If that brings concerns in France about rising prices for bread, as flour is exported rather than being used in local boulangeries, then the same can be said for the wine industry—where exports to China rose by 14 per cent in 2017 alone to nearly 220 million litres. French wine exports to China are expected to be worth more than $20bn in five years’ time, something that is better news for wine growers in France than for wine drinkers.20
What also irks is not just that many of the most famous vineyards in Bordeaux have changed hands in the last few years and been bought by famous personalities like the actress Zhao Wei or the tycoon Jack Ma (who owns four, including the celebrated Château de Sours), but some have also changed names in order to be more appealing to drinkers in China. Château Senilhac in Médoc has been renamed Chateau Antilope Tibetaine (Tibetan Antelope), Château La Tour Saint-Pierre has become Château Lapin d’Or (Golden Rabbit), while Château Clos Bel-Air is now Château Grande Antilope (Big Antelope).21
That might annoy purists who see proud names that have earned respect and fame over centuries being dropped, but the rise of the East has other effects that change what seem to be mundane elements of the world around us. Qatar Airways is just one of a large clutch of airlines whose operations have fuelled demand for commercial jets—demand that will only continue to rise. The International Air Transport Association (IATA) expects that the numbers of passengers travelling by plane will nearly double to 7.8 billion a year by 2036, with the growing and increasingly affluent populations of Asia, with China, India, Turkey and Thailand driving this increase.22
According to Boeing’s separate analysis, that means 500,000 new pilots will be needed over the next twenty years.23 But the consequences are being felt already: there are not enough pilots to go round as it is. This has pushed wages sky-high, with salaries of $400,000 being offered by Xiamen Air for Boeing 737 pilots—and offers as high as $750,000 a year being reported in some quarters.24
Salary inflation on this scale has obvious implications for the cost of travel. But the pressure caused by the shortage of pilots worldwide has already seen established and well-resourced operators cancelling flights as a result of staff shortages.25 It might seem hard to believe, but when a plane gets cancelled on a business trip to the American Midwest, on the way back from a skiing holiday in the Alps, or before a dream holiday on the other side of the world, the rise of the Silk Roads will have something to do with it.
How that hotel room looks, what music is playing in the lobby and what drinks are available in the bar will also be influenced by the same factors. In 1990, the numbers of Chinese visitors to foreign countries were minimal, principally limited to state-related activities, spending around $500 million abroad in total.26 By 2017, that figure had risen by 500 times to more than $250bn per year—roughly double what American travellers spend abroad annually.27 These figures will rocket in the future, given that only around 5 per cent of Chinese citizens currently have passports. According to some estimates, 200 million Chinese will travel abroad in 2020, with research suggesting this will open up particularly rich opportunities in the gaming and cosmetics sectors, as well as boosting airlines flying to the right places, hotels that cater to Chinese tastes and online booking agents that arrange travel abroad—like Skyscanner, which was acquired by Chinese company Ctrip at the end of 2016 in a deal worth $1.7bn.28
The changing world also offers challenges—often in unexpected places and in unexpected ways. China’s rise has presented extraordinary problems for donkeys and donkey breeders from Central Asia to West Africa. Donkey hides are an ingredient in ejiao, an alternative medicine popular in China that is purported to dull pain but also treat acne, prevent cancer and improve the libido. Demand for ejiao has led to a halving of the donkey population in China in the last twenty-five years and new sources of donkeys being identified elsewhere.29 Prices for donkeys have quadrupled in Tajikistan, and there have been sharp rises in Africa as well. This is not necessarily good news. Because donkeys are used as pack animals and play an important role in agricultural production and in bringing food to market, the sudden and sharp decrease in their numbers (and the rise in their price) has threatened to destabilise the agrarian economy in countries where the balance can often be precarious. For this reason, export bans of donkeys to China have been introduced in Niger, Burkina Faso and elsewhere in Africa.30 One effect of the rise of the Silk Roads has been the emergence of a black market in donkey hides.31
Linking the trade in donkeys and the difficulties of first-time buyers in acquiring property in London may not seem an obvious step to make. Yet the surge of foreign capital that has been poured into Central London real estate has been a factor in driving prices up to the point of unaffordability. The surge of foreign capital between 1999 and 2014 played a role in increasing the prices of expensive homes, as well as producing a “trickle-down” effect on less expensive properties. According to the workings of one scholar, prices would have been 19 per cent lower in the absence of the foreign investment that poured into the city in that period.32
A substantial amount of that came from Russia. Between 2007 and 2014, almost 10 per cent of all money spent on property in London was Russian—with that figure rising to more than 20 per cent on homes worth more than £10m.33 Inflows of capital into overseas residential property markets from China have also been soaring, with Chinese citizens buying more than $50bn of homes abroad in 2016 and $40bn the following year.34 This does not include capital that accounted for a third of all investment in London commercial real estate in 2017.35
It is a similar story elsewhere. Chinese buyers bought properties in Vancouver in such volume in 2016 that prices escalated at a rate of 30 per cent per month compared with the previous year, leading city authorities to introduce a 15 per cent tax on real estate bought by foreign buyers in an attempt to cool the market. Similar pressures can be found elsewhere in Canada—as well as in San Francisco, Australia, New Zealand, and now in South East Asia too.36 Not being able to afford a home may not have its roots along the Silk Roads, but it is part of the narrative of a world that is moving its economic centre of gravity away from the West.
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The rising wealth in the East is eye-opening in its scale. In February 2017, Mehrdad Safari, an Iranian businessman who had rented an apartment in a tower in Istanbul, enjoyed living there so much that he bought the entire block for $90m (excluding VAT). Once it was only Americans who liked something so much they bought the entire company—as Victor Kiam famously claimed about Remington, the electric razor business; now others have the inclination and the means to do so.37
The changing world means changing spending patterns and living habits at home as well as abroad. Pakistan is now the world’s fastest-growing retail market, partly thanks to the fact that disposable income has doubled since 2010. The number of retail stores, which is forecast to rise by 50 per cent between 2017 and 2021, is also being driven by the two-thirds of the populace under the age of thirty—and by the changing attitude to money among the young, who want to enjoy a good lifestyle now rather than save to enjoy one later.38
In India the dramatic expansion of the middle class that has happened in the last three decades is continuing at an extraordinary pace. Although some economists note the highly uneven distribution of wealth in India, which has seen disproportionate gains going to the rich, the fact that the number of households in India with disposable incomes of more than $10,000 a year rose from 2 million in 1990 to 50 million by 2014 tells its own story.39 This is just the start of a transformation that is seismic in scale and significance. Recent research estimates that consumer spending will treble in the next eight years before reaching $4tr by 2025. Such changes are affecting the way that people in India live: the traditional model of extended families cohabiting is being replaced by households of single people or couples, both with and without children. This naturally has an important impact on famil
y life and presents challenges for the housing market and for infrastructure such as transport, electricity, water, health and education. But it also presents immense opportunities, not least since market research estimates that small households spend 20 to 30 per cent more per capita than joint families.40
These shifts are not lost on the luxury goods industry, where patterns of demand have changed beyond all recognition since the early 1990s. At that time, Chinese customers accounted for a negligible percentage of buyers of luxury goods. Now they account for a full third of the global total—and by 2025 will buy 44 per cent of all luxury goods.41 This is one reason why Prada Group is opening seven stores in 2018 in just one city—Xi’an.42 It also explains business decisions made by Chanel, for example, to buy a series of silk manufacturers in order to guarantee supply for their products, something that is not surprising given the brand’s popularity in China and elsewhere around the world.43
These trends are clear too to Starbucks, the chain of coffee houses, which has set its sights on expansion in China. The scale of its ambitions shows just how big it believes the opportunities are in the world’s most populous country at a time of change. In 2017, the company announced that it would open 2,000 stores in China by 2021—or the equivalent of one new Starbucks coffee shop every fifteen hours.44 China is a market that not only offers the prospect of lucrative returns; it is one that cannot be ignored.
It is a similar story in India, Pakistan, Russia or the Gulf—where customers in the United Arab Emirates alone spend almost $3bn a year on high-end cars. Getting things right in the East makes—and breaks—leading brands.45 The same applies to almost every sector in the economy, including music and culture. For example, when the Chinese government dropped its One Child policy at the end of 2015, shares in companies that make prams, nappies and baby formula soared—while those of popular brands of condoms fell sharply.46 A report by Credit Suisse suggested the surge in births would result in hundreds of billions of yuan being spent on retail goods related to babies, infants and children.47 There are fortunes to be made by being in the right place at the right time as spending habits change—and consequences for failing to adapt or respond in the right way.
There are consequences too for getting it wrong. A poorly thought-through ad campaign that was by Dolce & Gabbana in China in the winter of 2018, made worse by comments apparently made by one of the eponymous founders on social media, was described by some commentators as one of the most damaging miscalculations in retail history. Outrage in China led to the brand being dropped across leading stores and online platforms in the country—as well as on Net-a-Porter, which withdrew D&G products from its Chinese-language websites, putting hundreds of millions of dollars of revenue at risk, at least in the short term.48
Being in the wrong place at the wrong time also affects fortunes. When Meng Wanzhou, the Chief Financial Officer of tech and communication giant Huawei was arrested in Vancouver in December 2018, there was uproar in China. While the Chinese government demanded the release of Meng, with an editorial in the People’s Daily calling the arrest “despicable” and an abuse of basic human rights, others took more drastic action.49 Shares in Canada Goose plummeted by more than 20 per cent, knocking $1bn of the value of the popular parka-making company, as a result of calls for a boycott on the Chinese social media company Weibo.50
Winners and losers in the tourism sector in the future will be determined by which locations, hotels, facilities, menus and tourist attractions most appeal to the population of Asia, which currently stands at nearly 4.5 billion and is becoming more numerous—as well as richer.51 To put this into perspective, judging from World Bank and Organisation for Economic Cooperation and Development (OECD) data, not one of the ten fastest-growing economies of 2017 is located in the western hemisphere, nor has one been for the last decade.52 Tastes, trends and appetites will be made in the East—and not in the West.
Changing aspirations, appetites and tastes will drive demand—as they always have done. But the speed of transformation is striking. A recent report by McKinsey & Company noted a shift in the way that Chinese consumers choose between products. In almost half the categories surveyed by the company, including food, electronics, personal care and beer, respondents expressed a clear preference for local brands over foreign peers.53 Corporate fortunes and failures will be made in the East—and not in the West.
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Economic and demographic growth provide one part of the picture of change. It is important, however, to recognise that both bring growing pains as well. Building infrastructure to support booming populations is logistically difficult, expensive to do and requires not just advance planning but a considerable degree of luck in being able to anticipate what the future will look like in terms of what energy, technology and transport needs might be.
Ironically, therefore, building smart cities from scratch can be easier than upgrading existing urban centres. In Bangalore, for example, difficulties caused by rapid urbanisation and the success of the city’s IT sector has put an extraordinary strain on water resources. While the city’s water board has prepared detailed proposals that they claim can not only improve supply for the current population of around 8 million but also a population that is forecast to more than double by 2050, some senior officials have spoken about the need to have a plan to evacuate the city before “Day Zero”—the day that all taps run dry—which might come as early as 2025.54
Bangalore is an extreme case, but it is illustrative of the wider challenges facing urban growth as well as economic, demographic and even political stability in the future. The link between rapid urbanisation and radicalisation is one that is as familiar to historians of Russia in the early twentieth century as it is to those working on Turkey in the 1970s.55 Not surprisingly, it is also a subject of considerable interest to scholars working on the world of today and tomorrow.56 A recent UN report on cities did not pull its punches. “Many cities all over the world,” it states, “are grossly unprepared for the multi-dimensional challenges associated with urbanisation.”57
Peace and stability are not to be taken for granted—as even the most cursory look at Syria, Iraq, Yemen and Afghanistan show. The limited development of democratic traditions, the diffusion of power and wealth from small elites and the emergence of professional middle classes means that across Asia there is a series of powerful leaders—and obvious fragilities too that can mean states fail quickly and dramatically.
Those who do try to adapt find that it is not just hard to manage change; it is also hard to keep up the appearances that reform is a reality. A series of measures announced in Saudi Arabia at the end of 2017, which included opening the first cinemas in forty-four years, allowing women into a sports stadium and issuing driving permits for women, was greeted as a sign of progress in a country long derided for the lack of any form of gender equality.
The hopes and expectations, however, were quickly tempered by the arrest of ten of the country’s most prominent activists, mostly women, who were then reportedly electrocuted and tortured while in custody was a classic case of one step forward and at least two steps back.58
This followed on from the murder in October 2018 in Istanbul of the journalist Jamal Khashoggi, who had been formerly part of an inner circle around the Crown Prince, Mohammad bin Salman, showed the stark difference between the hopes and the realities of those looking for increasing tolerance and openness in Saudi society.59
The difficulty of championing progress while practising repression is nowhere better shown than by the fact that on the same day that the foreign minister of the United Arab Emirates, Abdullah bin Zayed Al Nahyan, wrote a passionate column for the leading Canadian daily, the Globe and Mail, arguing that it was vital that women be empowered across the Middle East, one of the most prominent human rights activists in the UAE had been sentenced to ten years in prison—and heavily fined for insulting the “status and presti
ge of the UAE and its symbols.”60
Unregulated, accelerated change has proved unnerving to others in different ways. In China, for example, concern over city development led the highest body in the country, the State Council, to issue guidelines to tighten up planning rules and ordering a greater emphasis on promoting “construction techniques that generate less waste and use fewer resources, such as the use of prefabricated buildings.” That seems laudable enough. More eccentric, however, was the fact that the clampdown was also used to issue a stern line about strange-looking buildings, with a ban issued on “bizarre architecture that is not economical, functional, aesthetically pleasing or environmentally friendly.” To ensure compliance, remote satellite sensing will be used “to locate buildings that violate existing urban-planning policies.” Drones flying overhead will not just be watching who you talk to or where you are, in other words, but also what you might choose to do with your chimney pots or patio extension.61
A new world is coming, one that seems unfamiliar to most but also in turns exotic and worrying. It is perhaps hard to believe that one of the most vibrant centres for tech start-ups in the world today is Iran, where one unexpected side effect of being distanced from Western competition has been a surge in new businesses and incubators for start-up companies, like Sarava, that help fledgling concepts off the ground.62 Among those selected to appear at the appropriately named Silk Road Startup in Kish in the spring of 2018 were a marketplace for water-friendly food and agriculture products, an eco-friendly and online fashion marketplace for women to buy and sell pre-owned wearables, and a handheld device that measures the level of blood glucose with infrared spectroscopy and artificial intelligence.63
The New Silk Roads Page 3