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Asia-Pacific cities in Tomorrow's World: An untapped demographic dividend

Asia-Pacific cities in Tomorrow's World

In the final installment of our Asia-Pacific cities research series, we discuss the favourable demographic dividend that we believe will continue to place Asian cities at the forefront of Tomorrow’s World global cities landscape.

While many Asian countries are overshadowed by an aging and declining total and working-age population, many gateway Asian cities continue to be buoyed by rising urbanisation, positive net migration, and a more youthful and productive labour force. There is still an untapped demographic dividend from investing in Asian cities. The populations of many gateway Asian cities are still growing, mainly through urbanisation and intramigration, despite falling national averages.

Cities are growing faster and getting bigger

Despite the less-than-favourable national demographic trends, many Asian cities will continue to yield net positive demographic dividends in the coming years. This is unsurprising, as workers typically move into cities offering better job prospects, wages and a higher quality of living. Workers move within countries, between states and into more vibrant cities. Some will migrate and others will commute into the cities for work. Consequently, these gateway or global cities continue to expand geographical boundaries, output and population size, and become even more interconnected and wealthy. For example, the Tokyo population grew by close to 1% from 2001-2015, even while the general population stagnated and started to decline from 2011 (Fig.1). Similarly, the population of major Australian cities has also consistently outstripped the national average in relative terms. While overall population growth has stayed stagnant in China since the 1980s due to the one-child policy, the registered population of major cities within the key Pearl River Delta, Yangtze River Delta and Bohai regions has grown by more than five times the national average, mainly due to rapid urbanisation and the expansion of geographical boundaries. In many regional cities, a variation exists between the resident and floating population. In Singapore, around 250,000 people travel back and forth to Malaysia daily. Tokyo, another major commuter city, see close to 2.4 million people travel into the city for work each day, representing c.20% of the resident population. Used by roughly 3.6 million commuters daily, Tokyo’s Shinjuku station is the world’s busiest passenger station. Many Asian cities are among the biggest in population size globally. A high population provides a large and easily accessible pool of labour, a more productive capacity, and a large potential domestic market for consumer goods, entrepreneurial opportunity and overall economic growth.

Fig.1: Stronger case for Tokyo than Japan

Source: Oxford Economics, 2017

Many of the world’s most populated cities in the future will reside in China; there are already 14 Chinese cities with a population of over five million people, and more than 160 cities with one million people. Many of the world’s biggest metropoles will also reside in China in the future, as we see the emergence of new cities centred around some of the largest existing urban centres today such as Guangzhou, Shenzhen and Hong Kong in the south, Beijing, Tianjin and Hebei in the North, Chengdu and Chongqing in the West, Wuhan in the centre, and Shanghai, Hangzhou and Suzhou in the South East. It is estimated that the top 225 Chinese cities will contribute about 30% of global growth by 2025 (McKinsey), with Tokyo, Seoul, Jakarta and Bangkok among the other big Asian megacities.

More stable fertility rate

Based on the demographic transition theory, which suggests that human population transitions from high to low birth and mortality rates as countries industrialise and modernise once the transition is complete, the total fertility rate does not change much. Some developed Asian economies are likely to see a stabilisation in demographics in the longer term even, if the total fertility rate may never reach the replacement level of 2.1. In this regard, the picture in Japan is improving. Since 2005, when the fertility rate bottomed out at 1.26 births per woman, it has been slowly but steadily growing to 1.42 in 2014, which is better than South Korea, Singapore (both 1.19), Hong Kong and Germany. The United Nations estimates that this trend will continue and Japan will be producing 1.72 babies per woman in 30 years, although it is still projected to lose about 15% of its total population by 2050 (Fig.2).

The world’s urban landscape is changing and Asia will be at the epicentre of this decisive shift in the coming decades. Despite the rather uninspiring headline of demographic trend, there are lots of strong mitigants to underpin the prospects for many Asian economies and cities. Many of Tomorrow’s World cities will reside in Asia, and are expected to become the largest (by economic and population size), wealthiest, most interconnected and resilient cities in the world, underpinned by the shift in economic influence from West to East. Rapid urbanisation will translate into increasing household and wealth growth, which in turn should strengthen consumption power for housing and household durables. Many of the future's urban economic success stories will arise out of Asia-Pacific cities and global institutional investors will do well to ride the growth of these megacities.

Fig.2: Fertility rate tells a stronger story

Source: Oxford Economics, 2017

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