Planning reform proposed in China’s growth strategy

China250If you are 30 years old, then 260 million people have moved from rural China into its cities during your life time. This amounts to more than half of the current EU population. 117M moved in the decade between 2000 and 2010. Environmental pollution in many of these cities is still terrible, and for many migrants the housing conditions remain well below acceptable western norms. However, a case can also be made that this has been the most successful mass-migration from the countryside in human history. But now serious questions are being asked, and reform is on the agenda.

An urban transformation
Urbanization has been fundamental to China’s astonishing development since the mid-1980s. A peasant economy has been transformed into a globally leading manufacturing and services economy in the space of one generation. Half a billion Chinese people have been lifted out of poverty over that period. I first visited China in 1997, and each time I have been back since then I have been awe-struck by the pace and scale of urban growth.
The UK government is still resisting the case for a post-2015 urban Sustainable Development Goal. China has no such qualms. The Chinese government, perhaps better than any other, understands why urbanisation is so important. It has learnt from experience, and has recently undertaken a far-reaching review of that experience, aided by the World Bank.

The kind of questions China has been asking are: How can a new model of urbanisation become an engine for higher-quality economic growth? How can more efficient urbanisation support China’s future economic transformation? How can more inclusive urbanisation promote integration and cohesion? How can more sustainable urbanisation help slow environmental deterioration, achieve more efficient use of resources, and advance food security objectives? They are questions that every government should be asking, even those in countries like UK where urban growth is not so driven by rural to urban migration.

Efficient and inclusive urban development
The result of these deliberations was a recent report, Urban China: Toward Efficient, Inclusive, and Sustainable Urbanization.  It identifies six priority areas for action:
1. Reforming land management and institutions. The rapid spread of the cities has eaten into the supply of land for agriculture. The report says currently the amount of farmland available is close to the minimum necessary to ensure food security. The conditions for initiating and regulating the land conversion process have varied, with very little planning control in villages, as farmers became developers and landlords, while elsewhere local governments requisitioned land at cheap prices. To achieve more efficient use of land, the report calls for legal limits on rural land taken for public purposes by local governments, and recommends market-based pricing for industrial land, and shifting the zoning of industrial land to commercial and residential use. This is to encourage the development of service industries and provide a stronger economic base for smaller cities and lower housing costs.

2. Reforming the hukou household-registration system to provide equal access to quality services for all citizens and create a more mobile and versatile labour force. The hukou system is an origin-based rather than a residence-based registration system. It denies rural migrants full citizen rights and equal access to urban services. In effect it has been an anti-urbanisation measure. China’s urbanisation level remains below the norms for a country with this level of GDP per capita, and there is still a massive rural labour surplus. A new residency system is sought that will provide a minimum standard of public service to all residents – and further boost the move to the cities.
3. Placing urban finances on a more sustainable footing, while creating financial discipline for local governments. The report recommends moving toa revenue system that would ensure a higher portion of local expenditures is financed by local revenues. Local governments should be allowed to borrow directly, but within strict central government rules.
4. Reforming urban planning and design. The hope is that basing the government prices for industrial land on market value will encourage land-intensive industries to move to smaller, secondary cities. Cities are also urged to make better use of existing urban land through flexible zoning, with smaller plots and more mixed land use, which would lead to denser and more efficient urban development. Linking transport infrastructure with urban centres and promoting coordination among cities would encourage better management of congestion and pollution.

5. Managing environmental pressures. The most important task for achieving greener urbanization is enforcement. The report calls for China to focus on “green governance”.

6. Improving local governance. Local government needs to become more efficient, inclusive and focused on sustainable urbanization.
Reforming planning
The report argues that “China would benefit from replacing the current standards-driven master planning with more dynamic approaches based on sound economic strategies for cities.” Like other World Bank reports it backs agglomeration economies. However, the belief that land prices will lure factories to smaller cities looks more like an act of faith in neo-classical economics theory than an assessment of the full range of factors that will shape industrial location.
Rapid urbanisation and economic growth have dramatically increased traffic levels and congestion, as cities spread beyond their traditional boundaries. New approaches to metropolitan governance are needed.
A sobering figure in the report is the one that says that 95% of urban growth in China is now low density edge-city or leapfrog development. There is very little infill and redevelopment. If this continues urban areas will triple in land size by 2030, urban energy consumption will triple, with the sprawl accounting for 59% of the increase.
If you want to understand China’s patterns of urban development and the operation of the planning system there, then this report is the place to start.