Chinese renminbi 中国人民币 – the new currency of the 21st Century

Chinese renminbi 中国人民币

The Internationalisaltion of the 中国人民币

Before the 2013 Spring Festival 春节, the People's Bank of China named the Singapore branch of the Industrial and Commercial Bank of China the clearing bank for yuan in Singapore. China sees Singapore as its regional partner for the extension of yuan internationalisation. The aim is that the emergence of new offshore centers will expand the existing regime instead of creating competing systems.

So far, Hong Kong has had a good eight-year head start and remains the dominant offshore center of the Chinese currency, handling around 80pc of offshore trading.

Once the clearing mechanism is set up in Singapore, there will be greater transparency in the movement of yuan funds. Singapore will be the gateway for China in the Southeast Asia, which provides a platform for Beijing to facilitate wider use of yuan in trading with Southeast Asian nations.

London and the Chinese renminbi 中国人民币

At present, a cross-border trade settlement scheme is driving liquidity into 人民币 offshore markets. The size of the offshore 人民币 liquidity pool a financial centre can generate, therefore, largely rests on bilateral trading volume. Compared with Hong Kong, which had $283.5bn of bilateral trade with mainland China in 2011, the UK’s trade with China was only worth $58.7bn. Further, the 人民币 is barely used as a trade settlement currency in UK-China trade. 

London is therefore limited by liquidity concerns, even though it hosts deposits of 人民币109bn. This issue will remain a challenge until the 人民币 becomes fully convertible as an international currency. The City could perhaps attract a significant volume of 人民币 resources through its advantage in global foreign exchange trading. But, for as long as the cross-border trade settlement scheme remains the major pillar in China’s 人民币 strategy, the City will not be a become a big player. 

A second stumbling block is the technical difficulty caused by the 人民币 clearing system. In the offshore 人民币 market, up until now only Hong Kong has been thoroughly equipped with both the 人民币 real-time gross settlement system, which allows swift, large fund transactions, and with a人民币 clearing bank, Bank of China (Hong Kong). 

London is lacking this critical 人民币 settlement system. It also doesn’t have a local人民币 clearing bank. Even if the City is in a good position to gear up global demand, the majority of those offshore 人民币 transactions still have to be conducted via Hong Kong. As a result, market practitioners see less benefit in concentrating their 人民币 businesses in London. Multinational corporations can simply shift 人民币 deals to Hong Kong branches (or perhaps to Singapore). In other words, until London has the requisite financial infrastructure, it will struggle to be more competitive. 

Thirdly, and perhaps of most concern, is the differing understanding of Beijing’s 人民币 internationalisation strategy in the Bank of England and the UK Treasury. China’s 人民币 strategy is a policy-driven process, with deep public sector involvement. The most evident example is the role of bilateral currency swap agreements. In Beijing’s view, a bilateral agreement between central banks has profound implications beyond the intrinsic value of the swap itself. It represents a will to jointly develop 人民币 offshore business at the level of officialdom.

However, the Bank of England sees limited value in establishing a line in currency swaps. The 人民币 is not yet fully convertible, and the size of its global offshore market is neither large or liquid. The Bank insists that the private sector should take the initiative. It therefore remains reluctant to get involved in the swap issue. The UK Treasury, on the other hand, is making great efforts to initiate policy dialogue with Beijing and Hong Kong. It wants to push the City towards the front tier of the 人民币 offshore business, and thereby boost the economy through a closer relationship between China and the UK.

While the development of the offshore 人民币 market remains contingent upon China’s financial reform process, whether the Bank of England and the UK Treasury can take collective action will ultimately determine the City’s future in the 人民币 internationalisation game. The Geo-Trade Blog will continue to follow closely new developments on the internationalisaltion of the Chinese renminbi  中国人民币.

New York's Manhattan Grid - a blueprint for the US' biggest city

Aerial view in 21st century of the Manhattan Grid started in 1811

Before it could rise into the sky, Manhattan had to first create the streets, avenues and blocks that would later support the 20th century skyscrapers. In the early 19th century, New York's population was continuing to increase having tripled to 96,373 since 1790 mostly due to the growing port. It was then predicted that 400,000 people would live in the city by 1860. The City planners were entrusted with planning the city in 1811. They proposed a grid for the future city stretching northward from roughly Houston Street to 155th Street in the faraway heights of Harlem as the layout in the photo (above) and map (below) show.

Manhattan Grid Plan

 

The Grid Plan

The grid plan is a type of city plan in which streets run at right angles to each other to form a grid. The Greeks and Romans used City Grids as did the Chinese from 1500 BC onwards. The Chinese Tang 唐 Dynasty laid out their capital city in a grid plan.

The Roman model was also used in Spanish settlements during the exploration of the Americas. In 1573, Felipe II compiled the Laws of the Indies to guide the construction and administration of cities in the Americas. The Laws specified a square or rectangular central plaza with eight principal streets running from the plaza's corners. The grid plan became popular with the start of the Renaissance in Northern Europe. In 1606, the newly founded city of Mannheim in Germany was the first Renaissance city laid out in the grid plan as the map below shows. 

Mannheim Grid Plan

 

Why use grids?

An inherent advantage of the geometry of a proper grid is its tendency to provide regular building space in well-spaced sequences. This maximises the use of the land of a block without affecting street frequency - any frequency of streets produces the same packing effect. Furthermore geometry also minimises disputes over lot boundaries and maximises the number of lots that can front a given street.

Another important aspect of street grids is that traffic flows of either pedestrians, cars, or both, only cross at right angles. This is an important safety feature, since no one entering the intersection needs to look over their shoulder to see oncoming traffic. Hence the grid is a geometric response to our human physiology. It is highly likely that the original purpose of grid layouts comes from the Athenian Agora where the laying out of market stalls into regularised rows at right angles solved the problem of frequent wagon collisions that occurred when the markets were laid out randomly in a field with traffic approaches at odd angles.

New York's Manhattan Grid

The Manhattan grid plan was a far-reaching, visionary and daring plan to urbanize the geographical limits of the Island of Manhattan.The plan called for a regular grid of streets and property lines without regard to the topography of the island itself. This included numbered avenues running north and south roughly parallel to the shore of the Hudson River. The avenues would begin with First Avenue on the east side and run through Twelfth Avenue in the west. There would also be 155 orthogonal cross streets. 

Interestingly, Manhattan’s grid is not perfectly regular. No two blocks are ever precisely the same because the grid indulges variety, building to building, street to street. Some avenues are wider. Broadway cuts diagonally across the north-south streets, and those cuts have made room for public spaces (Union Square, Madison Square, Herald Square, Times Square, Columbus Circle, Verdi Square). 

New York’s grid has proved flexible enough to adapt when the city’s orientation has shifted north-south, and flexible enough to accommodate the creation of Central Park which interestingly was not a part of the original grid plan. It was not until 1853 that the idea for a large area of green space for leisure activities was envisioned.
 

One of the advantages of the Manhattan city grid is that it makes a complex place instantly navigable. Manhattan invites long walks, because walkers can judge distances easily and always know where they are. In contrast other cities such as London which are formed from historic agglomerations of villages, often include vast stretches of nowhere land as they sprawl in ways that discourage easy comprehension and walking. 

 

Finally, perhaps one of the greatest benefits of the Manhattan grid is that it gives order through physical form to a city filled with a diversity of ideas, concepts and people from so many different places. It is not likely that this is exactly what the original city planners had in mind back when they proposed that the Manhattan Grid should "promote the health of the City" back in 1811.  

Cities in the 21st century — a city-dominated world

Picture of Beijing in the 21st century

The 18th and 19th centuries were the last centuries of empire in the world. The idea of the nation-state took hold in the 19th century. The Wesphalian idea of nation-state sovereignty that basically says that a nation's affairs are its own, and no other state has the right to act within its borders has been the basic diplomatic template since the 17th century. The limits to the nation-state were shown by European rivalries at the beginning of the 20th century while growth in cities began to flourish from the mid-20th century across the world. As a consequence the 21st century looks set to become the 'century of the cities'.

By the year 2030, three out of five people will live in cities. The UN forecasts that today's urban population of 3.2 billion will rise to nearly 5 billion by then. The top 25 cities in the world account for more than half of the world's wealth. And the five largest cities in China and India account for 50pc of those countries' wealth.

This increase will be most dramatic on the least-urbanised continents, Asia, América Latina and Africa. Surveys and projections indicate that most urban growth in coming years will be in emerging economies as the map below indicates.


Map of Growth in Cities since 1950s, 2000s and projected to 2015

Mega-regions

A new concept has recently arisen in the growth of cities known as the 'mega-region'. A mega-region occurs when growth in cities in a particular region is accelerated. Research shows that the world's largest 40 mega-regions cover only a tiny fraction of the habitable surface of the planet and are home to fewer than 18pc of the world's population but account for 66pc of all economic activity and about 85pc of technological and scientific innovation. The mega-regions, rather than countries, are becoming the key driver behind economic development and wealth creation.

The largest of these is the Shenhzen-Guangzhou region in China, home to about 120 million people. China is planning to create the world's biggest 'mega-region' by merging nine cities to create a metropolis twice the size of Wales with a population of 42 million.

Map of new Chinese mega-region

The new mega-region will cover a large part of China's manufacturing heartland, stretching from Guangzhou to Shenzhen and including Foshan, Dongguan, Zhongshan, Zhuhai, Jiangmen, Huizhou and Zhaoqing. Together, they account for nearly a tenth of the Chinese economy.

By 2015, around 150 major infrastructure projects will mesh the transport, energy, water and telecommunications networks of the nine cities together, at a cost of some 2 trillion yuan (£190 billion). An express rail line will also connect the hub with nearby Hong Kong.

A new concept 'Aerotropolis'

In a new book titled “Aerotropolis: The Way We’ll Live Next” by Kasarda and Lindsay, the authors develop a vision of the 'aerotropolis' as a symbol of a city-dominated world. The aerotropolis is “glocal,” a place that draws on local competitive advantages (like cheap labor) as it plugs into the  21^st century global on-demand-production supply chains. Therefore it makes sense to affix cities to airports on the model of the aerotropoli for air transport companies such as Fedex and UPS. Hence an airport, having begun life as an outlying curiosity, on the edge of the city, becomes the heart of the mega-region or mega-city, its raison d’être.

The book illustrates this new concept through a series of compelling numbers. While world GDP rose 154pc between 1975 and 2005, world trade grew 355pc. Meanwhile, the value of air cargo climbed an astonishing 1,395pc. More than a third of all the goods traded in the world, some $3 trillion worth - but barely one percent of its weight! - travels via air freight.

If the book is right and Aerotropoli do take off, then, this has the potential to further push international trade relations between mega cities and mega-regions into the foreframe and leave the country relationship as a minor detail. For example, when New Songdo, an aerotropolis near Seoul, does business with São Paulo, the South Korean-Brazilian relationship is of little interest. Likewise the new Chinese Shenhzen-Guangzhou mega-region is likely to pay little attention to what the UK thinks, but will be very interested in London.