Throughout most of the twentieth century, the most dynamic East Asian cities were in Japan, Korea, and Taiwan. Tokyo, Japan, is the world’s largest urban area, with 34 million inhabitants. The vast Kobe–Osaka–Kyoto area in Japan has 18 million (shown in the Figure 9.20 map). Korea is home to Seoul, East Asia’s second-largest urban area, at 25 million people, and the fourth-largest urban economy in the world (after Tokyo, New York, and Los Angeles). The metropolitan area of Taiwan’s capital of Taipei is home to almost 7 million and has the second-highest per capita income in East Asia ($48,000) after Tokyo ($65,000).

However, for the last 30 years, the strongest urban growth in East Asia, and indeed in the entire world, has been in China. In 2012, nineteen of the 20 fastest-growing cities in the world, as measured by increase in GDP per capita, were in China. Despite the rapid growth, urbanites still represent only 53 percent of China’s total population, so more growth there is likely, whereas in every other country in the region—even North Korea—the majority of the population has been urban for at least two decades. Most East Asian cities are extremely crowded, and future growth poses a challenge for planners and residents (see Figure 9.20A, B).

Spatial Disparities China’s focus on export-oriented manufacturing based in urban areas has led to rural areas lagging behind cities in access to jobs and income, education, and medical care. The map in Figure 9.16 depicts the problem. GDP per capita is significantly lower in China’s interior provinces than it is in coastal provinces, and within each province there is a disparity between rural and urban places, shown in pie diagrams on the map of rural versus urban incomes. Notice that rural–urban GDP disparities, while still significant, are less extreme in northeastern and coastal provinces than in interior and western provinces. Similar rural-to-urban disparity patterns are found in all other countries in East Asia, including North Korea.

206. OLD BEIJING MAKING WAY FOR MODERN DEVELOPMENT

219. SOME CHINESE FEAR PRIVATE PROPERTY LAW WILL COST THEM THEIR HOMES

International Trade and Special Economic Zones When China initiated economic reforms in the 1980s, many people were wary of the disruption that could result from abruptly opening the economy to international trade. To ease the transition, China first selected 5 coastal cities as sites where foreign technology and management could be imported to China and free trade established. These special economic zones (SEZs) (Figure 9.21) now operate like EPZs found in other world regions (see Chapter 3). In the late 1990s, the program was expanded to 32 other cities, many of them in the interior. These new locations were designated economic and technology development zones (ETDZs). Like SEZs, the ETDZs provide footholds for international investors and multinational companies eager to establish operations in the country.

This program was successful. Today the SEZs and ETDZs are China’s greatest growth poles, meaning that their development, like a magnet, is drawing yet more investment and migration. The first coastal SEZs were spectacularly successful. In just 25 years, many coastal cities, including Dongguan (the city Li Xia migrated to in the vignette that opens this chapter), grew from medium-sized towns or even villages into some of the largest urban areas in the world. Foreign direct investment remains concentrated on the eastern coast, which accounts for 94 percent of China’s exports. As shown in Figure 9.16, GDP per capita (PPP) rates remain noticeably higher on the eastern coast relative to China’s interior.

Recently, ETDZs in the interior have had higher rates of growth than those on the coast. One reason for this is that China spends 9 percent of its GDP on transportation improvements (by comparison, the United States spends 2 to 3 percent), which has made central and western China more accessible. New highways and railroads may eventually enable the interior to catch up with the economic development of the coast. The world’s longest high-speed rail now takes a traveler from Beijing to southern China in 10 hours rather than 22, and it is routed through central China, not along the coast.

Urban Labor Shortages, Hukou System Reform, and Economic Transitions In 2013, China reached a major milestone that every rapidly developing country eventually reaches: its booming service sector now creates more jobs than its industrial sector. Many of these jobs offer much better pay and working conditions than industrial jobs do, which is creating a serious shortage of workers in the industrial sector.

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Until recently, China’s spectacular urban growth was based on hundreds of millions of new urban migrants who were willing to put up with adverse conditions to earn a little cash. Fewer migrants are now willing to work in such jobs, creating periodic labor shortages. Some factory owners have been forced to offer higher pay, better working conditions, and shorter workdays or more time off. The government is also trying to offset labor shortages by making changes to the hukou system that will gradually give formal urban residency status to the vast floating population of people who have migrated illegally.

The extra costs these changes impose—especially the higher wages and the improved access to subsidized housing, education, and health care for millions of urban migrants—mean that China is no longer the cheapest place to manufacture products. Some factories have already moved to Vietnam, Bangladesh, and countries in Africa with even cheaper labor.

Some industrial employers hope that enough new migrants will be drawn to the cities by the hukou reforms that the labor shortages will disappear. The experiences of other countries, though, suggests that China’s urban service sector will continue to attract more and more migrants. The rapid growth of the service sector is being fueled by the purchasing power and consumption of China’s increasingly wealthy urban populations.

These changes in China’s labor market added a new twist to the story of Li Xia, whom we met in the vignette that opens this chapter.

Hong Kong, which was a British possession from the end of the first Opium War in 1842 until 1997, has long had a special role as a link to the global economy for China. Before 1997, some 60 percent of foreign investment in China was funneled through Hong Kong, and since then Hong Kong has remained the financial hub for China’s booming southeastern coast (Figure 9.22).

Hong Kong is one of the most densely populated cities in the world; its 7.2 million people are packed into only 23 square miles (60 square kilometers), an area roughly the same size as the borough of Manhattan in New York City but with four times as many people. Hong Kong is also one of the richest cities in the world: its per capita GNI (adjusted for PPP) in 2013 was similar to that of the United States, at U.S.$53,050. Hong Kong also has the world’s third-largest container port (after those of Shanghai and Singapore).

In July 1997, Britain’s 99-year lease of Hong Kong ran out and Hong Kong became a special administrative region (SAR) of China. Hong Kong still operates under a political and legal system established by the British that allows for more political freedom. Even so, over a million residents, many of them quite wealthy, left before China took over in 1997, worried that their fortunes and freedoms would diminish. China allows more political freedom in Hong Kong, in part because of the island’s important role as a link to global trade. Given the obvious success of many cities along China’s southeastern coast, from Macao to Shanghai, Hong Kong will probably continue to be a financial hub as this very rapidly growing region develops. 220. AS HONG KONG ENTERS SECOND DECADE UNDER CHINA, CITY PONDERS PLACE IN ECONOMIC GIANT

Shanghai’s Latest Transformation Shanghai has historically been a trendsetting city. Its opening to Western trade in the early nineteenth century spawned a period of phenomenal economic growth and cultural development that led to it being called the “Paris of the East.” As a result of China’s recent reentry into the global economy, Shanghai is undergoing another boom, which has enriched some people and dislocated others (see Figure 9.20A). On average, residents of Shanghai are now as affluent as people in Central European countries like Poland and Hungary, and if current growth trends continue, their wealth will soon be on par with that of residents of Portugal or Slovenia. Shanghai today has the world’s busiest cargo port, and the region around the city is now responsible for as much as a quarter of China’s GDP.

In less than a decade, the city’s urban landscape has been remade by the construction of more than a thousand business and residential skyscrapers; subway lines and stations; highway overpasses; bridges; and tunnels. Shanghai’s shopping district on Nanjing Road is as imposing as any such district around the world. For hundreds of miles into the countryside, suburban development linked to Shanghai’s economic boom is gobbling up farmland, and displaced farmers have rioted.

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Pudong, the city’s new financial center, sits across the Huangpu River from the Bund—Shanghai’s famous, elegant row of big brownstone buildings that served as the financial capital of China until half a century ago. Previously, Pudong was a maze of dirt paths and sprawling neighborhoods of simple, tile-roofed houses, but its former residents were pushed out to make way for soaring high-rises. New construction is restricted in the historic section of the Bund, which is another reason why the centrality of Pudong has been attractive as a new business center. The Oriental Pearl Tower has become a visual symbol for the economic vitality of Pudong, the city of Shanghai, and all of China.