Asean
Realising China’s urbanisation dream
Author: Wang Xiaolu, NERI
China is experiencing rapid urbanisation. It is the main engine of economic growth in contemporary China, although it is facing some severe challenges. A major problem is that the majority of the 234 million rural migrants in urban areas have not obtained urban permanent resident status, blocked by the hukou or urban household registration system. The newly released urbanisation blueprint by the Central Committee of the CPC and the State Council, National New-Type Urbanization Plan 2014-2020, announced the acceleration of the process of turning rural migrants into urban citizens.
The plan anticipates that by 2020 urban residents will make up 60 per cent of the total population, compared to 53.7 per cent in 2013 — while urban permanent residents will comprise 45 per cent, compared to 36 per cent in 2013. It is promised that rural migrants in urban areas will be covered by social security and entitled to equal opportunities in education, medication, housing and other public services. Other targets include improved city cluster layouts, and better urban planning, urban administration and urban environment, economising land resources, and protecting urban historical and cultural heritages.
This new style of urbanisation is intended to focus on the needs of the population rather than merely focussing on more building. With full implementation of the plan, a healthy urbanisation trajectory can be expected, although some targets — such as the rate of urban permanent residents — seem somewhat conservative. This may reflect strong resistance to the reforms.
The plan is a step in the right direction. The key issues that remain to be dealt with lie in the implementation of the plan. As the document correctly notes, existing problems in urbanisation are the result of bad institutional arrangements, including defects of the existing hukou system, the land management system, social security systems, budgetary and taxation systems, and government administration systems. Without a holistic reform of these systems, the targets set by the Plan may not be achieved.
The most pressing problem is that of government administration systems. Under the current system, governments at different administrative levels often focus exclusively on short-run economic growth and investment projects to the detriment of public services and social development. While officials may complain that they don’t have enough money to meet social targets, spending on investment projects and government consumption is often unnecessary or inefficient.
According to some studies, the social cost of one migrant worker officially becoming an urban permanent resident is 50,000–100,000 yuan. It is often argued that the total cost borne by the government if all rural migrants were officially urbanised would exceed 20 trillion yuan — far beyond what the government can pay.
But this argument exaggerates the cost to the government. Firstly, it represents an aggregate, not an annual cost. Secondly, it includes additional spending on urban infrastructure that the government already pays for, and should not be double counted. Thirdly, a quarter to a third of rural migrants are already covered by urban social security and public service systems. And fourthly, the cost of workers to join the social security system will be paid by both themselves and their employers, not the government. Potential government top-ups would only comprise a small proportion of these costs.
Once this has been accounted for, and dividing the total government cost by 20 years, the annual cost to the government would be only 0.3 to 0.4 trillion yuan and represent between 3 to 4 per cent of total government revenue in 2013. This is much less than the fiscal stimulus carried out during the global financial crisis to promote economic growth, which cost 4 trillion yuan to the central government and more than 10 trillion yuan to local governments. In 2012, government investment from budgetary funds totalled 1.9 trillion.
Finding the money in the budget for urbanisation and social development is not a problem, as long as the requisite reforms to the budgetary process are made. Other necessary steps are reforms to the social security system, and land management systems to allow market mechanisms to play the decisive role in allocating land resources. All these reforms were stated by both the Plan and the Third Plenary Session document of the 18th Central Committee of the CPC. The hard part is the implementation.
Wang Xiaolu is Deputy Director and Senior Fellow at the National Economic Research Institute, China Reform Foundation, Beijing.
Continued here:
Realising China’s urbanisation dream
Asean
ASEAN weathering the COVID-19 typhoon
Author: Sandra Seno-Alday, Sydney University
The roughly 20 typhoons that hit Southeast Asia each year pale in comparison to the impact on the region of COVID-19 — a storm of a very different sort striking not just Southeast Asia but the world.
Just how badly is the COVID-19 typhoon thrashing the region? And what might the post-crisis recovery and reconstruction look like? To answer these questions, it is necessary to investigate the strengths and vulnerabilities of Southeast Asia’s pre-COVID-19 economic infrastructure.
Understanding the structure of the region’s economic house requires going back to 1967, when Southeast Asian countries decided to pledge friendship to one another under the ASEAN framework. While other integrated regions such as NAFTA and the European Union have aggressively broken down trade barriers and significantly boosted intra-regional trade, ASEAN regional economic integration has chugged along slower.
Southeast Asian countries have not viewed trade between each other as a top priority. The trade agreements in the region have been forged around suggestions for ASEAN countries to lower tariffs on intra-regional trade to within a certain range and across limited industries. This has lowered but not eliminated barriers to intra-regional trade. Consequently, a relatively significant share of Southeast Asian trade is with countries outside the region. This active extra-regional engagement has resulted in ASEAN countries’ successful integration into global value chain networks.
A historically outward-facing region, in 2010 around 75 per cent of Southeast Asian commodity imports and exports came from countries outside of ASEAN. This share of extra-regional trade nudged closer to 80 per cent in 2018. This indicates that ASEAN’s global value chain network embeddedness has deepened over time.
Around 40 per cent of ASEAN’s extra-regional trade is with the rest of Asia. From 2010 to 2018 Southeast Asian countries forged major trade relationships with four Asian countries: China, Japan, South Korea and India. Outside Asia, the United States is the region’s major trading partner. ASEAN’s trade focus on Asia’s largest markets is not surprising. Countries tend to establish trade relationships with large, geographically close, and culturally similar markets.
Fostering deep relationships with a few large markets, however, is a double-edged sword. While it has allowed ASEAN to benefit from integration in global value chains, it has also resulted in increased vulnerability to the shocks affecting its network connections.
ASEAN’s participation in global value chains has allowed it to transition from a net regional importer in 1990 to a net regional exporter in 2018. But the region’s deep embeddedness in a small and tightly-coupled network cluster of extra-regional global value chain partners has exposed it to disruption to any and all of its external partners. By contrast, ASEAN’s intra-regional trade network structure is much more loosely-coupled: a consequence of persistent intra-regional trade barriers and thus lower intra-regional trade intensity.
In the pre-COVID-19 period, ASEAN built for itself an economic house held up by just five extra-regional markets, while doing less to expand and diversify its intra-regional trade network. The data shows that ASEAN trade became increasingly concentrated in these few external markets between 2010 and 2018.
This dependence on a handful of markets does not bode well for risk and crisis management. All of the region’s major trading partners have been significantly affected by COVID-19 and this in turn is blowing the ASEAN economic house down.
What are the ways forward? The immediate task at hand is to get a better picture of the region’s position in global value chain networks and to get on top of managing its network risk exposure. Already there are red flags around the region’s food security arising from its position in food value chains. It is critical to look for ways to introduce flexibility into existing supply chains for greater agility in responding to crises.
It is also an opportune time for ASEAN to harness the technology transfer gains of global value chain participation and invest in innovation-driven diversification of products and markets. The region’s embeddedness in global value chain networks certainly places it in a strong position to readily access large export markets not just in Asia but also Europe and the Americas.
Over the longer term, ASEAN is faced with the question of whether it should seriously look…
Markets
Tiger Trade Launches SGX Trading, Meeting Demand from Asian Investors
Access to the Singapore Exchange (SGX) adds to Tiger Brokers’ current menu of stock exchanges, such as the New York Stock Exchange (NYSE) and the Nasdaq Stock Market (NASDAQ), the world’s two largest stock exchanges, as well as the Hong Kong Stock Exchange (HKEX).
SINGAPORE (ACN Newswire) – Tiger Trade, a one-stop mobile and online trading application by Tiger Brokers, has launched access to the Singapore Exchange (SGX).
(more…)Asean
Can Asia maintain growth with an ever ageing population ?
To boost productivity in the future, Asian governments will have to implement well-targeted structural reforms today.
Asia has been the world champion of economic growth for decades, and this year will be no exception. According to the latest International Monetary Fund Regional Economic Outlook(REO), the Asia-Pacific region’s GDP is projected to increase by 5.5% in 2017 and 5.4% in 2018. (more…)
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