African Lions, Vietnam Loves Trade & The Straddle Bus

In 1977, when International Need to Know was but a mere lad, we attended the first Seattle Mariners baseball game ever in the concrete confines of the Kingdome. The Mariners lost that night and for much of the last 40 years have continued to lose in ways both conventional and confounding. So we are unaccustomed to the flurry of success in the first fourth of this season, including the barrage of runs last night and the walk-off home run the night before. But even adrift in a sea of victory, we still have enough wits about us to anticipate the roar of African Lions, chuckle at Donald Trump and Bernie Sanders’ worst nightmare and gaze with wonder at the latest innovation coming out of China. It’s this week’s International Need to Know, the weekly newsletter that even while looking in its basement for stray millennials, provides key information about the world for people of all ages.

Without further ado, here’s what you need to know.

African Lions

We recently wondered in this space about Africa becoming a prime location for textiles.  Africa is generally ignored in the news unless the subject is disease, corruption or war.  And yet, Africa is large and diverse. And it’s been growing. After East Asia, it is the second-fastest growing economic region in the world.  On current trends, Africa will grow 3.7% this year. The African Development Bank tells us that growth rates in Africa rose on average by 2% during the 1980-90s but by 5% in 2001-14.The growth rate has slowed a bit in the last year and a half due to commodity-reliant African countries being hit by the fall in commodity prices, but the growth rate is still above other regions. The growth is highest in East Africa followed by West Africa and Central Africa. We all know about the urbanization taking place in China and other parts of Asia, but the same thing is happening in Africa, only faster (but so far without the robust infrastructure). Since 1995, the population living in cities in Africa has doubled. African countries have lots of challenges going forward but those that build out infrastructure, institute economic reforms and provide strong education, could become African Lions like the Asian Tigers of yesteryear.

Trump and Sanders Worst Nightmare

Everyone knows the quote about history repeating itself (or if you don’t, you’re doomed to hear it again). Far less known is the notion that history likes to paint mustaches on us when we’re asleep.*  And, Vietnam offers a great example of it. President Obama is in Vietnam as we write, 40 years or so after America exited a war to stop Communism from spreading across southeast Asia. But, look at the poll below. Over 90 percent of Vietnamese say “most people are better off in a free market economy.” An equal number say trade is good. And 75 percent of the population have favorable views of the United States. Of course, the vast majority of Vietnamese were born after the U.S.-Vietnam war ended (go to Vietnam and ask about the war and they will ask, “which one?” There have been a number before and since the U.S. war). Nearly 70 percent of Vietnamese are under the age of 35. And with low labor costs, Vietnam stands to gain in world trade. When I was last in Vietnam, it was remarkable how many of the business people were counting on the Trans Pacific Partnership trade agreement to improve their economy. So, there’s reasons why Vietnamese are so market, trade and American friendly. Even so, the poll results are interesting and perhaps not so predictable from an Embassy rooftop in 1975.  

The Straddle Bus!>

We’ve given China bears lots of space in recent INTN editions but China is complicated and as we noted a number of months ago, it is an innovative place despite stereotypes to the contrary. So we focus this week on one of those cool innovations, the Straddle Bus. The idea was first broached in Shenzhen (one of the most entrepreneurial areas of China) a few years ago and now a Beijing company has picked up the baton and is building a life-sized model for Changzhou. They expect to start testing it this summer. Essentially the straddle bus “will run along a fixed route, and its passenger compartment spans the width of two traffic lanes.” Cars will be able to drive underneath it, thus alleviating traffic congestion. Passengers will load onto the bus at designated elevator stations. It will have a capacity of 1200 passengers, again reminding us of the scale of China. The engineers claim the costs are 16% of the cost of building a subway. Regardless, it’s very cool. Check out the video demonstration.

    

China, Endangered Plants, and Japanese Electrification

Last night driving back to the worldwide headquarters of International Need to Know, traffic came to a complete halt. This is no longer an uncommon occurrence in this neck of the woods, even though it was after rush hour. We soon learned our delay was caused by a Beyoncé concert. But even Queen Bey was unable to prevent us from turning Lemonades into lemons and worrying about housing prices in China, despairing over endangered flora but ultimately brightening to electrifying news out of Japan. It’s this week’s International Need to Know, not needing to dope up like a Russian athlete to bring you the most important happenings of Beyon–er, our world.

Without further ado, here’s what you need to know.

Location, Location, Rembrandt

Last week, we were working with some Chinese investors looking for ROI here in the Seattle area. While walking in a residential neighborhood on our way to a meeting, one of the investors asked, “How much does a house cost in Seattle?” It’s a curious question, kind of like asking how much do paintings cost. It depends, of course, on the house–how large, where it’s located, does it have a view, does it have an antique Rembrandt in the attic? Chinese are looking to place their money in “safe” investments overseas now that large returns are no longer guaranteed in-country. China’s economy is definitely slowing, as we’ve pointed out in this space. More evidence of the slowdown came this week when provincial growth rates were reported. Of 31 provinces, 25 reported a slowdown from 2015’s year-on-year growth and 14 are undershooting their expansion targets. And these are the official statistics. What is really going on at the province level may be worse. Housing data is also showing a slowdown, although not in Tier 1 cities, as the chart below shows. Tier 1 cities in China saw huge inflation through 2015. Tier 2 and Tier 3 cities? Not so much. Which brings us back to our Chinese investor’s question. How much does a house cost? Here in Seattle we see housing prices continue to rise. In fact, that worldwide headquarters of INTN that Beyoncé prevented us from reaching in a timely manner? A house kitty-corner from HQ recently sold for about 50% more than its Zillow value. Values here are being driven up by lack of inventory but also by Chinese and other outside investors buying into the market. Seattle is becoming a Tier 1 city. As the world urbanizes, Tier 1 cities around the globe are likely to continue to experience housing inflation…right up ’til the moment they don’t. More on China’s housing situation soon.

Save the Plants

When worried about world encompassing environmental problems, photos of animals–the polar bear, or the Sumatran tiger or some other cute mammal or bird–are often used to make the point of how dire the situation is. But what about the cute fern or lonely lichen or other plants? Because as it turns out, far more plants are endangered than animals in our little world today. In fact, the International Union for Conservation of Nature claims that “there are almost as many threatened species of plants as fish, birds and mammals combined.” The flora may be in more trouble than we fauna which, of course, has implications for we fauna.

Japan is Electrifying

No, not their economy, though Japan’s economy surprisingly expanded by 1.7% in the first quarter, staving off recession worries. What we’re talking about is Japan’s robust electric car infrastructure. Japan now has more car charging stations than gas stations as you can see below courtesy of Forbes. Japan is now the proud home of 40,000 electric vehicle charging stations, more than four times the United States and now outnumbering the 34,000 Japanese gas stations. Nissan, with it’s electric Leaf, is helping to drive this infrastructure build-out. Of course, Japan’s geographic territory is much smaller than the United States, making it easier to develop its electric infrastructure. But this growing and large number of electric charging stations is indicative of the change that is coming to our auto infrastructure. Now the key question is how will Japan generate the electricity to power the cars?

Corruption, Renewable Energy Investments & Where People Vacation

Perhaps it’s no coincidence that in the same week UFO aficionados came out for Hillary Clinton, and in the same year that Mulder and Scully made a triumphant return, NASA announced this week that they have discovered another 1284 planets using the Kepler telescope, more than doubling the number of known planets. Apparently nine of these newly found planets may have the characteristics needed to sustain life, bringing the known total of so-called “Goldilocks” planets to 21. But even as we wondered which presidential candidates we would like to send to one of these 21, it did not distract us from ferreting out corruption around the world, inquiring into who is spending money on renewables and discovering where all the tourists are coming from. It’s this week’s International Need to Know, your Area 51 of unseen information about our own so far habitable planet.

Without further ado, here’s what you need to know.

The Gift of Trade

We’ve had the occasion to talk with lots of exporters in recent months about their challenges and opportunities in exporting. Many of these companies noted the challenge of Byzantine rules in overseas markets. Regulations in these countries seem to change haphazardly in ways that adversely affect the companies’ ability to do business and often in ways that are beneficial to their domestic competitors. A few companies even touched on the corruption in the markets they sell to, not calling them fantastically corrupt as David Cameron put it to the Queen this week, but just your everyday type of corruption, which is more than enough distortion for your average business to deal with. How pervasive is corruption? The World Bank quantifies the corruption problem in the chart below. In interviews of more than 130,000 firms across 135 economies, the World Bank found that “1 in 3 companies identify corruption as a major constraint to operating their establishments.” Nearly 20 percent of these businesses said they are expected to give gifts to public officials in order to “get things done.” None of this is new, of course. But it is occurring in a world in which trade rules are under attack, especially in the United States. Ironically, we probably need more trade agreements (with real teeth), not less.

Renewing Investments

Show me the money. This week we do so in clean energy. Investments in renewable energy continue to be robust totaling $206 billion in 2015 and for the first time more than half of all new generation capacity came from renewals. Regular readers of INTN will not be surprised given our predictions in this space that solar will dominate energy generation within 20 years. China, the world’s biggest polluter was also the biggest investor in renewables at $103 billion. The U.S., the second-largest polluter, was also the second-largest investor in renewables at $44.1 billion. Ahh, sweet symmetry. The rest of the top investors are displayed below in all their technicolor glory courtesy of the Frankfurt School UNEP Center. But it’s not all rosy for the renewable energy market. The report by the Frankfurt School notes that more than half of the world’s coal-fired power station capacity is less than 23 years old. Since coal plants usually have 40-year lifetimes, and, as Frankfurt notes, “the costs of running them once built is much less than the cost of constructing new fossil fuel or renewable capacity,” we, like bad kids on Christmas, probably have lots of coal burning in our future with all the consequences associated with it.

 

  

Vacation

As Memorial Day looms here in the United States, we’re headed into prime tourism season. Soon swarms of rabid tourists will descend on museums and heritage sites with selfie sticks and phone cameras eagerly at their grasp. A year or so ago, International Need to Know found a ticket booth with no line at the Eifel Tower. When a large group of Chinese tourists saw our discovery, we were nearly stampeded to death. So we are not surprised by the answer to the question of who are the world’s top tourism spenders. It’s not even close. Last year Chinese tourists spent $292 billion, more than twice what American tourists spent and triple the expenditures of German tourists. This large sum is partly because of the number of Chinese tourists and partly because Chinese tourists spend more per trip than other vacationers. The U.S., however, continues to be the largest destination for international tourists. Tourism, by the way, is an export, and an increasingly important one. International tourism now accounts for 7% of total world exports and 30% of service exports. In the future, when robots rule the world, will we all be tourists or will we beWALL-E-style inhabitants of this planet?

Technology Democratization, Dual Citizenship and Where Your Clothes are Made

The Broadway sensation Hamilton received a record 16 Tony nominations this week leaving the John Jay Society seething in resentment. All of this raises the question of which of today’s current policy and political figures will inspire musical tributes two centuries from now? We’ll take your suggestions even as we try to explain why you may want to hide your face, determine where the global citizens are and discover where your clothes are made. It’s this week’s International Need to Know, providing neither song nor dance as we try to make sense of this stage of a world in which we all play a part.

Without further ado, here’s what you need to know.

The Continued Democratization of Technology

Just last week we remarked on how technology spreads more quickly and is developed in more parts of the world than it was 30 years ago. Fresh evidence of that comes from Russia where big strides in facial recognition were recently made.  A Russian software developer named Andrey Mima claims he was able to use nothing other than photos of two women from 2010 to track them down. He inputted the photos into his perhaps inelegantly yet succinctly named software, Findface, and the software found the two women on Russia’s version of Facebook (calledVkontakte). The face recognizing algorithm was originally developed by a Russian start-up calledNTechLab. This small, new Russian company beat out Google and other big players in theUniversity of Washington’s MegaFace face recognition challenge. Put aside for a moment worries about privacy and the fact that there is a contest called “MegaFace” and understand that innovation and technological development happens all over the world nowadays. Such democratization of technology and its development will have a big impact on the world economy, security issues and poverty, to name just a few. Okay, now you can go back to worrying about the privacy implications (see the linked story for one example) of this particular technology while International Need to Know stays busy deleting all known photos of itself from the Internet.

Dual Citizenship

If our music streaming service is informing us correctly, John Lennon once sang “Imagine there’s no countries, it isn’t hard to do.” For most people, it actually is pretty difficult to imagine. People think of themselves as Americans, or Canadians or Brazilians or any number of other nationalities. But there are indeed many who think of themselves as global citizens first as a new poll by Globescan for the BBC shows in the chart below. The poll was conducted in 18 countries across five continents. The results defy simple stereotypes. More people in China see themselves as global citizens than do Americans, Canadians or British. A few weeks ago, we noted the economic challenges in Spain so perhaps we should not be surprised that 45% of Spanish “strongly agree” that they see themselves more as a global citizen then a citizen of Spain. Of course, ask a Spaniard if they are a part of Real Madrid nation and the chart may blow up entirely.
  

Made in ?

We probably all remember 15 years ago heading to our favorite clothing store and noticing that everything was made in China. Unless you joined a nudist colony, you were wearing clothing made from that ever fascinating, complicated country. Today, China still accounts for 41% of all apparel exports as you see in the chart below from the World Bank’s Stitches to Riches Report (Stiches to Riches sounds like a cleaned up Nicki Minaj lyric). But, as China diversified it’s economy into electronics manufacturing and other industries, apparel now only accounts for seven percent of China’s exports. China’s share of global apparel exports are likely to fall too as labor costs in China rise. The always stylishly attired INTN, is already seeing anecdotal evidence of this. Today, when shopping for new duds, the “Made in China” tag is not nearly as ubiquitous. Instead we see tags indicating Bangladesh, Vietnam and other countries as the source of the clothing. We often wonder if certain African countries may enter the picture in the future. Low labor costs in Africa combined with China’s investments in Africa seem like a winning combination for a future apparel industry.