China is no more a single market than any other large economy, a basic point but one that bears repeating. The McKinsey Quarterly has given visual expression to that thought with a map delineating the country’s central and eastern mega-conurbations. It also offers a reminder that Greater Shanghai is as large an economy as Switzerland.
The chart is excerpted from a larger McKinsey Quarterly article, Winning the $30 trillion decathlon: Going for gold in emerging markets.
This Bystander likes a hypothesis that can spread its wings and take flight. That land-use reform and reform of local government finances are key to developing sustainable, efficient, livable, and competitive cities in China would be one such proposition.
It is not so fanciful an idea. The argument runs thus:
Low-carbon cities need compact urban form and smart spatial development. But related concerns linked to the rapid expansion of cities such as congestion, local pollution, and safety also increase when public transport becomes less competitive as a result of poor spatial growth. Rural agricultural land is over-consumed. Cities expand into areas with higher risks of disasters or higher ecological values. Contingent liabilities increase from off-budget borrowing linked to land expansion. And equity concerns arise over the compensation of rural land users on the urban periphery. Reforms in land-use planning, municipal financial frameworks, and changes in spatial development can address these concerns and promote low-carbon growth.
Its proponents, Axel Baeumler, Ede Ijjasz-Vasquez and Shomik Mehndiratta, are three of the authors of Sustainable Low-Carbon City Development in China, a new book looking at the development of low-carbon cities in China. It is published by the World Bank and is a 500+-page miscellany of urban development projects the Bank has been involved with in China and elsewhere. We suspect it has been somewhat hurriedly assembled so that publication could happen early in China’s current five-year plan, which calls for both continued urbanization and a significant lowering of the country’s carbon intensity. Aimed at city officials, the book is a why and some starter ideas type of book. A second edition promised for a couple of years time is intended to be a more detailed how-to manual.
The first edition doesn’t break much if any new ground. Its value lies in pulling together so many disparate aspects of sustainable urban development that have to be connected for success. For example:
If coordinating all those isn’t challenge enough for city officials–and just think of how many ministries, administrations, agencies, departments and offices they cut across–there is also the perennial question of the country’s scale. China is set to add an estimated 350 million residents to its cities over the next 20 years–and that after three decades of unprecedented urbanization, modernization, and economic development. Some 13 million people move from the countryside to the city each year, putting sustained pressure on all forms of public services: energy, water, transport and waste.
At the same time, China has set itself ambitious goals to reduce the carbon and energy intensity of the economy and to transition to low-carbon growth. The current five-year plan, which runs to 2015, sets a target of creating of 45 million jobs in urban areas. It also contains, for the first time, an explicit target to reduce the carbon intensity per unit of China’s GDP. A 17% cut is the goal by the end of 2015, as a milestone on the road to a 40%–45% reduction by 2020.
China’s cities will have to lead the way if these goals are to achieved. They have a sufficiently high degree of autonomy, and, as the authors note, they are “politically, financially, and administratively organized to act quickly and to realize national policy goals”. The true secret to why China’s so-called state capitalism has delivered three decades of double digit economic growth is that its city officials’ career advancement (promotion to a more powerful level of connections) depends on delivering local economic growth. Collectively on a city basis they are given a fairly free hand by central government to create raw GDP growth regardless of the environmental and social cost (up to the point it threatens the Party’s legitimacy to rule). As a market-based incentive it is pretty red in tooth and claw. But it has worked.
If China is to achieve its twin goals of larger but greener cities, it will have to change the incentives dangled before city officials. That, in turn, means dismantling the underlying mechanism that now allows them to work so effectively–the link between land use, finance, and urban sprawl.
Local governments are overdependent on land development for revenue, and particularly on sales of collectively owned rural land to property developers. As a result many Chinese cities have more than doubled their built-up area in no more than 10 years. Changing how cities finance themselves needs to be rethought fundamentally. That means tax reform, better direct access to debt and capital markets for cities, and new ways to facilitate fiscal transfers from higher levels of government.
Bits of that, such as greater municipal bond issuance, are starting to happen. But a lot of stars will have to fall into alignment for it all to come together so the sum of the parts is greater than the whole. A lot of vested interests are challenged. They will have ample opportunity to frustrate the process. Not only will it require new sets of both administrative and market-based incentives to encourage the development of low-carbon cities, with the market-based ones becoming increasingly more important, it will also require an administrative culture that facilitates cooperation across what are now largely independent fiefdoms.
It will also require one more thing. Residents who want to live in more liveable, energy-efficient cities like, and are prepared to be active in creating them.
Filed under Environment, Politics & Society
Just A Small City In China Getting Bigger
More than half of China’s population now lives in cities, as has been widely noted, making the country predominantly an urban nation for the first time. Two-thirds to three-quarters will likely do so by 2020. It was one in nine when Mao took power.
Urbanization has been a main prop of rising living standards, and promoted as government policy. Arguably, China’s has been the most managed such migration from farm to factory in history. The flip side of that has been an ever-widening urban-rural income gap. While that has been true for the past 30 years, it was only under the most recent five-year plan that diminishing the gap became a high policy priority. Measures were introduced to support agriculture, farmers and the countryside. They continue under the current five-year plan.
The scale of the migration from country to city is immense, some 300 million people over the two decades to 2020, needing to be provided with shelter and jobs. That is the numerical equivalent of moving the entire populations of Guatemala or Mali or Ecuador every year for 20 years.
China has 661cities by the official count. They have the capacity to absorb some but not all of those arriving from the countryside. China’s list of urban conglomerations with populations in excess of 20 million may soon extend beyond Guangzhou, Shanghai and Beijing, but small towns and cities are designated under the current five-year plan to provide the new homes, jobs and social services that will be required to absorb 40% of the labor coming off the land. As the coastal provinces are transformed into high-end service economies and manufacturing is moved inland, the eastern megalopolises won’t need vast swathes of new unskilled labor. Hence the push to develop satellite towns and second- and third-tier cities in the poorer central and western provinces. Towns and small cities are also seen as a bridge across the urban-rural income divide.
Yet, as recent events in Wukan and a host of other places earlier bear testimony, it is proving to be a troubled passage because of the fault lines in local government and the weak legal framework for land rights. The later has meant that planned rapid development has been possible because land could be taken in the name of a greater public good, but the combination has made the process highly uneven, often exacerbating inequality and sowing social discontent, leaving migrant workers and villagers, in particular, disgruntled and shut out from the benefits urbanization is meant to deliver.
One one estimate, farmland expropriation for urban redevelopment displaced 60 million-70 million people between 1990 and 2007. That is an order of population the size of Thailand, France or Italy. Even the mass migration from Italy to the U.S. at the end of the 19th century over a similar period emptied out only a third of Italy’s population.
The growing pains of towns and small cities across the country, like large ones, are all too evident. Infrastructure development–for roads, sewage, potable water, flood defense–often struggles to keep up with the rapid pace of industrialization and urbanization. Similarly, social services, transport and education. Local environments, and so quality of life, pay a huge cost, too, as land is chewed up for development and inadequate infrastructure fails to prevent the despoiling of what is left.
Some towns and small cities work better than others. Top-down planning going spectacularly wrong, resulting in ghost towns such as the much-ridiculed Ordos in Inner Mongolia, may be the exception to the rule, but the variable results in other places is partly of their own making, partly systemic. There is high variability in both the quantity and quality of trained local officials, in their cosiness with local business interests, and, most importantly, in their relationships with the next level up of government.
That last matters so much because the hodgepodge of tax and bureaucratic powers of small towns are often contested with the next higher level of bureaucracy. As a result, selling land rights to companies and developers from larger cities has become the usual way for town officials to raise funds. Wukan may have been an extreme case, but being bilked out of land by corrupt or incompetent local officials who want to turn it over it for urban development is at the heart of hundreds of thousands of similar if smaller-scale and less prominent disputes and protests every year.
These protests increasingly worry Beijing. The Party’s legitimacy to rule turns on delivering rising living standards for all. Economic development was meant to forestall social unrest, not foster it. It should also concern the rest of the world. Urbanization is an essential precursor to rebalancing China’s economy towards domestic consumption.
Beijing’s new plans for managing social unrest are designed to deal with its growing problems with urbanization. It can no longer count on the traditional cohesiveness of rural communities and danwei in the big cities to self-police. The technological upgrading of police and their surveillance capacities, and the tightening of control over mass media, including microblogs, are central to controlling the larger scale of protest that cities enable. Dissidence, whose wellsprings tend to be in the universities and artists and writers studios in the cities, is being cracked down on. Yet, tackling the root causes of social disgruntlement requires reform of local government finances and governance, and most of all, land rights. Otherwise the influx of millions of migrants into towns and small cities will only exacerbate the fault line that is trembling below.
Filed under Politics & Society
By 2025, Shanghai and Beijing will have higher GDPs than Los Angeles and London, a further sign of the world’s eastwards economic shift. The prediction comes from the McKinsey Global Institute, the economic research arm of McKinsey & Co., the international consultancy firm, which has been working on mapping the changing economic power of the world’s metropolitan areas, and is recirculating some work on this it first released in March. Shanghai is already among the world’s top 50 cities ranked by GDP, but as well a Beijing, Chengdu, Chongqing, Foshan, Guangzhou, Hangzhou, Nanjing, Shenyang, Shenzhen, Tianjin, Wuhan and Xian will all join it by 2025, McKinsey predicts. European cities will be most numerous among the dropouts, but another will be Taipei.
This Bystander had to retire to the peace and quiet of the country to pour over McKinsey’s recently published data dump on global urbanization, Urban World, Mapping the Economic Power of Cities. It is a trove of information and projections that brought out our inner wonk faster than you could say ‘megalopolis’.
Urban World ranges far beyond China, but even restricting ourselves to those parts germane to our immediate interest was mind-boggling. China is on track to become the first nation with an urban population of 1 billion people–sometime between 2025 and 2030, McKinsey reckons. One hundred new Chinese cities will enter the ranks of the world’s 600 largest economic conurbations by 2025. China will increase the number of its megacities–those with a population of at least 10 million–by 13 over the same period. And so it goes on and on.
The strains on land, energy, water and the environment will be immense; as will be the demands of providing adequate urban social services. Megacities or megaslums? More broadly, the shift in the world’s urban axis east and south will have tremendous implications for what we now call the developed world. We shall endeavor to return to these subjects in some detail, but meanwhile, on the grounds that a picture is worth a thousand words, and two twice as many, here is a graphical representation from McKinsey’s report that highlights the sheer scale of the urbanization China is undertaking and the wealth it will create.
First, population and per capita GDP for 2007:
Now, the projections for 2025:
That is quite some transformation. And remember urbanization is a policy priority.
Filed under Economy, Politics & Society
China Bystander 