Caixin
Apr 03, 2017 09:41 PM
ECONOMY

Despite Growing Pains, Megacities Rise in Urbanizing China

(Beijing) -- Minor cities are pursuing megacity dreams, while established urban giants Beijing and Shanghai are struggling to control nightmarish growth.

China's cities are thus responding as conditions warrant to the most ambitious urbanization campaign in human history -- a nationwide effort directed by the government since 2010 that's designed to boost living standards and the economy.

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China’s 21st century urbanization rate has already outpaced those reported in every other populous country on the planet. According to a McKinsey Global Institute in Asia forecast, the nation's urban areas by 2025 are expected to have 400 million more people combined than in 2010 -- underscoring a population shift double the size of that stemming from India's urbanization campaign.

Ten years ago, most Chinese lived in rural areas where farming is the chief economic activity. But according to official data, about 57% of the population -- or more than 790 million people -- lived in cities last year. Urbanization is expected to swell that figure to 65% by 2030.

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The big-city boost complements a Chinese government effort to encourage economic growth in less-developed, inland cities such as Guiyang, the capital of the nation's poorest province Guizhou.

Guiyang last year was ranked as the best-performing Chinese city in terms of employment, wage and GDP growth rates, according to the U.S.-based think tank Milken Institute. What was once a sleepy town is now booming with cloud computing services and telecommunications companies.

Another reason why Chinese authorities want millions of farmers to move to cities is that they hope to increase the agriculture sector's productivity.

“The average plot of land per farmer in China is much smaller compared to (those in) all developed countries,” said Jonathan Woetzel, McKinsey Asia director. Moving laborers off farms and into factories has already reduced the number of plots nationwide and paved the way for more efficient, mechanized farming.

“Given China’s large population, it's not possible to rely only on agriculture to fuel growth," said Wu Weijia, a Tsinghua University professor and deputy director of the university's Institute for Architecture and City Research. "Industrialization, modernization and urbanization are particularly important to create employment.”

Growing Pains

The ongoing push to expand cities has not been without growing pains, as urban planners in the nation's seven, officially designated metropolises including Beijing, Shanghai and Chongqing can testify. Beijing's population increased 27% between 2010 and 2015, while Chongqing's urban head count also rose 27% over the same period.

Many of the toughest challenges revolve around the government's "hukou" household registration system, which often limits access to a city's schools and public services to locally born residents. Big-city life can thus be extremely complicated for newly arrived families from the countryside.

Only about 41% of all Chinese citizens hold permanent, urban hukou permits, according to government data.

Beijing in particular has been accused of policies that rely on “selective if not harsh criteria that turns people away,” said Winston Mok, a former McKinsey China consultant now working as a private investor in Beijing.

Some say rigid, arguably caste-like systems have emerged in Beijing and other cities that use the hukou system to bar low-skilled workers who've moved in from rural areas from local schools and hospitals. On the other hand, skilled migrants can get around this obstacle to some extent by paying taxes for required periods of time.

Urbanization has also been blamed for excessive residential building in some cities and tricky land-grab deals that benefit real estate companies and local governments at the expense of farmers.

The practice of building beyond demand in the name of urbanization is now haunting some parts of the country with “ghost cities” marked by rows of new and gleaming -- but vacant -- apartment buildings.

Some cities with blocks of empty buildings are in less-developed parts of the country, such as Inner Mongolia, that were specially targeted for central government support in hopes they would catch up economically with eastern China's wealthy provinces.

Mok said government efforts to encourage urban growth in less-developed areas have had a negative impact on well-developed cities by raising property values -- and in some cases creating real estate market bubbles. As a result, he said, some eastern cities have suffered from housing shortages, steep home prices and high levels of government debt.

A growing pain affecting second-tier cities, which the government defines as those with between 1 million and 3 million residents, involves a lack of housing. People are moving into these cities at a rate that outstrips new apartment construction.

Breakneck development in many cities has exacerbated a variety of other urban problems, such as traffic congestion and air pollution, underscoring a darker side of urbanization.

Big Dreams

Fast-growing Shijiazhuang is a second-tier city whose residents breathe some of the nation's worst air yet dream of achieving mega-city status.

Authorities in this Hebei province city best known for textile and pharmaceutical plants wants to boost the population to 10 million by 2030 so that it rivals Chengdu and Nanjing. A mayor's office projection says Shijiazhuang is on target to be bigger than New York City.

Shijiazhuang's urbanization initiative fits a central government plan to integrate Hebei's cities with neighboring Beijing and the city of Tianjin to create a "super-city cluster" called Jing-Jin-Ji over the next decade. The region is already home to 10% of China’s population.

Shijiazhuang lags behind Beijing and Tianjin in terms of personal income and infrastructure development, Tsinghua's Wu said. Beijing’s per capita gross domestic product in 2016 was 106,000 yuan ($15,379), while Shijiazhuang commanded only 50,800 yuan per head, the government said.

It was also among the 10 most polluted cities in China in 2015, according to the Ministry of Environmental Protection.

At the heart of the nationwide urban growth campaign is infrastructure construction. But Wu said every big city should have a vibrant cultural scene in addition to highways. And it should be livable, not choking on toxic air.

A successful city offers residents economic opportunities as well as a clean living environment, Mok said, citing Xiamen, Qingdao and Chengdu as good examples.

Shijiazhuang's development is tied to transforming about half of the current urban landscape, since more than 43% of the city's inhabitants live in "village" sections of the city dominated by old, one-story homes and narrow lanes.

“Real urbanization depends on how well people are integrated into a city," Mok said. "Several big Chinese cities are far lacking on this count.”

Another dreamer is Nanning, the capital of southern China's Guangxi region and home to more than 6.9 million people. Local officials have set their sights on expanding the city's well-developed area to accommodate 65% of the population by 2020.

Guangxi officials also plan to urbanize a silver, iron and granite mining area near the China-Vietnam border. The plan calls for 5 million city dwellers by 2030.

The eastern cities of Jinan and Qingdao in China’s second most populous province Shandong are also growing rapidly. The province wants to increase the number of urban inhabitants to 103 million in 2020 from 95 million in 2015.

The Yangtze River Delta economic zone has been targeted for more urban development, too. The central government's National Development and Reform Commission has identified five cities in the zone -- three in Jiangsu province and two in Zhejiang province -- to draw enough new residents to form megacities by 2020. Officials have similar plans for three more regional cities.

Because China’s economic growth model is driven by new investment, central and local governments have been pouring trillions of yuan into new roads, railways, subways and other infrastructure.

The Ministry of Finance said about $1.4 trillion (9.6 trillion yuan) was spent on infrastructure development between January and October 2016.

According to a People's Daily newspaper report from the recent National People’s Congress in Beijing, Henan province official Qiao Xinjiang pegged central government infrastructure spending in his province at 100,000 yuan for each person who moves from a rural area to a city.

But urban growth is also generating healthy amounts of revenue for government agencies, since local officials make money by selling or leasing land to real estate developers.

Central and local government agencies pocketed a total 320 billion yuan by selling land-use rights to property developers between January and September 2016, according to the finance ministry. That amount was 13.7% more than governments collected in the same period 2015.

Contact reporter Poornima Weerasekara (Poornima@caixin.com)


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