Hong Kong billionaire Joesph Lau has stepped down as chairman and CEO of his flagship real estate developer Chinese Estates Holdings of Hong Kong after he was found guilty by a Macau court on Friday of bribery and money laundering.
“It’s all bad news today,” was Chinese real estate tycoon Pan Shiyi’s last post on Sina Weibo on September 13. Part of that melancholy went to Wang Gongquan, a prominent venture capitalist and a civic activist that Pan has known for more than two decades. Wang was detained last week for “assembling a crowd to disturb public order,” a move widely seen as part of the recent crackdown on vocal critics and activists. Wang’s Weibo account has been disabled since, but netizens retweeted old features on his civic work and his political views to express support.
Residential real estate prices surged in China in August - up 18-19% in first-tier cities - as it appears the slowing of several tightening measures earlier in the year has sparked a full-fledged recovery in the bubble-growing in the Chinese property market. [Prices have once again surged after a temporary haitus] As The FT reports, some investors and analysts have started to express concern about whether China’s property market is veering into dangerous bubble territory, but the government has so far taken a much more dovish line. The fact that the government juxtaposed the soaring prices in the big cities with relative stability in smaller cities merely stoked the fires of hot-money inflows as one analyst noted, "continued effort to paint a picture of still-benign housing price conditions may imply that the central government wants to deal with other issues first before making a very clear stand on the overall housing policies." Restrictions on purchases remain but it seems clear that no new tightening has given developers and investors the green light to blow the bubble even bigger. Via The FT, Residential prices soared in China’s biggest cities in August, raising the possibility that the government will take fresh measures to cool the red-hot market. Prices for new homes in Beijing, Shanghai and Shenzhen – the country’s three largest cities – surged 18-19 per cent year-on-year, accelerating from previous months. ... The sharp increase in prices in the biggest cities is the latest evidence of a full-fledged recovery in the Chinese property market after it was smothered by several tightening measures earlier this year. ... Some investors and analysts have started to express concern about whether China’s property market is veering into dangerous bubble territory, but the government has so far taken a much more dovish line. ... The “continued effort to paint a picture of still-benign housing price conditions may imply that the central government wants to deal with other issues first before making a very clear stand on the overall housing policies,” he said in a note to clients. ... Over the past four years the Chinese government has waged a continuous battle to rein in the housing market, raising mandatory mortgage downpayments, placing restrictions on the number of homes people can buy and levying a tougher capital gains tax on sales. But since the country’s new leaders – Xi Jinping and Li Keqiang – took office in March, there have been no big new tightening policies enacted on top of the measures already in place. Analysts believe this has given developers and investors the confidence to flood back into the property market. So clearly, China is back to its old tricks. Having tried (and not liked the results - as we noted here) to 'taper' in June - sending SHIBOR to 25% and almost crashing the entire banking system in the process - the new regime has reverted to the old regime of credit pumping (as seen in the chart below's uptick at far right to around CNY18tn total debt once again)... This simply means the credit bubble will get worse and more and more unsustainable. So, in summary, as the Fed is about to learn we suspect; once you have made the market entirely dependent on the flow of credit and threaten to taper/deleverage, the cracks appear very fast. Perhaps this is why the PBOC has taken its eye off the domestic real estate bubble for now as the growth in 2-way trade volumes collapses... (Charts: Sean Corrigan)
While Chinese stocks are underperforming their Japanese neighbors', the decision of which Asian language to learn (in order to potentially better your future) is clear. As Hurun Research notes, half of the richest women in the world (with assets in excess of $1 billion) are from China - including 3 from the Top 5 and 6 of the Top 10. Asia was home to the highest number of billionaires this year with most of them operating in real estate sector. The total wealth of the 1453 billionaires amounted to a staggering US$5.5 trillion, the equivalent of China’s GDP and the so-called 'Ten-Zero-Club' - individuals with over USD10bn - grew by 25 to 108 people. The USA still ranks #1 (exceptionally) for the country with the most billionaires - at 409! Via Shanghai Daily, One out of four on the list of 50 richest women in China is involved in real estate business. And 18 percent of them are in the financial sector. Also from the real estate sector is Chen Lihua, 72, of Fu Wah International, who ranks No. 2 on the list with 37 billion yuan of self-earned wealth. According to Hurun, half of the richest women in the world with assets valued in excess of US$1 billion are from China, including three among the top five and six among the top ten. Rupert Hoogewerf, founder of Hurun Research Institute, said: "This generation of Chinese women entrepreneurs have not only earned themselves a high status in their country, but also secured an unshakable position on the global stage.” And if you are shooting for the moon, dust off the James Bond tuxedo and head over to meet Yang Huiyan. At 32, she is the heiress to property developer Country Garden, and has retaken the title of China’s richest woman from another property tycoon Wu Yajun, 49, this year, according to the Hurun List of Richest Women in China 2013 released today. Via Hurun.net, On the 2013 list, Hurun Report has ranked 1453 individuals with personal wealth of US$1 billion or more. Asia was home to the highest number of billionaires this year with most of them operating in real estate sector. The total wealth of the 1453 billionaires amounted to a staggering US$5.5 trillion, the equivalent of China’s GDP. The average age is 63. One in ten is female. This past year has seen a rebound in the wealth of private sector. Stock markets in the US have risen and the US dollar has got stronger, rising against the Brazilian Real by 19%, Indian Rupee by 12% and Japanese Yen by 6%, making it harder for locals to make the cut-off. The Hurun Global Top Ten grew by 26% on average. The so-called ‘Ten-Zero Club’ – individuals with US$10bn – grew by 25 individuals to 108 billionaires. Real Estate produced the most billionaires – 219, accounting for 16% of the entire list. The USA:Ranks No 1 with 409 billionaires. Investments, TMT and retail are the top three sources of wealth for American billionaires, with 102, 88 and 40 billionaires respectively. The combined wealth of the US billionaires is US$1712bn, with New York as their capital. And in graphic format from a different source (via Visual.ly): Explore more infographics like this one on the web's largest information design community - Visually.
Top Global Real Estate Markets For Affluent Chinese
China's foreign direct investment grew 0.6% on year to $8.38B in August, although the expansion was down sharply from 24.1% in July and 20.1% in June. In January-August, FDI rose 6.4% to $79.8B vs growth of 7.1% a year earlier, The Conference Board's Leading Economic Index +0.7% in August vs +1.4% in July. Five of the six components contributed positively to the index in August. Growth slowed as "real-estate activity slumped markedly." (PR)ETFs - Stocks: FXI, GXC, PGJ, YAO, FCHI, PEK, CAF, YXI, XPP, FXP, MCHI, YINN, YANG, TCHI, CHXF, KFYP, HAO, ECNS. Bonds: DSUM, CHLC. Currency: CNY, CYB, FXCH Post your comment!
Sipping a glass of 2010 Louis Latour Chassagne-Montrachet, Houston Rockets owner Leslie Alexander is explaining where he got the idea to buy a potato barn in Bridgehampton, New York and hire a Hollywood production designer to rip it up and turn it into an ultra-exclusive wine club. "I wanted to do something fabulous, grand," he says. Cost to join: a refundable $50,000 initiation fee plus annual dues and extra charges for special events. Clad in a red Rockets baseball cap, beat-up Top-Siders, red polo shirt and white cargo shorts with a hole over the right knee, Alexander, 70, is sitting on an upholstered chair that looks like it came from a castle in 17th-century France. His wine glass perches on a low, distressed-wood table. Three filigreed chandeliers dangle from the high-vaulted ceiling above, their blue bulbs casting a soft light. This being the informal yet status-conscious Hamptons, summer home to billionaires like Ronald Perelman and Steven Spielberg, Alexander figures that wine enthusiasts will be eager to join and attend tastings like the two-day, $17,500-a-head extravaganza of 57 vintages of Château Pétrus the club hosted in June 2012. "I envisioned a place where people who had great collections could store their wine and come together and hang out," he says. For older Hamptonites, he notes, there are no inviting places to go after dinner. "You're not going to go to a disco," he says. "Instead you can come here and drink wine. It's like a golf club for wine." Though he flunked high school French in South Orange, New Jersey, he named the club Société du Vin. "I wanted something that was French-sounding and intriguing." Intriguing is an understatement. As one observer says about the club, it looks as if the Addams Family won the lottery and blew the money decorating. There's a reason for that. After buying the barn in 2008, Alexander saw the opulent New York loft of actor Gerard Butler on the cover of Architectural Digest, loved it and called the decorator Elvis Restaino, whose main work has been in movies and television. Alexander green-lighted the first 3-D designs he saw on Restaino's iPad. They included Romanesque brown-and-gold pillars, a long copper-topped bar studded with high chairs made of upholstery and carved wood, backlit wineglass cases, two ships' figureheads jutting from the walls and flooring made of recycled red oak and tiles that are replicas from a French castle. A huge green and gold bas-relief of Bacchus, the god of wine, surrounds two hulking dark-wood doors. Restaino says the barn's beamed structure reminded him of the scaffolding on the inside of the Statue of Liberty. Restaino chose the patinaed gold, brown, blue and green color scheme to offset the red wine he envisioned members pouring. Downstairs on the delivery staircase, he painted the names of top wineries--Abreu Vineyard, Harlan Estate, Château Lafite Rothschild. "The metaphor was ascending to heaven and you'd drink all these great wines before you die," he explains. Alexander's one design restriction: no leather. He is a longtime PETA member, and he donates to "a million animal rights organizations," including his own sanctuary for abandoned horses in Virginia. The cushy chairs are made of vinyl. Alexander's childhood was a long way from Hamptons wine club founder and basketball team owner. He grew up in the Bronx and then middle-class New Jersey, the only child of an insurance broker and a homemaker (the accent stuck; he says "dooawg" and "tooawk" for "dog" and "talk"). When he was 21, his father died and he dropped out of Brooklyn Law School to help his mother. "There was no money," he recalls. He found he had a knack as a trader, but after stints at several Wall Street firms he tried law school again, graduating with such low grades he had a tough time finding a job. So he went back to trading, this time bonds, for himself, very successfully. In the late 1970s, enjoying his wealth, he began to quaff, not really knowing what he was drinking. "I used to go out to dinner a lot, and Montrachet was the most ?expensive wine on the list, so I ordered it," he says. "It was only $100." Then he started reading wine critic Robert Parker and later newsletter writer Stephen Tanzer and the Burgundy-centric website Burghound.com. Wine buying became "an addiction" for Alexander, who believes you get better value if you buy young vintages in good years, store them well and let them age. He says he's trying to stop at 6,000 bottles, worth $2 million. At age 50 he had more than enough money to retire. Instead he bought the Rockets for $85 million in 1993 and has had a successful run as an owner, attracting players like Charles Barkley, Chinese sensation Yao Ming and, most recently, former Los Angeles Laker Dwight Howard, who signed a four-year, $88 million contract this off-season. "It's like the greatest entertainment in the world, and you've created it," he says. By 2006 Alexander was a member of The Forbes 400, with an estimated net worth of $1.2 billion. He fell off the following year when his 20% investment in for-profit student lender First Marblehead tanked, but he's not headed to the poorhouse any time soon. The value of the Rockets, according to FORBES estimates, is now $568 million. In August Alexander bought a Manhattan penthouse for $42 million, his fifth home among other real estate investments. Buying and renovating a $5.5 million potato barn was no problem. Alexander says he's not trying to profit from Société du Vin but hopes to break even. Out of the gate, that seems optimistic. The club officially opened on Memorial Day--its Restaino-designed invitations were made by hand--and ominously, on an overcast afternoon in early August, there are no patrons in sight (Alexander won't say how many have joined). The vast 55-degree cellar looks empty save for a half-dozen or so cardboard boxes, as do most of the nine private cellar rooms with their polished-wood shelves and chandeliers. What if Alexander can't find enough people to join? "If that happens, we'll get to it at that point," he shrugs. In the meantime he's begun to move in some of his collection, assuring that, at the very least, he has created his own ultimate wine cave.
SouFun (SFUN +10%) shares continue to run after the company reported that Chinese home prices surged 8.6% Y/Y in Aug., the largest leap since last Dec. The market is expected to continue to be white hot, after buyers have seen "a series of land sold at record prices, while the government didn't take much action," according to Mizuho's Alan Jin. The stock has run up 83.8% YTD, but its valuation still "look[s] reasonable," opines Barron's. Previous: Soufun jumps on Chinese real estate market strength Post your comment!
Beijing police hold Liu Hui in what critics and family say is latest example of state intimidation of dissident's familyPolice have arrested the brother-in-law of China's jailed Nobel peace prize winner Liu Xiaobo on fraud charges, in what the family said is the latest act of official retaliation.Beijing police detained Liu Hui on 31 January, just before the lunar new year and a planned family reunion, and formally charged him two weeks ago over a real-estate dispute, lawyer Mo Shaoping said on Thursday. He said the criminal charges were unwarranted in a business dispute that has since been resolved.Liu Hui's arrest is the latest blow to the family and, Mo said, is particularly painful for his sister, Liu Xia, the wife of democracy campaigner Liu Xiaobo. He was imprisoned in late 2008, and ever since he was awarded the Nobel prize two-and-a-half years ago, Liu Xia has been under house arrest. Isolated in an apartment with no phone or internet, she appears emotionally fragile, allowed only weekly visits with family members and a monthly visit to her husband in prison.The latest arrest "affected the whole family, especially Liu Xia, who is worried about her brother", said Mo.Calls to the prosecutor's office in the suburban Beijing district of Huairou where Liu Hui is to be tried rang unanswered. Family members publicly declined comment, but privately one said the stress on the family is taking its toll. They are under close surveillance and have been warned not to talk to the media about Liu Xiaobo or Liu Xia, said the family member, who asked not to be identified.An associate of Mo's, who declined to be named, said Liu Xia skipped her February visit to Liu Xiaobo in Jinzhou prison 280 miles (450km) east of Beijing out of anger at the arrest of her brother.Chinese authorities commonly put pressure on relatives and friends of government critics and political and religious dissidents as a way to try to keep them in line. Even by those standards, the treatment of the Liu family is severe and underscores how the Nobel award embarrassed the Chinese government, which bridles at criticisms of its human rights record and its authoritarian political system."We used to interact with both Liu Xiaobo and Liu Xia's brothers and sisters, but now we have been completely cut off from them," said Pu Zhiqiang, an activist lawyer and family friend. "I think there is only one explanation about this: that the family has been the victim of repressive measures, which are cruel and cowardly."Liu Xiaobo, once a literary critic and university lecturer, had campaigned for peaceful democratic change for 20 years and been imprisoned three times before his current stint, an 11-year sentence for drafting a programmatic call for political reform called Charter '08.The recent arrest of the brother, Liu Hui, may be particular retaliation for two incidents that broke the security cordon around Liu Xia and her isolation in her fifth-floor apartment in central Beijing. Reporters from The Associated Press visited her briefly in December, getting into the building while the guards were apparently away at lunch. A few weeks later five Chinese activist friends did the same thing. In both cases Liu Xia appeared agitated and shaken.Pu, the lawyer and Liu family friend, said arresting and prosecuting Liu Hui in an ordinary business dispute fits a pattern of selectively using the law to harass activists and their families.The artist and prominent government critic Ai Weiwei has faced tax charges, for example, rather than a direct attack against his activism. "State security is increasingly using selective enforcement of the law," Pu said.Police previously arrested Liu Hui in April last year for the same real-estate dispute but then released him on bail in September, Mo said. According to the recent indictment, Liu represented a company from the southern city of Shenzhen in development deals in Beijing, and he and a partner pocketed 3m yuan (£318,000) that was claimed by another party to the transaction.He is scheduled to go on trial in May, Mo said, even though the disputed funds have already been returned, and there's insufficient evidence of a crime. "This is irregular," Mo said.Liu XiaoboChinaAsia Pacificguardian.co.uk © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds
No sooner did the stock indexes go to a new peak than whispers about a "bubble" bursting-- look out below because stocks are vulnerable to a 20%-40% move-- begin to make the rounds. Out ahead of the "bubble" pack was the Treasury bond bubble being predicted for many months by the fixed income gurus who predict QE means a massive inflation-- and by some Cassandras who know scaring the market is their preferred route to obtain television appearances. Lately, with home prices rising every month, and the inventory from the mortgage forfeitures and financial meltdown rapidly disappearing, there has even begun to be worry warts wondering if the run on home prices has had its day-- for the time being. Thankfully, the fears of a "bubble" in commodities, especially crude oil and gold, which have been fomented by billionaire hedge fund impresarios and those wannabe hedge fund billionaire impresarios-- have been relatively quiet. And for good measure, too. The Chinese economy seems to be getting squeezed by tighter capital controls and a slowing in growth. The dollar is strong-- a slap in the face to the gold bugs, who absolutely must have a fast depreciating dollar to get the parabolic rise in gold to $5000 an ounce (it's $1600) that will allow them to sell into it. None of this is remotely like the Hunt brothers driving silver to $50 an ounce in 1980 as they famously tried to corner the market. None of this is at all as exaggerated as the manic spike in Japanese stock and real estate prices in the late 1980s-- which, as we all know well, precipitated the fall since then. None of this is as irrational as the run-up in technology stocks in the late 1990s, when shrewd investors like Leon Levy dared go short and ride the turmoil to profits. Nor does it correspond to the madness of the credit market bubble prior to 2007 when every fool in the world was buying mortgage backed securities without understanding the value of the real estate that backed them or the fantastically dangerous amount of leverage they were playing with. All those incidents-- those painful happenings-- were bubbles bursting spreading pain all about. Lucky for us, esteemed veteran investment adviser Morris Offit, founder of OffitBank, has just published his pithy opinion underscoring that for now no investment asset class is at an extremely irrational level. For a "bubble" to happen, writes Offit, "the price in the market grows well beyond the maximum value that any of the traditional demanders available willing to pay." Even the 10 year Treasury at a yield of 1.50% or 1.85% or 2% looks to be a bubble since the Fed itself is acquiring two-thirds of the newly marketed government debt alongside accumulation from pension funds, insurance companies, clearing houses and family offices. Just because everyone receives a negative return on these securities does not make the Treasury market a "bubble," Offit strongly believes. I'm with him. Yes, eventually interest rates will begin to rise-- but not in a ruinous spike. Summing up, Offit writes; "The special ingredients that are necessary to have a dramatic bubble event are not currently present."
Submitted by Charles Hugh-Smith of OfTwoMinds blog, It is far too early to be projecting much from Cyprus except a continued erosion of faith in Eurozone banks and leadership, and by default, the euro as a placeholder of purchasing power. What do we know now that the Cyprus bank crisis has been resolved? What we know--that the resolution follows basic capitalism 101 guidelines of matching risk and loss, unlike the rejected across-the-board tax on all deposits--is dwarfed by what we don't know, for example: Does the Cyprus "bail-in" set a precedent for much larger Eurozone banking/debt crises? Though the Cyprus resolution is being held up by some as a model for all future Eurozone bail-outs, is the situation in Cyprus truly applicable to larger economies? Is the Cyprus crisis a tipping point that marks a sea-change in perceptions of systemic safety and risk? Though no one can claim with any certainty to have the answers to these questions, we can seek a coherent context for our inquiries. One way to do this is to have a wide-ranging discussion with a well-informed, knowledgeable commentator: in my case, that person is Alasdair Macleod of GoldMoney.com. Here is our half-hour conversation in podcast format. (video format is posted below) Of the many points raised in our discussion, I found these especially relevant to establishing a useful context of the Cyprus crisis: 1. Banks have perfectly legal claims on the money you have voluntarily chosen to deposit. Sovereign nations or multinational organizations like the E.U. may provide insurance on deposits in member banks, but collecting on that promise is not the same as withdrawing your money in a non-crisis situation. 2. Political expediency is often served by changing the rules, either by dictat or by hastily prepared legislation pushed through a legislative body desperate to resolve a crisis in such a way that it retains its own power and autonomy. 3. Cyprus is an offshore financial center designed to attract large deposits from wealthy foreigners (apparently mostly Russians and Britons). In this, it is more like a Caribbean banking center than a large, diverse economy like that of Spain or Italy. 4. The Cyprus banking crisis is fundamentally different from that of Greece. Cyprus is not indebted to foreign banks; its banks are insolvent due to their own mismanagement of loans, assets and risk. The foreign capital is not at risk of a sovereign default; it is at risk of a bank collapse and the seizure of deposits by creditors. For these two reasons, it may be misleading to project the crisis and resolution in Cyprus onto other quite different financial crises in other quite different economies. The common ground may be a rising fear of capital controls and the search for safe havens that won't implode or change the rules overnight. 5. Loss of faith in one's banks, government and currency may play out in several ways. Those depositing cash in Cypriot banks were very likely hedging the perceived risk of holding that cash in local currencies and local banks. The sudden emergence of risk in what was perceived to be a safe haven will likely spark interest in non-banking safe havens, for example, precious metals, and what correspondent Mark G. calls the Glass Jar Bank, which he observes is still a popular alternative in Eastern Europe to entrusting one's cash to banks. 6. A lack of alternative investments leads to asset bubbles in whatever asset is perceived as a safe haven. Households in China, for example, save a prodigious amount of their earnings, but this is not just thrift: the social safety net is rudimentary in China and cash is the only safeguard available. Since the stock market is rightly perceived as a rigged gambling den, the vast majority of Chinese households choose to invest their cash in real estate, as this is about the only alternative to a savings account available to non-Elite households. Alasdair noted that the Chinese government has encouraged its citizenry to buy gold, and I noted that the government is well aware that the real estate bubble--inflated by housing being the only available place to park savings other than low-yield savings accounts--poses a great hazard to the nation's financial stability. 7. As faith in the Eurozone's banks, leadership and currency erodes, the U.S. dollar will gain value as a mathematical function of the dollar index. Add in the devaluing yen and the dollar will rise significantly against the other major currencies. 8. There is a much larger geopolitical game being played in Cyprus. Despite rumors of Russian participation, the Status Quo remains firmly in place: the Troika managed the banking crisis, Great Britain retains its naval base and the West retains access to any offshore gas/oil that might be recoverable off Cyprus. Here is a precis of geopolitical issues revolving around Cyprus: Trouble in the Eastern Mediterranean Sea: The Coming Dash for Gas (Foreign Affairs). What can we conclude about the longer term consequences of the Cyprus banking crisis? In my view, the present confusion is legitimate: it is far too early to be projecting much from Cyprus except a continued erosion of faith in Eurozone banks and leadership, and by default, the euro as a placeholder of purchasing power. Alasdair and I discuss a variety of other topics as well, including the Keynesian endgame playing out in Japan: For more on the the eurozone credit crisis by Alasdair, please read Europe is Drowning Under Too Much Government (PeakProsperity.com) For more on why the U.S. dollar will strengthen by CHS, please read What Will Benefit from Global Recession? The U.S. Dollar (October 9, 2012)
Shunfa Hengye, the real estate development arm of Chinese auto parts billionaire Lu Guanqiu's Wanxiang Group, is looking to expand abroad this year, according to a statement by the company.
JUST inland of Macau and Hong Kong, the Pearl River delta explodes into a sprawling mass of urbanity that includes some of China's largest and most productive cities. The Chinese government is busily knitting all of these cities together into one grand megapolitan area, home to nearly 50m people and stretching over 100 miles across at the widest part. It's like trying to tie the Philadelphia and New York metro areas together—if there were a couple more Philly-sized metros in between the two. The merger is being accomplished via a wave of infrastructure investment, including utility and telecommunications projects but consisting largely of massive spending on transport. China is undertaking similar strategies all around the country, and some clusters may come to hold nearly 100m people.Matthew Kahn and Siqi Zheng have done some analysis of the Chinese strategy. Mr Kahn posts the abstract to a new paper, which reads:Megacity growth in the developing world is fueled by a desire to access their large local labor markets. Growing megacities suffer from high levels of trafﬁc congestion and pollution, which degrade local quality of life. Transportation technology that allows individuals to access the megacity without living within its boundaries offers potentially large social beneﬁts, because individuals can enjoy the beneﬁts of urban agglomeration while not paying megacity real estate rents and suffering from the city’s social costs. This paper presents evidence supporting the claim that China’s bullet trains are playing this role. The bullet train is regarded as one of the most signiﬁcant technological breakthroughs in passenger transportation developed in the second half of the 20th century. Starting in 2007, China has introduced several new bullet trains that connect megacities such as Beijing, Shanghai, and Guangzhou with nearby cities. Through facilitating market integration, bullet trains will stimulate the development of second- and third-tier cities. By offering households and ﬁrms a larger menu of location alternatives, bullet trains help to protect the quality of life of the growing urban population. We document that this transport innovation is associated with rising real estate prices in the nearby secondary cities.Cities are one of humanity's great technological innovations. They are essentially tools to minimise distance in order to facilitate interaction and exchange. Interaction and exchange are the foundation of most of human activity, social and economic. Physical proximity can be achieved either through greater population density or improved transport. In practice, the two are complementary and shape each other. In reading the abstract above, I got to thinking about America's own emerging-market experience and that of some of its great economic hubs. Over the course of the 19th century, the population of New York City rose from about 60,000 to 3.4m. New York had huge natural advantages, but it wasn't a given that it would grow in such fashion. Public works, like the Erie Canal, reinforced the benefits it already enjoyed from its uniquely accommodating natural harbour. But New York's growth also depended on decisions made concerning the city's transport infrastructure, which shaped New York's ability to raise its population and thereby facilitate so much interaction and exchange.At the beginning of the 19th century, New Yorkers concentrated in a tiny bit of real estate at the southern tip of Manhattan. With the expansion of horse-drawn omnibuses and elevated railways, development crept northward, making room for more millions. In the early 20th century subways led to explosive growth in the outer boroughs while commuter rail opened up inner suburbs on Long Island and in Connecticut and New Jersey. Fast rail allowed for greater population density and easy access to business centres from farther afield. New York's economic reach grew, and by 1950 metro New York was home to nearly 13m people.More infrastructure investment followed, but of a different sort: highways. Automobile transport expanded New York's geographical penumbra but generally led to lower population densities. The region's population distribution shifted outward, but overall population growth slowed. This slowdown was rooted in other factors as well, of course, including a deindustrialisation that was itself related to changing transport options.China's investments look extraordinary to many rich-world observers, but they're not so different from those made in the rich world during an earlier period, albeit at larger scale and with more advanced transport technology. It's important to recognise that Chinese rail investment, like New York's rail investment, is about more than alleviation of congestion or pollution. It is about creating economic potential by reducing barriers to exchange. Just as there is a strong economic case for reduction of statutory barriers to trade, based on the gains from larger markets and specialisation, there is an important economic case for reduction of physical barriers to trade.It isn't surprising that emerging markets are typically much more ambitious that advanced economies when investing in new infrastructure. Advanced economies already have a large infrastructure base while emerging markets are building up from very little. Urban population growth is slower in advanced economies because the rural-to-urban population shift has occurred. But just because there is less scope for investment in such infrastructure and resulting increase in market potential doesn't mean that there is no room for improvement. Census data show that the country's largest cities continue to add population. The population of America's ten largest metropolitan areas rose by 800,000 people, just from 2011 to 2012. In many of America's large metro areas, rising populations coincide with increasing rents and home prices, suggesting that housing supply is failing to keep pace with growing demand. If it were possible to raise housing supply growth in such places, in other words, the rate of population growth might also rise. Allowing for more interaction and exchange.There are two ways to raise housing supply growth in growing cities. You can remove barriers to construction of housing, like zoning and height limits. And you can invest in transport infrastructure that increases access to these metropolitan markets. You can also do both, and allow for greater population density around and along new transport lines, the former providing a market for (and financing for) the latter.As Ed Glaeser explains here, new transport investments may not raise demand to live in a metropolitan area where it's lacking. Construction of light rail in Detroit isn't going to make people want to move to Detroit (though intercity connections that gave Detroit better access to other thriving markets, like Chicago or Toronto, just might). But where demand to live in a place is outstripping the ability of local builders to respond, as in coastal California, or much of the Northeast Corridor, that imbalance between supply and demand is a barrier to exchange, and infrastructure investment that reduces the imbalance expands the economy's market potential.America certainly doesn't need to go on a China-like infrastructure binge; it has been there and done that. But expanding trade, foreign and domestic, takes more than just the removal of regulatory barriers. It can also mean a literal expansion in cities' ability to facilitate exchange by helping more people get where they'd like to go, faster.