Transformation is Awaiting the Aerotropolis

The Covid-19 pandemic decimated aviation, airports, and global trade, at least in the short-term.  It is unlikely to reverse their long-term upward growth trends, though, since these are structurally determined. Airports will play ever more-important roles as anchors of expanding networks of air routes connecting people, businesses, and cities worldwide. This will make them business magnets and regional economic catalysts as they attract globally linked, time-sensitive firms to their immediate environs and drive them outward, creating a new urban economic form — the aerotropolis.

Aerotropolis is the brainchild of Dr. John Kasarda, the Chief Advisor of the Zhengzhou Airport Economy Zone and President of the Aerotropolis Institute China. In this episode, we are honored to interview the father of the aerotropolis concept to talk about its challenges during the Covid-19  pandemic era and its post-pandemic era opportunities in shaping foreign direct investment, global supply chains, and trade. Dr. Kasarda will also discuss the Zhengzhou Airport Economy Zone (ZAEZ) and why it has earned the reputation as “China’s Aerotropolis”.

Question

The Covid-19 pandemic has not only taken over one million lives   worldwide but it has also dragged the global economy into the most severe recession since the Great Depression. Do you think the global economy will be stuck in stagnation, and if so, how long do you think the recession will last?

John Kasarda

Many parts of the world are in poor economic shape due to the Covid-induced economic downturn, but overall, I feel that most will experience significant recovery by the end of 2021. China’s economy has already rebounded along with its domestic air passenger traffic and air cargo exports.  The United States is likewise rebounding while Europe is recovering a bit more slowly. My expectation is that the global recession will not last beyond 2021. Nor will there be a repeat of the Covid-19 pandemic after 2021 since a vaccine will likely come along before the middle of that year which will prevent a future resurgence. As a result, though there will be a handful of individual countries remaining in recession, most countries should return to normal economic growth within 2 to 3 years from now.

Question

Will Covid-19 bring any change to the development of aerotropolis?

John Kasarda

No. The collapse of aviation and economic downturn caused by Covid-19 will only impact aerotropolis development in the short term. Aviation and airport economies have gone through a number of downturns during past crises such as SARS, the swine flu, and the great recession of 2008–09. In each case, resolutions of the crisis occurred and within two years afterward, aviation and aerotropolis development expanded at a healthy pace, continuing their upward trajectories.

Question

What do your think are the five keywords that define the future of aerotropolis?

John Kasarda:

Speed.We live in an economy where time is not only cost but also money. Time-based competition will predominate in global supply chain management, high-end manufacturing, and e-commerce. Those locations that develop economies of speed, which the aerotropolis optimizes, will capture a disproportionate share of new global investment.

The second keyword is agility. The aerotropolis provides agility and flexibility to firms by allowing them to respond quickly to changing market and supply chain conditions. This agility, facilitated by aviation, also enables firms to acquire the highest quality production inputs from throughout the world at the lowest costs.

Connectivity. Despite political tensions, we live in a connected world. The aerotropolis is about rapidly connecting countries, cities, businesses, and people so that they all might economically advance.

A premise of the aerotropolis model is transformation. The subtitle of my aerotropolis book is “The Way We’ll Live Next”.  Aerotropolis represents new ways of living and working.  In the past, people avoided living near airports because of noise, congestion, and other problems. This has changed in recent years as wealthier residential areas have sprouted close to airports. The advantages of airport proximity attracts frequent business travelers who are among an expanding number of higher-income residents who chose to make the aerotropolis their home.

Economic transformation is likewise an aerotropolises function. Foxconn, employing over 200,000 workers in the ZAEZ represents a major aerotropolis firm leading the economic transformation of Zhengzhou and Henan Province. Foxconn’s transformative impact also greatly expanded the ZAEZ’s air cargo system that can deliver products anywhere in the world in days or even hours while simultaneously allowing ZAEZ firms to source components worldwide quickly and efficiently, making the ZAEZ a trade dynamo.

Prosperity.The aerotropolis attracts investments and generates jobs while bringing prosperity to a region and creating opportunities for people of all walks of life from taxi drivers and warehouse workers to investment bankers and corporate lawyers.

In short, by bringing speed, agility, connectivity, transformation, and prosperity to businesses and places, the aerotropolis benefits all.

Question

How has the process of FDI location decision-making by multinational firms changed in the last two decades, and how can the ZAEZ adapt to these changes to attract more FDI in the future?

John Kasarda

The factors shaping FDI location decision-making have been evolving. Costs were once the near-exclusive factor in multinational firm manufacturing location decisions. In the past, multinational firms sought locations that would minimize manufacturing cost inputs such as low-skill labor, materials, utilities, and taxes along with acquiring incentives.

Over the last 20 years, the FDI location decision-making process has become much more complex. As manufacturing grows smarter and more sophisticated and China opens up, new decision-making factors have come into play. Cost and incentives remain important, but other factors such as talents and livability are increasingly emphasized by multinational firms pursuing foreign locations. As such new factors emerge, multinationals are utilizing site selection consulting firms to assess numerous locations and guide where they should invest abroad. These consulting firms gather an immense amount of information and data via the Internet and other sources to build models for foreign firm location optimization based on industry requirements and specific company needs. Such models form the empirical foundation for their recommendations to multinational firms on where to place their FDI.

Given these changes, the ZAEZ should stay in close touch with major site selection consulting firms providing them with pertinent data and information on why the ZAEZ represents a preferred location in China for a foreign firm to prosper. Since the site selection consulting firms often know which multinationals are exploring investment abroad, this strategy will be far more effective than the ZAEZ trying to directly contact executives of the firms that they would like to attract. It is especially important that the ZAEZ determine the metrics major site selection consulting firms typically use in their models and make sure the ZAEZ’s websites and its other online content provide such  data and information. This is absolutely essential since many foreign locations are either eliminated or selected to be in the short-listed group for follow-up site visits based initially on online research by the site selection consulting firms. Good online content can help the ZAEZ make the first cut and possibly even get into the finalist group of locations for investment.

Question

Apart from attracting FDI, what other roles should the administration of the ZAEZ play to make the region a better place? 

John Kasarda

Areas that possess or attract top talent always do well in terms of business and urban development. Thus, if the ZAEZ wishes to fully attain its economic transformation goals by moving up the value chain of business and industrial development, talent recruitment will be key. Success here rests heavily on creating the social environment that appeals to younger, better-educated Chinese managers and professionals as well as expat executives. The ZAEZ has done a commendable job in providing high-quality housing and green recreation areas, but that’s not enough. Social life and urban amenities need greater emphasis for the ZAEZ to improve its talent recruitment and retention. This means the ZAEZ needs to upgrade its shopping venues and introduce quality international restaurants as well as develop trendy areas with vibrant nightlife and other urban amenities that talented labor prioritizes in choosing where they wish to live, work, and be entertained.

Question

You, as Chief Advisor of the ZAEZ, are the key person, proposing and leading the project branding the ZAEZ as “China’s Aerotropolis”. Could you talk about why the ZAEZ has earned this distinction?

John Kasarda

The ZAEZ is really quite remarkable. It is one of the few airport economic zones in China that has met every condition to be branded an aerotropolis. The ZAEZ successfully brought together aviation, multimodal surface transportation, business investment, and urban development in an integrated fashion in executing the aerotropolis development model.

The investment outcomes that occurred speak for themselves. During the past 7 years, over 100 major industrial projects have called the ZAEZ home. This includes impressive amounts of investment in sectors such smart electronics, biomedical, logistics, and e-commerce.

Many other ZAEZ advances are aerotropolis oriented, such as its immense  “Air Silk Road” cargo flows to Luxembourg. Based on its global air cargo accomplishments, the ZAEZ accounts for 60% of the value of Henan Province trade and in the process has created approximately a half million jobs onsite. This led the People’s Daily to crown the ZAEZ  as “China’s Aerotropolis” in April 2019.

Some have noted that the success of the ZAEZ in evolving into China’s Aerotropolis benefited from its leaders closely following the strategic roadmap I prepared for them in 2012–13. However, I can take at most 1% of the credit for offering the aerotropolis model as guidance. The other 99% credit must go to the leaders of the ZAEZ, including its Administrative Committee and department heads as well as officials of Zhengzhou City and Henan Province, who efficiently implemented the model to make the ZAEZ China’s Aerotropolis.

About the Author

John D. Kasarda, Ph.D

Chief Advisor to the ZAEZ

President of AIC

Chairman of IAP

Dr. Kasarda, is professor emeritus of the University of North Carolina at Chapel Hill. He developed the Aerotropolis model defining the roles of aviation and airports in urban economic development. He guided and helped the planning of 20+ airports and their surrounding areas globally, such as Memphis Airport, Dubai World Center (Dubai South) and Taiwan Taoyuan International Airport. He guided the development around the airports and what to do to turn these areas economic catalyst of the regions.

Dr. Kasarda has published more than 100 articles and 11 books on aviation infrastructure, logistics, urban development, and business competitiveness. His book, “Aerotropolis: The Way We’ll Live Next” (co-authored with Greg Lindsay), was featured in Time Magazine in 2011 as one of the “10 Ideas that will change the world”.

Dr. Kasarda received the “Yellow River Friendship Award” in 2016, and the Order of the Long Leaf Pine, North Carolina’s highest civilian honor for the contributions he has made. 

Author: Kira Liu

Organizer: Yang Bai Editor: Binbin Yao  Translator: Helen Liu Proofreader：Vine Li

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