The Future Is Asian

by Parag Khanna

  Also at the graduate level, business schools and their executive programs have put down stakes in Asia. Harvard Business School’s most recent curricular innovation—known as “global immersion”—requires students to tackle challenges for partner companies and then travel and embed themselves in their headquarters, most of which are in Asia. France’s INSEAD, which has long had a campus in Singapore, is being copied by other Western business schools such as the University of Pennsylvania’s Wharton School, which opened the Penn Wharton China Center in Beijing in 2015.

  For the West’s educated, professional, and mobile class, no region is better placed than Asia to capitalize on Brexit, opposition to Trump, and Western elites’ revulsion with their own politics. There is already an older stratum of American bankers, English teachers, and missionaries who are deeply familiar with the advantages of expat life in Asia. Legendary investors such as Mark Mobius and Jim Rogers have strategically located themselves in Asian hubs in order to gain local insight into how to capitalize on Asia’s breakneck growth. Now a new generation of expats is following in their footsteps, taking advantage of Asia’s mix of opportunity and comfort and enjoying the hallmarks of expat life such as low taxes, high quality of life, public safety, rigorous education, and efficient governance that one finds in key Asian hubs that also rank among the world’s safest cities: Tokyo, Osaka, Singapore, Hong Kong, Melbourne, and Sydney.

  Particularly since the financial crisis, the number of American expats has ticked up substantially. The number of US citizens living abroad was only 4 million in 1999 and 6.8 million in 2013 but reached 9 million in 2017.36 Among Asian countries, the Philippines, Israel, South Korea, and China have the largest number of American residents, with China and India the fastest growing destinations for Americans heading abroad. According to the industry-standard HSBC Expat Explorer survey, expats in Asia are three times more likely to earn over $250,000 per year as they would at home.37 Asian airlines have a nearly unlimited appetite for US-trained pilots, offering them salaries of up to $300,000 per year.38 With salaries at that level, it is no surprise that thousands of American and British financial professionals and consultants have chosen to retire in Asia rather than return to dead-end middle management, cutthroat competitive positions, or mandatory retirement in New York or London. Instead, they shrewdly manage their taxes and housing and health care costs and leverage their regional networks to continue working in private equity, wealth management, or merchant banking. American teachers can also circulate among the many new international schools popping up in Asian cities and earn about triple their home salaries—with better education for their own kids.

  The combination of the financial and energy downturns has affected many expat families whose breadwinners were recalled or laid off by banks and oil and gas companies. But the story that doesn’t make Western headlines is how many more expat families have remained in Asia and gone local by taking jobs with regional companies and putting their kids into local schools. Switching from high-pressure Western employers to more creative and ambitious Asian companies has gone from an outlier choice to a desirable career move. This in turn has helped overcome the long-standing social divides between expats and locals in places such as Hong Kong and Singapore, where expats increasingly see themselves not as separate and superior but as very much part of the community. Rather than detaching expats from Asia, then, the economic troubles in the West have largely encouraged expats to become more Asian in their lifestyles. And the more rapidly Asia modernizes, the broader the range of destinations in which Western expats are planting roots. Bangkok, Jakarta, and Ho Chi Minh City are poaching experienced Americans already living in Hong Kong, Taipei, and Singapore. Phuket and Bali now have well-connected airports and high-quality international schools, resulting in a growing resident population of digital entrepreneurs.

  Asian governments know that in the short run it makes sense to import brains to stimulate innovation. The Gulf countries have been attracting British, German, and American talent for decades. In Saudi Arabia, the King Abdullah University of Science and Technology (KAUST) offers sizable salaries to American academics to relocate to the desert near Mecca and work on pressing challenges related to the country’s energy industry and other sectors. Westerners are also being drawn by entrepreneur visa schemes offering stable long-term residency in exchange for hiring and training locals in cutting-edge areas ranging from metallurgy to artificial intelligence. Thailand has launched a four-year visa for entrepreneurs who want to start a business in the country. China is not content only to lure back overseas Chinese but has also launched the Thousand Talents Plan, which has attracted more than six thousand non-Chinese entrepreneurs, scientists, and innovators to take up residency in China. Almost every Asian country is doing the opposite of the West: opening its arms to attract talent from far and wide.

  Asia has never looked so enticing for American millennials, 80 percent of whom believe that Asia is the most important foreign region for their future. American engineers and English teachers are in high demand across the region, young American actors and stuntmen are trying their luck in Hong Kong’s thriving film industry, and Americans are approached on the street to adorn commercial ads targeting Asian customers. American basketball and soccer players are earning solid seasonal paydays staffing teams from China to Thailand. Importantly, it is not just any young Americans that Asia is attracting today but the clever, adventurous, risk-taking, entrepreneurial ones. Over the past two decades of intensive traveling across Asia, I’ve witnessed a surge in the number of young Americans making the leap over the Pacific—often indefinitely. Whether or not they have a concrete plan, it takes both courage and brains to make it in alien countries operating in exotic tongues. Just two of the hundreds I have gotten to know are a young Canadian, J. T. Singh, who bounced between Singapore, Hong Kong, and Shanghai before establishing a lucrative niche as a cinematographer making viral branding videos for Asian cities and companies, and Benjamin Joffe, an energetic French investor and tech mentor who runs one of the largest start-up incubators in China. In the age of global social media, each such success story inspires five—or five hundred—more. And with the rise of nomad-friendly short-term housing from Tokyo to Bangkok to Bali, ever more Westerners are trying their luck in Asia—with no plans to return home. Asians settling in America are called Asian Americans. Will we call this new caste of Americans settling in Asia “American Asians”?

  6

  Why Europe Loves Asia but Not (Yet) Asians

  Asia’s relations with Europe are long-lasting and intense. From Greek armies to the Crusades to European colonization, greater Asia has for millennia been on the receiving end of European fascination and imperial designs. In the reverse direction, Phoenicians ruled the Mediterranean, Mongols plundered eastern Europe, Arabs preserved classical Greek learning, and Chinese goods and inventions inspired the Silk Road. Most Western knowledge of Asian civilizations, languages, and religions comes from European explorers and missionaries such as the English navigator James Cook, who mapped the South Pacific islands, and philologists such as Max Müller, the German professor at Oxford who romanticized the East, particularly India, in the mid-1800s, while mining it for transcendental wisdom. Or consider Nicholas Roerich: as he wandered Tibet and the Indian Himalayas, the Russian mystic and spy believed that the region’s ancient symbology provided a rational structure to reconcile art, science, and religion. Europe’s persistent obsession with Asia has been essential for Asia’s own self-discovery: It was French archaeologists who stumbled upon the great temples of Angkor Wat in Cambodia’s dense jungle, unearthing the Khmer civilizational heritage that attracts millions of tourists every year.

  Although the very term Asia is a European coinage meant to designate the “other” in lands beyond, the rapid blending between Europe and Asia unfolding today portends a continental superfusion. Washington’s conventional wisdom has been that the United States should put the declining Europe on the back burner to foc
us on the rising Asia. Now it appears that the declining United States and its failed Asia policy have put Euro-Asian convergence front and center. From London to Shanghai, networks of high-speed railways, trade hubs, and Internet cables are underpinning a Euro-Asian commercial axis that even shows signs of evolving into a Eurasian system.

  As an exchange student, undergraduate, think-tank analyst, and doctoral candidate throughout the 1990s and 2000s, I would frequently travel between the United States and Europe as part of transatlantic delegations aimed at extending the bonds between the twin pillars of Western civilization. For Americans, it was a strategic investment in a Western alliance necessary to manage Russian volatility, Arab instability, and the “global war on terror.” For Europe, the United States still represented its primary security umbrella and economic partner, as well as Europe’s key political ally in promoting human rights and democracy. Europe, simply put, saw hope to the west and fear to the east.

  Today the situation seems almost reversed. Under presidents Bush and Obama, the fallout over the disastrous Iraq War, and revelations that the United States was spying on its closest allies left Europeans feeling alienated from the United States. During the Trump administration, the rift has only deepened as Washington has called for uncomfortably high levels of defense spending by Europeans, threatened the region’s core industries with tariffs, and dropped out of the Paris climate agreement. To Europeans, then, Asia has suddenly begun to appear a more stable long-term value proposition than the United States. And just as suddenly, my invitations to Europe shifted from requesting a perspective on Washington to seeking insight into Asia.

  Asia has become a wedge issue between the United States and Europe. The United States sees Europe once again as a frontline region against an expansionist Russia and a collapsing eastern Mediterranean. But these are crucial geographic bridges in advancing the Eurasian agenda. While the United States banned almost all contact with Russian officials and reneged on its agreement to engage with Iran, European countries were hosting Iran investment conferences every month and speaking to Vladimir Putin weekly about settling the Ukraine crisis and restoring energy cooperation. One might even claim that given the stagnation in European-American relations—a dull but steady marriage not immune to tantrums—Asia is increasingly what animates the household chatter. Indeed, Asia is being invited into the dining room. At the elite Munich Security Conference, traditionally a transatlantic gathering of foreign ministers and defense officials taking place each spring, the growing presence of Russian and Chinese officials is what has kept the forum from becoming a moribund ritual—and what has kept US vice presidents, secretaries of state, and leading senators returning each year.

  Europe’s pivot eastward is proving to be much more successful than the United States’. Europe has been leading the way in eastward expansion since the 1990s, with the EU doubling its membership by absorbing Eastern European countries and deploying funds such as the European Bank for Reconstruction and Development (EBRD) to modernize them. The Council of Europe includes Russia and the Caucasus countries, while the Organization for Security and Co-operation in Europe (OSCE) includes all other former Soviet republics as well, including those of Central Asia. The Asia-Europe Meeting (ASEM) already represents the world’s largest global economic group, accounting for more than half of global GDP and more than 60 percent of world trade. Asia-Europe trade is expected to reach $2.5 trillion by 2025, about double the current trade between Europe and North America or between North America and Asia.1

  There is no question that Europe will prevail over the United States in the race to profit from Asia’s rise. Since both Europe and Asia fear the creeping protectionism of “America first” policies, their mutual desire to substitute the United States with new Eurasian ties has only grown. The end result of the United States’ protectionist measures has been damage to US workers and exports, with Europe grabbing every opportunity to capture markets that Americans have been closed out of through reciprocal tariffs.2 With Europe’s trade surpluses being absorbed by Asian demand, Germany’s ministers openly rebuff the US Treasury’s calls to rein them in.

  Europeans and Asians agree that their main collective priority is to connect the Atlantic to the Pacific. A century after China declared war on Germany, Germany has thriving relations with China and other Asian nations. China has replaced the United States as Germany’s top trading partner outside the European Union. All European leaders travel more to Asian countries than to the United States, and German chancellor Angela Merkel visited China eight times between 2004 and 2018. The German and Chinese cabinets meet annually for a joint session. During Merkel’s 2018 visit to China, Xi Jinping promised to “open the door even wider” to German business. The German engineering giant Siemens has thrown its weight behind Belt and Road precisely because it has been active in the markets lying between Germany and China far longer than Chinese companies have—and China also needs its high-tech products to achieve its Made in China 2025 goals. Another example is Germany’s Manz, which sells an advance thin-film coating to Chinese solar panel makers such as Shanghai Electric Group. Hamburg has a three-decades-long sister city partnership with Shanghai that has gained steam as their ports exchange ships ever more frequently. Berlin’s city government has launched a StartUp AsiaBerlin program that sends delegations of tech entrepreneurs to Bangalore, Manila, and Jakarta, helping companies such as Coolar—which makes solar-powered refrigerators ideal for tropical Asian countries that still lack electricity—to expand far from home. Meanwhile, the annual Asia-Pacific Weeks Berlin brings Asian entrepreneurs in the other direction to survey and procure technologies from German tech innovators.

  China has thus far been the most aggressive in selling its wares in Europe. Inside the enormous hangars of the Messe Berlin grounds, there are ever more frequent expos featuring the latest Chinese flat-screen TVs and household appliances to stock European department stores. Even if you don’t wander around the convention grounds, you can tell the Chinese sales teams have descended on Berlin through the announcements in Mandarin at Tegel Airport. But the more Eurasian infrastructural connectivity expands and reduces the costs of travel and marketing, the more Asians will set up shop in Europe as well.

  The most significant episode in European countries’ accelerated reorientation to Asia is their joining the Asian Infrastructure Investment Bank (AIIB) over US objections, putting their diplomatic and commercial weight behind a Chinese-sponsored institution. But their move was perfectly logical, for the European Union—not the United States—is China’s largest trading partner.3 With the European Central Bank ramping up its purchases of renminbi for its reserves and allowing offshore renminbi clearing centers across Europe, the expansion of Sino-European liquidity is paving the way for even more commercial integration.4 Related to this, European countries are now focused on copying the German model of driving exports in high-growth markets, especially in Asia. Because European countries see the enormous potential of Belt and Road to benefit their major exports, they are sending warnings to Beijing to make sure they get their fair share of the work.

  The massive EU-Asia trade volumes already achieved are even more remarkable given the lack of any major trade agreements across Eurasia and the long-distance shipping on which most transcontinental trade depends. Now, with the launch of more than fifty new freight rail lines linking a dozen Asian countries to a dozen major European cities, corporate Europe is even more enamored with the Asian opportunity. Kuehne + Nagel, one of the world’s largest freight-forwarding companies, is expanding its Asia operations while also deploying its know-how in digital logistics to speed up intra-Asian logistical throughput between dozens of Asian ports and urban hubs. As trains run from Yiwu to Madrid, Chengdu to Duisburg, Belt and Road conferences are popping up in London, Milan, and Berlin on a monthly basis.

  Duisburg, Germany’s largest inland port, is the site of extensive Chinese investment in transport and logistics operations and also the point of departur
e of twenty trains per week headed for China. In 2017, a German-Chinese cultural exchange commission organized a Kazakhstan Day in Duisburg at which more than a dozen countries set up pavilions and hosted speeches, concerts, art exhibits, and food trucks celebrating the many countries lying along the iron Silk Roads linking the two ends of Eurasia. The centerpiece of this Blue Container festival was the trains. For the first two years of continuous freight service, many of the railcars painted with the bright blue logo of China Railway Express were full of cargo heading from east to west—brimming with laptops and mobile phones—but relatively empty for the long return back to Asia. But by 2017, Europeans realized that the same insulation moderating the temperature inside containers full of Chinese electronics could also protect refrigeration units storing French wine, Iberian ham, and Belorussian milk.5 As Asian demand soars for high-quality European frozen foods, trans-Eurasian railways will transport them to Asian grocery stores ever more efficiently.6 Even Western Europe’s biggest food companies, such as Nestlé and Unilever, earn no more than 20 percent of their revenues in Europe. Asia is already their fastest-growing and in some cases their largest market.

  Europe’s retail industries are aggressively penetrating all Asian markets. The German sporting goods titan Adidas sells more shoes in Shanghai alone than in all of Switzerland and Austria. Both Germany’s multinationals and its SMEs have ever smoother access to business-to-consumer (B2C) platforms such as Alibaba’s Tmall (formerly Taobao Mall). As European pharmacies such as dm-drogerie markt tie up with Alibaba, they can seamlessly export high-quality baby care products such as milk powder formula on trains reaching Asia in days rather than weeks. France, too, has sought to boost its trade with Russia, China, and India. In 2016, its trade with those three countries alone amounted to nearly $100 billion, still less than its $142 billion with the United Kingdom and United States but increasing much more quickly. The 2018 World Cup witnessed a record profit for the Fédération Internationale de Football Association (FIFA), which lured one-third of its sponsors from China versus none in 2014, even though China itself didn’t even qualify (though South Korea knocked the reigning champion, Germany, out of the competition). Three straight Olympic games are being held in Asia—Korea 2018, Japan 2020, and Beijing 2022—which will boost sales for European manufacturers of everything from soccer balls to skis.