The power of Asia's cities
Andrew Sheng says change at local level will create its own set of social and ecological challenges
Two years ago, the broad consensus was that global rebalancing was in the direction of the East. But with capital now flowing back to the US, as the Federal Reserve begins talking about tapering its programme of quantitative easing, and with Asian markets and currencies retreating across the board, there is doubt whether the Asian growth story is still accurate.
The global rebalancing story was basically about demographics - an ageing advanced society competing against younger emerging markets. But the story of the rise of the East is also about the trend of urbanisation - the clustering effect of Asians into cities that will generate higher incomes and new sources of growth. This story remains unchanged.
Cities don’t have the baggage of nationalism, and co-operation between them can benefit all
The 2011 McKinsey Global Institute study on "Urban world: Mapping the economic power of cities" estimated that 1.5 billion people living in 600 cities accounted for more than half of global gross domestic product in 2007. But by 2025, the top 600 cities will have one quarter of the global population and nearly 60 per cent of global GDP. As the world urbanises, income and wealth will concentrate in cities.
As one sociologist has argued, "density is destiny". The density of city population brings diversity, competition, new ideas, culture, art, science and commerce. Cities stand at the heart of change in the growth order - the economic, social, ecological and global order.
Asian cities will comprise a significant number of the top 600 cities. Of the 136 new cities that enter the top 600, all will come from the emerging markets, of which China will account for 100 and India 13.
The interesting part of this story is that economic density today is concentrated in the advanced economies plus the emerging country megacities (with populations of over 10 million), which together account for 70 per cent of world GDP. But these regions and megacities will only account for one third of global growth to 2025, whereas 577 of the top 600 cities will account for half of global growth to 2025.
In other words, economic power will shift towards the new global cities in Asia, because the income levels of these cities will rise due to migration from rural areas. Immigration brings diversity and competition, and generates vigour, innovation and entrepreneurship. These cities will require huge amounts of investment in infrastructure and housing.
