We returned to the US last night. American East Coast weather was the same as what we had left in Hong Kong.
For our final trip report, let’s start by speaking about infrastructure. We talked about the Shenzhen subway expansion that is underway. It is scheduled to be completed in 2016. Here is a photo of the work underway in downtown Shenzhen:
This is a photo from our hotel room. They started work on most days around 5am, and worked 7 days a week. One morning, the pile driver started at 4:30am. We were reliably told that starting that early is illegal. Also, when the temperature reaches 40°C, the work is supposed to stop.
In Hong Kong, the Airport Express (AE) is a dedicated subway from downtown Hong Kong (HK) to the airport. We had a free shuttle from our hotel to the AE. A one-way ticket costs HK$100 (US$ 12.90) and the trip takes 24 minutes. You can check your bags at your airline counter in the subway before boarding. Here is what the cars look like:
A taxi takes about an hour. If only all the subways around the world could learn from Hong Kong, it would make traveling easier. The train operator is MTR, 77% owned by the government, meaning it is ultimately owned by Beijing, though Hong Kong retains its own government and legal system. According to the WSJ, MTR is public, and made US$548 million in the first half of 2013. It runs lines in Beijing, Shenzhen and Hangzhou, as well as in Melbourne, London and Stockholm.
Then there is the airport. The Wrongologist had visited the old Kai-Tak airport many times. There was one runway that jutted out into Victoria Harbor. Landings at Kai-Tak were dramatic, you could look into the windows of apartment buildings on the final approach, and a few planes took an unexpected bath when they missed the runway. At the northern end of the runway, six story buildings were just across the road. The other three sides of the runway were surrounded by mountains and Victoria Harbor. Kai-Tak closed in 1998 and was replaced by the Hong Kong International Airport:
The new airport is built on a large artificial island formed by levelling Chek Lap Kok Island, and adding land reclaimed from the bay. Even today, there is a significant dredging operation underway to add additional space to what is a very large facility. The airport is the world’s busiest cargo gateway, with Memphis (FedEx) in 2nd place.
Compare these facilities with international arrivals/departures at New York, LA or San Francisco airports. Please don’t bother comparing the subway to the airport options at our major city airports with the HK Airport Express.
Second, let’s talk Chinese consumerism. It is staggering: One of the most prevalent things you see in Shenzhen and in HK are people using smartphones. Even middle-aged professionals use their smartphones at least as much as American teens, and possibly more. They walk into people while intently viewing the phone screen, often while talking via the speaker. The Android large screen format appears to be the market leader over the iPhone in Shenzhen and HK. Expatriates in HK seem to favor the iPhone, but Chinese favor the Android system, with HTC handsets seeming to be most popular. Despite that, the Apple Store in Central HK was extremely popular:
It is two floors and was packed all day on Sunday with Chinese shoppers. Another very interesting aspect of Chinese consumerism is the popularity of foreign cars. Here is an Audi pop-up showroom in the Harbour Centre in Tsim Sha Tsui. Note that most of the people checking out the cars are Chinese. We even saw a 3-generation Chinese family picking out their seats in an Audi 8:
Even with all their wealth, there are issues. The Financial Times reported on Monday that with HK’s elderly set to be 1/3 of the territory’s population by 2050, the Territory wants to export some of its elderly residents to mainland China:
The Hong Kong government needs to provide homes for almost 30,000 elderly people on their waiting list for subsidized residential care, but property values in HK make finding that space very difficult.
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Hong Kong also has one of the highest elder poverty rates.
HK is looking to neighboring Guangdong province (home of Shenzhen) to provide the living space. The average old person is waiting 30 months for a place in a residential home, so thousands of elderly people die before they ever get one.
The shortage of placements for elder care is not unique to Hong Kong. Mainland China must consider how it cares for its elderly, which will be almost 30% of China’s population by 2050.
In 2013, the Wrongologist reported on China’s demographic danger zone:
The implications for China’s social safety net spending are obvious. Demographics will be a determining factor in China’s ability to continue the economic contract that keeps civil liberties in check while growing a huge middle class.
The one-child policy will reduce China’s labor force by 67 million people by 2030, equivalent to the population of France. While they have moved away from the policy, the economic impact is already baked in:
A decade after that, China will face a labor shortage of almost 140 million workers, surely the biggest job crunch the world has ever seen. That will have a big impact on wage inflation.
So, where is China heading? China is committed to continuing their significant annual GDP growth. And in order to grow:
- They need to solve their coming worker shortage
- They need more electric power
- To fuel those plants, they need more coal and more water, and both are scarce resources in China
- To feed their growing urban middle class, they need more water to meet the demand for more meat and dairy
- They need to enhance the safety net for the world’s largest elderly population. It will be 300 million (the current size of the US) by 2025
How they solve these simultaneous equations will determine what kind of society they will become and what level of global power they will wield in this Century.
One thing is sure, they have an experienced and capable technocrat class that has managed an amazing transformation of their economy in the past 20 years, something that would be unimaginable in the US.
So, we should expect to see at least one more cycle of high Chinese GDP growth before their aging crunch and concomitant inflation of wages and social costs causes lower growth and more discontent than exists currently.
Today, the Party no longer promises equality; it promises prosperity, pride and national strength. But what happens if there is a loss of the optimism that now fuels their citizens’ current high level of aspiration?
The working relationship between Chinese aspiration and authoritarianism will be tested if there is low GDP growth for an extended period. How will discontent be dealt with? How will the population react if there is a sustained loss of aspiration and optimism, if and when GDP growth slows?
The Internet has created a fugitive political class in China. Things once secret are now known, people are now connected where they used to be alone.
Will any coming political change be evolutionary or revolutionary?
Food for thought. Make mine bean curd.
China has to solve the problem of where to get water, where to put sewage. Unlike the west, where infrastructure evolved completely (from small town to city, with the rural south being last) China has vast areas that cannot provide for what we would consider basic needs. India is even worse. Hep B is endemic.
@ Terry: the Hep B problem is endemic. A collateral problem in China is that Hep B patients are discriminated against in the job market. Until recently when the practice was outlawed, Hep B was sufficient reason to deny a job application.