evaporating.

So wages have been rising, and some labor-intensive GVC activities have been moving to Vietnam, India and elsewhere.

The structure of the economy has been transformed, as agriculture’s share has fallen from 50% in the year 2000 to 28% in the year 2016, while services has risen from 28 to 44% over the same period.

China’s developed facilitated by education. China ranks high in the PISA education index.

But questions over quality of education for critical thinking and innovation. Also education in rural areas much weaker than in urban areas.

China has a number of the world’s leading universities -- Tsinghua University, Peking University, University of Science and Technology of China.

But many regional universities are of questionable quality.

Overseas study has become another factor driving China’s development. China is the most important source of international students in the US-- 351,000 Chinese students in the US (32.5% of the US’s international students).

China’s development also benefited from a demographic dividend, with rising working age population. But China’s working age population has been declining for about six years, and is dragging down the economy.

The one-child policy reduced fertility. But the recent shift to a two child policy has not resulted in greatly increased fertility because many women prefer one child.

Also resulted in gender bias.

19. China and India in the Asian Century -- Part 3

Chinese lives have improved dramatically.

China’s GDP per capital rose dramatically from $983 in 1990 to $16,762.

Life expectancy improved from 72 years in 2000 to 76 in 2016 (cf Japan 84 and US 78).

Based on a lower middle income poverty line of $3.20 a day, poverty fell from about 38% of the population in 2004 to 7% in 2015 (although based on a poverty line of $5.50 a day, some 27% of Chinese citizens would be living in poverty).

Irregular employment. But vulnerable to natural disasters. And lack of drinking water and toilets.

Middle class is still small.

Gender equality is poor -- 103rd out 140 on global gender gap index.

But income inequality widened dramatically, as the benefits of economic development were shared unequally, and corruption was widespread.

And China’s environment suffered enormously from rapidly from rapid economic development.

Contrary to the predictions of many political scientists, China has not moved in a democratic direction. Despite the initial hopes, social media and the Internet does not seem to have become a path to democracy.

China is an authoritarian regime, ranked 130 out of 167 in the EIU’s Democracy index. 82 out of 126 in rule of law index by World Justice Project. 87th out of 180 in Corruption Perceptions Index. Freedom of Press poor -- 186th in world. Bottom of list 65 countries for Freedom of Internet.

A “social credit system” is now being implemented a system of social control.

India's rapid economic development

Since 1991, India also enjoyed rapid economic growth (but less than China), thanks to the opening of the economy to international trade and investment, and other measures.

India has achieved great success in GVCs for business process outsourcing services like call centres, finance, tele-marketing, software development. Thanks to English language capacity and IT skills.

India has achieved much less success in attracting GVCs for manufacturing.

In more recent times India has managed to attract some manufacturing GVCs. Some iPhones are now assembled in India.

The US is India leading trading partner.

India has also become a world leader in the cinema industry (second to Hollywood), and international cricket.

India’s education and health conditions are weaker than China. Its infrastructure is also less good.

India’s universities rank well below China’s, with the highest ranked ones being the Indian Institute of Science, Indian Institute of Technology Indore, Indian Institute of Technology Bombay.

But India’s participation in GVCs for services have benefited from India’s strong education for engineering.
It has also benefited for Indian students undertaking international studies. India is the second most important source of international students in the US with 186, 000 (17.3% of the US’s international students).

India’s large contingent of international students have boosted participation GVCs, notably through their business connections in Silicon Valley.

20. China and India in the Asian Century -- Part 4

India is benefiting from a rising working age population, which will only peak around 2050.

This provides a good opportunity for a demographic dividend.

But India needs to provide education and jobs for this youthful population.

The structure of the economy has been transformed, as agriculture’s share has fallen from 60% in the year 2000 to 44% in the year 2018, while services has risen from 24 to 31% over the same period.

Indian lives have improved dramatically. GDP per capita rose from $1169 in 1990 to $7,189 in 2017.

Life expectancy rose from 63 years in 2000 to 69 in 2016.

Based on a lower middle income poverty line of $3.20 a day, poverty fell from about 76% of the population in 2004 to 50% in 2015 (although based on a poverty line of $5.50 a day, some 82% of Indian citizens would be living in poverty).

Irregular employment. Natural disasters. Lack of drinking water and toilets.

But income inequality has increased sharply. And middle class is still small.

Equality of opportunity for women is poor. Global gender gap index 108th.

Caste system is a problem.

India’s democratic credentials are strong. It is ranked 41st out of 167 in EIU’s Democracy Index. It is classed a “flawed democracy”. No Asian economy is a “full democracy”.
The only Asian economies that rank higher are -- South Korea (21st), Japan (22nd), and Taiwan (32nd). It ranks well ahead of Malaysia (52nd) and the Philippines (53th).

India ranks less well on other governance indicators.
(i) 68 out of 126 on rule of law index. (ii) 78th out of 180 in Corruption Perceptions Index. (iii) 83rd out 198 in Freedom of Press. (iv) 31 of 65 Freedom of Internet

China -- recent trends and issues

The global financial crisis of 2008 was a big shock to China. It feared that the economy would suffer enormously through the impact on GVCs.

Chinese government launched a big stimulus to economy. Ever since stimulating the economy. Now total debt of Chinese economy has doubled to more than 300 % of GDP.

As China’s cheap labor is being exhausted, wages have increased.
GVCs are being relocated to countries like Vietnam and India.
China’s GVCs threatened by robotics and reshoring.

China needs to switch from copycat to innovation policies.

Risk of middle income trap.

What efforts are China making?

-- Investing in education. Sending students overseas. Investing in R&D. Learning from GVC participation. Hiring "old boys" from Japanese and Korean companies.

China has great success in the technology field, especially in the social media space. Social media companies offer social media services, and other services like financial services.

China’s social media companies are not only copycats. They have been able to create new products and services, drawing on the best of Western companies.

And China has several “innovation cities” like Shenzen.

21. China and India in the Asian Century -- Part 5

But China’s Internet and social media world remains substantially isolated from the rest of the world, and subject to censorship and propaganda dissemination.

China’s social media is being used by the “social credit” system that is being developed to control society.

China has also used other practices to upgrade its GVCs like purchasing Western technology companies, forced technology transfer, intellectual property theft and subsidising Chinese companies.

This has led China into a trade war with Donald Trump -- as well as technology competition/war focussing on Huawei.

More than a trade war. Great power technology competition:
-- China wants to dominate new emerging technologies -- AI, advanced robotics, semi-conductors, 5G etc.
-- China wants to be technologically independent from US.
-- US wants to maintain global technological leadership.

But China needs to open up its economy to international competition in order to improve productivity.

The Trans Pacific Partnership is a good model, as is Japan’s free trade agreement with Europe.

One consequence of one-child policy is that China now has a rapidly aging population. China’s working age population has been declining for some six years now, dragging down the economy.

Although China has now switched to a two-child policy, child births still remain low.

There is much that could be done address the aging population issue, drawing inspiration from Japan — increase retirement age, womenomics, selective immigration, and economic reform to improve productivity. Reforming the hukou system would improve the economy and social justice.

Xi Jinping became leader of China is 2012/13. He is worried about the future of the Communist Party.

Protectionist economic policies to become a headquarters economy, and reduce technological dependence on US.

Tackling corruption, but political enemies too.

Trying clean up environment.

Stimulating economy to avoid unemployment and social instability.
International leadership through Asian Infrastructure Investment Bank, and Belt and Road Initiative.

Assertive behaviour towards to US, Japan and Taiwan to show it is the boss of Asia.

India -- recent trends and issues

India has maintained economic growth around 6-7% for a number of recent years. It has been outgrowing China for several years.
India had a change in government in 2014. BJP, under Narendra Modi. Implementing positive reforms.

Risk of middle income trap.

India is now attracting manufacturing GVCs.
India’s IT companies are now becoming world leaders.
Indian nationals are leaders of US companies like Microsoft, Google, Amazon.

And India has “innovation cities” like Bengaluru. And India practices frugal innovation!

India also needs to open up its economy to international competition in order to improve productivity.

The Trans Pacific Partnership is a good model, as is Japan’s free trade agreement with Europe.

22. China and India in the Asian Century -- part 6

India’s population will overtake China’s by the year 2027, and rise to 1.5 billion by 2100, compared with China’s 1.1 billion.

India has the potential for a large demographic dividend, if it could provide education and jobs for its youth.

India’s total GDP should overtake China’s in the second half of the century.


Great power transition in the Indo-Pacific

The Indo-Pacific has been undergoing major great power transitions.

Following World War 2, the US became the great power of the Indo-Pacific.

But now China has made it clear that it would like to be the great power of the region.

By some measures, today, its total GDP would already be bigger than the US.

China is still way behind in terms of GDP per capita, and economic, business and technological sophistication.

But China has market power, financial power and military power on its side.

Size matters!

But China’s soft power is weak -- see Hong Kong and Taiwan.

The US is still active in Asia. But it seems incoherent and unreliable, and less interested. Also, its soft power is declining. At the same time, the US is Asianising.

It is possible that in the second half of the 21st century that we will see another transition, as India could overtake China.

Is great power competition a problem?

If it leads to conflict, yes.

But if it remains just healthy competition, it can be positive. The US mission to the moon, some 50 years ago, was the product of competition between the US and the USSR.

Summary:

China is ahead of India now. But China faces many challenges, especially demographic.

India has the opportunity of a demographic dividend. It could overtake China. It is also a democracy, which may be a source of stability.