A TPDEARR Article
Trans-Pacific Dynamic Equity Allocation Research Report
Just as there are no natural laws enforcing fairness and equitability, there is no escaping disparity in modern life; no matter what civilization accomplishes, people and resources are not evenly distributed and inequality will persist. In this SEP.24 TPDEARR issue, we buck the conventional Western ideological approach to demographic comprehension and instead view an important relationship within national societies and between people groups through the quintessentially Chinese framework of “bianjiang wenti” (the “frontier question” in official Chinese rhetoric), which poses and deals with the issue of disparity between a nation’s core urban centers and its peripheral regions, localities and borderlands.
A whole new encyclopedic library could be erected and filled with analysis of Western societies through this practice, so suffice it to say that herein we can present only glimpses of a far grander undertaking. Nonetheless, the practice of broadening perspectives contributes instrumentally to expanding comprehension, and there’s much we can learn about economic development, demographic trends and the possible futures of capital flows by applying the viewpoints of contending competitors to each other’s circumstances.
The economic world today still orbits two poles, the US (the world’s primary customer) and the PRC (the world’s primary factory and supply chain hub). For about the past century, the greater global community has been subject to an ideological regime colloquially referred to as “the rules-based order”—a Western-imposed conceptual framework seeking to level and regulate behaviors among international players against agreed-upon laws and rules, and atop which sits the US as the hegemon and loudest voice. The precedents used to conceive of these laws and rules are almost wholly Western-originated, and enforced by Western-located institutions. We hope the analysis in this article serves as useful information and counter-positioning to the status quo.
The Inner Frontier
Countries are not demographic monoliths, even for small city-states like Singapore, with its large Malay and Indian subgroups sharing space and political power with a majority-Chinese population. Many of the differences between demographic groupings are intrinsic (i.e., traditions, beliefs), others are interrelated and overlapping (i.e., history, language, cuisine, security, governance), while others still can be viewed as disparities (i.e., the “haves” vs. the “have-nots”/wealth vs. poverty, population abundance vs. resource abundance). Through the lens of bianjiang wenti, we view all of these different dynamics as they are contained within the geospatial-economic network spanning from major politico-urban centers on the one hand, and out to their borderlands/surroundings, aka “the frontier”, on the other. How to handle the differences between these two domestic/internal demographic groups is the essence of the “frontier question”. The gains and advantages of modern society are not equally distributed between the centers and peripheries of a society, but accrue much more to urban cores. This is a self-fulfilling prophecy, as increases in economic traffic through an area (no matter how rural) beget increases in capital flow, which beget commercial growth, which begets urbanization, turning crossroads and backways into cities and centers of culture.
In the PRC, each of the two groupings has distinct demographic differences; the majority-Han, boasting several dynasties’ worth of imperial lineage, were the primary purveyors and beneficiaries of PRC statehood (following the fall of the Qing dynasty in 1912, and “victory” over the rival nationalist Kuomintang in the Chinese civil war that followed WWII) and continue to hold the power strings economically and politically, as well as ~91% of the total populous. Frontier/borderlands in China, which are inland from the coastal megacities, demonstrate ethnic diversity in ways that Han-centric urban cores do not, as would be expected from the separate settlings of thousands of different people groups over thousands of years. Dealings between the two groups are not on equal terms—consider the plights of native Tibetans in the (southwestern) Tibet Autonomous Region or Uyghurs1 in the (northwestern) Xinjiang Uyghur Autonomous Region as two among many examples. Moreover still, as a modern nation, the PRC and CCP have both been indelibly shaped by Mao (a Han) and every other paramount leader up through Xi Jinping (all Han), so there can be some parallels drawn to White/Anglo-Saxon majority power in the (much newer) modern US civilization. The differences between them, though, are non-trivial. Consider the following dichotomies:
- In the US, Euro-originating interlopers invaded and occupied the North American continent and overtook indigenous populations with guns and disease to assume demographic power about 250 year ago. In the PRC, Han peoples have been vying for control of the sprawling Chinese heartland with other regional ethnic groups for millennia. That they have assumed power now is but one of many such instances throughout Asia’s history.
- In the PRC, regional pockets of China’s 55 different primary minority ethnic concentrations scatter throughout the countryside, all with long histories, languages and established native claims to the local area, intermixed with those of the Han. At a practical level, the ethnic subgroups and dialects number in the hundreds and constitute about 9% of China’s population with a population growth rate that is more than double that of the ethnic Han majority. In the US, Native American populations, who have lost >90% of their people and >99% of their land through the centuries-long European colonial conquest, are one of the smallest census-recognized groups and only number ~1-2% of the US total population; they do not hold significant sway economically or politically. Most of the small cities and towns in the US are populated by Whites, not indigenous or First Tribes peoples, and a foreign traveler would be forgiven if it felt like there was a de-facto “Whites only” policy still in place in many of them. Stark demographic differences color “small town America” much differently than the pseudo-equivalent “rural Chinese village”. There are “native” Han Chinese in the PRC, but there are no White Native Americans; some people still struggle incorporating this idea into their notion of US history.
- In the US, the White-majority has shrunk notably over the decade leading up to the 2020 census and now makes up less than 58% of the total population (compared to the 91% majority of the Han in the PRC), with urban areas proving to be particularly diverse (and Democratic) relative to rural America.
- In the PRC, the 91% majority Han constitute only 85% of the delegates of the CCP’s National People’s Congress, so all minority groups are technically over-represented, with each sporting at least one delegate. However, only 1/3 of the 55 minority ethnic groups are represented in the Central Committee, the CCP’s official body of 375 “lawmakers”. In the US, by contrast, all non-White ethnic groups combined account for only 28% of the House of Representatives and 12% of the Senate, indicating Whites are dramatically over-represented in lawmaking, likely a product of 250 years of successful political gerrymandering.
- In the US, the White majority is more heavily represented in rural/frontier towns than in cities, and the more rural the area, the more likely the White voter is to vote Republican (= inner/heartland/rural country slants hard towards one side of a bipartisan spectrum). In the PRC, Han-majority-controlled political machinations are concentrated in urban cores and transpire from the top downwards; the common citizenry does not have electoral suffrage to select their leader. Approximately 100 million people are card-holding members of the Chinese Communist Party, 95% are ethnic Han, and there is no such thing as an opposition party. The frontier in the PRC is facing much different political circumstances than in the US.
Clearly, significant ethnic majority-minority dynamics are at play in addressing biajiang wenti in both the PRC and the US. In both countries, demographic makeup differs between urban cores and rural frontiers. In both countries, political power and financial resources concentrate in cities. In both countries, federal jurisdiction and administration overlaps with provincial/state administrations. In both countries, managing the frontier question requires addressing and incorporating the ethno-cultural differences between the two groups, and distributing power, opportunity and resources across asymmetrically endowed geographic areas. In all countries, however, bianjiang wenti is highly individualized depending on each nation’s particular situation and historical context. Seldom will one country’s solutions fit another’s problems.
Imaginary Borderlines, Real Borders
National borders are imaginary lines. If they weren’t written down on paper, they couldn’t possibly be agreed upon. For all of human history, occupants of all continents have managed to get by without them. In the age of empires that immediately preceded the development of the modern nation-state complex, managing territories and the people groups contained within them was usually handled from the inside-outwards, meaning that core/central/imperial palace concerns were the innermost ring of security and control in an outward-spreading series of concentric spheres of influence. Apart from naturally-occurring geographic formations, there was usually no such thing as an outermost wall or border edge, as all such peripheral areas were in constant flux depending on the perceived shrinking or expanding strength of the central empire. There peripheral frontier-lands have always differed demographically from the politico-economic nodes they orbit, and the history of China, the longest and grandest still-surviving civilization, is no exception.
Over millennia, control over “China” has vacillated between the Han and other ethnic groups (Mongols, Manchus, Jurchens, et al), but the reins of power have virtually always been held from the major urban centers nearer the coast, with the inner heartlands representing the sprawling “frontier”, just as is the case in other (much, MUCH newer) vast modern nations like the US and Australia, as well as in other geographically-smaller Asia-Pacific economies2 like South Korea, Japan, and Vietnam. Managing frontier areas and the perimeter of a kingdom or empire was a tenuous process of establishing “buffer zones” around the more-critical core areas, while testing the reaches of available power in extension outwards through a border-area which was inevitably porous due to the limitations of practical reach from a center of power. Tributary systems were particularly effective in this capacity for many a Chinese dynasty. In the switch from empire to nation-state, though, all of a sudden, there is supposed to be a set distinction of territorial space—a hard edge, demarcated on a paper map (which itself is invariably secured away in a core urban area), encompassing the range of endowed territory into which no foreign interlopers are “legally” allowed to pass. The implementation of internationally-recognized borders is obviously a very different contextual understanding of territory than that employed during the imperial days, and it does not eradicate the complexities in trying to assimilate (without destroying) the wide variety of people groups spread across China into a singular national identity3. The “frontier” has changed in its modern definition, but the natural resource, political, and inter-ethnic disparities between frontier and “core” (coastal) areas in China has not; Xi Jinping and the current CCP are highly attuned to this dynamic and mention it in policy regularly, indicating the prevailing elite do not view the question as being sufficiently solved. The Belt and Road Initiative (in its domestic capacity) and policies involving “regionalism”, “inter-regionalism” and “westward development” all seek to guide more integration between peripheral provinces and coastal cores, as well as within and among the peripheral frontier (“bian“) regions themselves.
We must remember that, despite however long a group’s occupancy may predate the arrival of the majority, it is never really in a minority group’s power to choose whether or not it is assimilated into a larger society in the process of nation building; it is typically a reality that is forcibly pressed upon them, frequently against their will, but nonetheless practically irreversible. In today’s time, the PRC cannot openly do to their own ethnic minorities what so many Western nations did to theirs4 during their state-formation years. The real borders of imaginary borderlines enmesh localized societies that often previously coexisted separately, but must now interrelate in ways that perhaps neither party asked for. Some nations, like South Korea, Japan and Vietnam, are highly homogenous and struggle little with minority group assimilation as they don’t amass in disruptively-large sub-populations. Other nations, like Indonesia and Malaysia, are substantially multi-ethnic and have not the luxury of unopposed ethno-centric governance, especially when comparing their relatively democratic political structures to the single-party dominance of CCP leadership in the PRC. Stakeholdership in policy choices and market dynamics is diverse and varied, and there are no easy answers to equitability questions. But one thing remains true: successfully integrating inter-regionalism unlocks economic prosperity by bolstering previously underperforming minority groups and localities, much the same as incorporating migrant diversity into domestic industry accelerates economic gains—folding in difference increases innovation, commercial resilience and network strengths. Like it or not, minority groups within the frontiers of a country’s borders, quite literally, have nowhere else to go.
In the crack of the door forced open by pursuing positive integration solutions to bianjiang wenti, we TPDEARR investors and capital allocators find a compelling set of opportunities.
Unlocking What’s Within
Resources, such as minerals, solar energy and space, come in abundance across frontiers, whereas urban zones harbor capital and human resources aplenty. For each to fully benefit, these separate sets of resources must be shared with each other beyond what occurs “naturally”, wherein capitalism-motivated urban cores suck up frontier resources to their own empowerment and share little of the gains with the frontier. As marketplaces of ideas, cities always progress faster. In the West, this issue is oft referred to as some linguistic version of “bridging the urban-rural divide”, where the idea of rural outlays (legislatively-approved distributions, subsidies, infrastructural upgrades, utility upgrades, post-secondary education expansions, etc.) is prominently featured—maintaining a strong suggestion that it is deficits in frontier areas that set them back in economic progress—the idea that frontiers might “catch up” to urban cores through provisions. While modern upgrades5 are certainly critical, the differences that define frontiers are also positive in nature, and don’t just represent lacks in comparison to cities.
Through bianjiang wenti we can understand that frontier areas can have unique and substantial offerings. In the PRC, relaxing the hukou household registration system is opening up greater opportunities for frontier-born peoples to access (higher, better) education and (better-paying) employment in urban cores, which also gives the urban cores new access to new labor pools. This opportunity is unprecedented in modern China, and presages economic pathways for regional groups that have historically been denied greater direct access to China’s urbanization benefits6. This would be a rosier outcome if it weren’t the case that there aren’t enough available urban jobs for the people who live there already. Total unemployment in the country has risen over 5% (inching ever higher than the OECD average of 4.8%), and (separated out) youth unemployment over 20%(!), which means there are tens of millions of active job seekers (many of them with highly-qualifying graduate degrees) across the urban cores with no employment spaces for them to fill. To unlock the potential of the newly-influxing frontier cohort in this type of economic environment, it is likely that innovations among the entrepreneurially-minded will be the difference makers and drivers of success, but such creme-de-la-creme of the micro and small business variety has yet to rise to the observable surface for our TPDEARR investing capacities, though we remain vigilant on the lookout. With that, let us turn southwards…
In Australia, the frontier-lands do not harbor an abundance of labor capacity just waiting to be unlocked, but rather another kind abundance: solar energy. Broad, flat and sunny. Now this is a positive difference that can be mutually beneficial to urban cores and the frontier alike. Discussed further in our SEP.24 Natural Elements article, this aspect of the Australian frontier, in conjunction with China’s dominance in the photovoltaic (PV) industry, serves as a strong basis for our selecting of [SEP.24 Squad Asset #1]. In everything PV, China wins. The most capitalistic success will come from firms who can successfully leverage positive market relationships with CN firms to exploit solar reserves in frontier spaces.
Another notable market of untapped frontier reserves exists in Mongolia, which is mostly frontier land, and which the US is strongly courting right now. 88% of the mineral exports coming out of Mongolia’s frontiers are unprocessed, so establishing commercial infrastructure domestically to process these exports would represent an enormous step up the value chain for Mongolia, and would very sufficiently address their own bianjiang wenti, potentially even up-classing a segment of their frontier labor force for new industry opportunities. Mongolia, though, sets nestled between two much larger powers (Russia and the PRC), it does not currently have sufficiently large capital investment reserves or a technically-advanced demographic class to “level-up” its industrial sectors, and it is substantially beholden to China as a trade and security partner. The PRC receives some 80% of Mongolia’s total exports, and Mongolia is dependent on its southern neighbor for food security, so its negotiating leverage is severely compromised. One way or another, Mongolia needs assistance unlocking its frontiers, but it must carefully balance its own demographic concerns internally while selecting how best to internationalize. Massive in-migration of thousands of Russians fleeing conscription to the Ukraine offensive have further complicated demographic balance, so all eyes will continue to train that direction to see how tempers can be stayed in the name of mutual progress.
Another approach to unlocking what’s within comes from, paradoxically, sending out workers and students to attain income opportunities and advanced education in other countries, then returning their skills and capital to frontier lands to integrate novel solutions from abroad. Many international migrants from rural areas have no promising economic opportunities locally, and the remittances they provide can be unprecedented in their relative scale. Mexico and China routinely rank in the top 5 diasporas globally, and their domestic economies benefit tremendously from the income and knowhow that their migrants attain abroad and relocate domestically. Moreover, 95% of executives surveyed across 10 countries are eager to establish more globally diverse teams, so the consensus is in: demographic diversity is one of the keys to unlocking commercial success across the frontier.
Additional Notes
Maximizing the economic and quality of life gains for frontier regions is an overarching goal of bianjiang wenti, and the larger the country, the larger and more difficult this task becomes. Investing in improvements to the unique offerings of the frontier and incorporating them into interconnected, interregional networks with equitable commercial integration is critical to optimizing this process, but that’s easier said than done. The frontiers typically do not have the capital to make this happen, and the urban cores are typically less enthusiastic about money-losing commercial efforts extended out to frontier regions, no matter how ethical and necessary they may be, so governmental guidance is imperative in incentivizing the private sector to help facilitate this process. Each administration is tasked with accomplishing this in close consideration of the different demographic stakeholders at play; no easy feat. Regardless, closing the urban-frontier disparity gap is a cornerstone of country formation in the modern age. When high-income localities inflate too quickly, they “hollow out” frontier regions and suck them dry of their human and natural resources. Balanced growth must be achieved so the one doesn’t end up destroying the other.
Entrepreneurs are an extremely important part of growth in competitive market economies, and they contribute immensely to innovation in every industry. Globally, new business density, which the World Bank measures as the number of new businesses registered per capita, is trending up in all income categories; the ratio of businesses to people is growing. The high-income nations’ rate of new business density is the highest at 7.3 new businesses per thousand people, more than 18x the ratio for low-income economies, representing an enormous opportunity to “to increase formal entrepreneurship activities and associated new business density”, greatly accelerating the rate of innovation and commercial progress for these lower-income countries. Nationwide digitalization efforts, increasingly more widespread, bring tremendous new opportunities to budding entrepreneurs in people groups populating frontier regions, enabling integration with the formal business economy in previously inaccessible capacities.
Adjusting to the new-age business economy proceeds in fits and starts. Residents and travelers through Asia will certainly understand how there are still substantial cash-only “businesses” operating in what can be quite large “informal economies”. In addressing this issue, an argument can be made that attempting to legitimize many of these micro food and service related businesses could constitute a prohibitively large administrative burden, effectively locking out many older and less formally educated entrepreneurs and forcing closure of locally beloved markets and service providers. Or, it could be argued that the possible upsides are limited for formalizing such businesses, so it’s not worth the effort. We reject these theories that effectively dismiss entrepreneurship beneath a certain threshold of economic significance as they fail to incorporate how increases to business acumen and financial literacy that come with more formal participation are exponential and unfolding. Instead, we contend that the economies that acknowledge the significance of the entrepreneurial class and design policy and legislation to support their efforts will accelerate their economic gains beyond competitors who fare worse in this practice. Apart from Hong Kong and Singapore, who have high new business density due to their restricted geographic areas and histories of strong pro-market reputations, most of East Asia has a long way to go in improving affairs for domestic entrepreneurs. The US remains the most-favored place to start a business by many, with 8 of the top 20 entrepreneurial cities in the world, but Australia is also a notable bright spot in the discussion and we look forward to following more Aussie business founders as their operations grow.
Entrepreneurs are an emergent demographic class everywhere humans live, but it usually takes financial literacy for a business to grow to a size where investors can start to take action in helping it expand. Promoting financial literacy and providing effective administration tools are variable challenges, especially for frontier regions less connected to urban cores, but the benefits of facilitating new business activity is paramount for economic success and digital services are becoming more accessible every day. This is a new era of computer-powered, digitally-networked, AI-assisted, internet-promoted entrepreneurialism that we are living in, and the class of participants therein is being likewise molded in the same environment, so unprecedented commercial adaptations await just beyond the observable horizon. Encouragement by a central authority to use and engage in entrepreneurialism can go a very long way, especially in frontier regions. As usual, we don’t know for sure what we’re in for, but there can be no doubt that remarkable people populate those far-off frontier spaces; bianjiang wenti can be a discussion of their opportunities rather than a critique of their dilemma.
Humans around the world demonstrate the constant allure and draw of cities every day7; cities grow of their own gravity. But the frontier—undeveloped, unbuilt, untamed—is the other side of the coin. The city needs the resources and space from the frontier to grow. The broad frontier hosts the little urban cores, not the other way around. It is very much a travesty that we, as a society, struggle so greatly to sufficiently channel the fruits of our economic fortunes back to the frontiers that begin all supply chains. All hope is not lost, though. In seeing the frontiers as vast and plentiful in their own endowments, we can break free from the conceptual rut of rural deprecation and step forward into a more equitable understanding of who provides what for the cities that power our society—a worthwhile approach to bianjiang wenti.
- The label “Uyghur” itself is a sort of collective euphemism applied by the CCP to a variety of mostly Turkic-speaking settler groups in and around the Tarim Basin in northwestern China, only some of which may have ever referred to themselves with the term. To many of these peoples, we suspect being called “Uyghur” is somewhat like a Native Cherokee or Hopi on the North American continent being called “Indian” by ignorant European colonizers. Widespread unfamiliarity with Chinese history among the international population has contributed to the reinforcement of the use of this term as it loosely applies to the collection of ethnic groups being forcibly reorganized throughout Xinjiang province in China.
↩︎ - Even island nations like Indonesia, Malaysia and the Philippines share the quality of having their capital and economic centers located near the coast, with other smaller ethnic groups being more heavily representative in inner “frontier” areas.
↩︎ - This relates closely to another prominent issue in China—minzu wenti, or, “the national question”. What is the Chinese national identity? With so many different ethnic groups, how can a singular identity be reconciled? In the US, the “melting pot” ideal holds a prominent position, though it does still stand opposed to another position in the power struggle: anglo-centrism. In the PRC, Han-centrism has prevailed, and is irremovably engrained into the conservative old guard, who still hold all the power strings. Solving minzu wenti will remain an ongoing task for the PRC (via machinations of the CCP, which have become increasingly repressive in the modern era).
↩︎ - Consider the systematic genocide of Native American tribes as one paramount example.
↩︎ - The Biden administration recently announced “$7.3Billion for Clean, Affordable, Reliable Electricity for Rural America”, which is fantastic for renewable energy infrastructure, but as a clean energy financing scheme, it serves more as a higher basis from which all localized businesses and consumers might thrive than it does as a targeting mechanism for individualized market success opportunities. Good government policy; less-good of a market opportunity. Next.
↩︎ - To be clear, the hukou/household registration system has origins dating back 4000 years. In 1950, at the dawn of the Maoist era, following WWII and the Communist victory in the Chinese civil war, nearly 90% of China’s citizens lived in rural/agricultural areas. Growth in the modern era required tight control over internal migration and agricultural assets; the hukou system was necessary and critical to prevent uncontrollable outflows of people and resources that would’ve undoubtedly collapsed the local and regional economies of wide swathes of the countryside entirely. Though many have penned some of the effects of the system as cruel throughout the years, alternative outcomes that could’ve transpired had the system not been in place could’ve certainly been far worse. Extremely large populations are difficult to manage. Reform is underway. The best of luck we wish to them and their efforts.
↩︎ - We are also guilty of drawing attention to urbanization and cities. We do it regularly in our TPDEARR issues. Like this, here.
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