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Research Highlights 2006: Director's Office

Themes
Research Highlights
 East Asian growth will be led by urban innovation
 Economic growth in China and India will boost average incomes in nearly every country
Team
Publications in 2006
Forthcoming in 2007

Research in the Director’s Office comprises a major program on East Asia’s Future Prospects plus the research activity of the Director.

Themes

During 2006, research associated with the East Asia Prospects Study focused on three areas, all related to the roles of technology and innovation in promoting growth: the development of innovation systems, with reference mainly to the institutions and policies being deployed in China and Thailand; new industrial drivers in major East Asian cities, with emphasis on creative industries such as fashion and videogames and high-tech industries such as biotechnology; and the links between universities and industries, an extension of earlier research.

Further work was carried out on international trade liberalization and poverty, including modeling the likely effects of the Doha Development Round, a survey of trade liberalization and employment, research on skilled labor migration, and the compilation of a migration stocks database.

Research Highlights

East Asian growth will be led by urban innovation

Growth in East Asian middle- and higher-income economies will increasingly come from innovation instead of factor accumulation; in turn, innovative activities are concentrated in major globally linked cities [3]. A successful transition from export-oriented manufacturing to an integrated, competitive, innovative economy will involve reshaping the urban landscape to foster innovative firms. This study explores how six cities in East Asia have started to do so: Bangkok, Beijing, Seoul, Shanghai, Singapore, and Tokyo.

Each city is seeking to nurture activities which have longer-term growth possibilities, scope for innovation, multiple linkages with other industries, and the potential for generating employment, especially for skilled and technical workers concentrated in urban areas. The study shows how specific creative and technology-intensive industries are emerging through a combination of public and private initiatives, and examines the future prospects of these industries. It suggests policies which could promote the development of these industries, e.g., tax credits and financial support to stimulate research and development by firms, land resources for technology parks to be built in collaboration with developers, financial policies which enhance the supply of angel/venture financing, and incentives for universities to engage in applied research and to commercialize some of their findings. In each city one industry provides a focal point: Singapore (biotechnology); Tokyo (robotics and animation); Seoul (movie and online video games); Bangkok (fashion and jewelry); Beijing (electronics); and Shanghai (construction). These subsectors offer a large scope for technological advancement and could also stimulate innovation activities in other related areas.

Economic growth in China and India will boost average incomes in nearly every country

China’s growth since the early 1980s is unprecedented and looks set to continue [forthcoming 2]. In scale and duration it exceeds that of the United States during the late nineteenth century and dwarfs the postwar growth performance of Germany and Japan. The remarkable strides by China and India in enhancing their industrial and service capabilities and the attraction of their potentially vast markets for foreign investors will almost certainly lead to a continuing shift of manufacturing activities and export capacity to these two giant economies. These developments, coupled with increased demand from China and India, especially for inputs, will mean that nearly all trading partners will benefit from the giants’ growth. China’s current account surplus is likely to taper off and looking forward, both China and India will be investing abroad in a much broader range of assets than previously.

Growth in China and India will increase both their CO2 emissions and demand for energy, but both countries will remain modest in per capita terms relative to the United States. There is considerable scope to improve their energy efficiency, but doing so will not relieve other countries of the need to adjust. In addition to energy and the environment, Dancing with Giants discusses two other factors that might slow development in China and India: widening income inequality and concerns over governance. The analysis and comparative experience discussed in the book suggest that the risk of a material slowdown from these sources is small.

Team




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