What's At Stake in China's Urban Future

Mark W. Frazier

September 24, 2015

One day into Xi Jinping’s visit to the United States, it’s clear that one of his key talking points is to address American concerns over the future of the Chinese economy. Americans should wonder about the prospects for the Chinese economy after the turbulence in global stock markets and slower GDP growth. Will the “new normal,” as Chinese leaders now term lower GDP growth rates, spell new problems for the rest of the world as China (just as the United States has done in the past) “shares” its adjustment costs with its trading partners? Amid these concerns, there’s a crucial transition that gets less attention than it should in American foreign policy circles: the rapid urbanization of China and its impact on the global economy.

President Xi Jinping’s September 2015 visit to the United States presented a natural opportunity to collect and share the thoughts of some leading Americans on key U.S.-China policy issues.

Americans Speak to U.S.-China Policy

Read all essays in the “Americans Speak” series.

Welcome to Washington DC, President Xi
Senator Mark Kirk (R-Ill)

Views on the Chinese President’s Upcoming State Visit
Congressman Charles W. Boustany Jr. (R-LA)

Let’s Be Frank
Robert Sutter
George Washington University

Low Oil Prices May Drive U.S.-China Energy Cooperation
Dennis Blair
Sasakawa Peace Foundation; Member of the NBR Board of Directors

The U.S.-China Economic Relationship: Challenges to Competitiveness and Opportunities for Innovation
Deborah Wince=Smith
Council on Competitiveness

What’s at Stake in China’s Urban Future
Mark W. Frazier
The New School

What Would New Breakthroughs on Climate Change Mean for the U.S.-China Relationship?
Joanna Lewis
Georgetown University

By 2030, China’s urban population will reach one billion. But that figure is of lesser significance than the manner in which China’s urban transformation unfolds. The American media’s fixation on “ghost cities” and other empty showcase projects distracts from the broader fact that Chinese cities (old and new) in fact need a much greater supply of affordable housing, infrastructure provision, and municipal services than now exist. As the urban population expands by about 350 million over the next fifteen years, where will the new urbanites live? How will they get around, what jobs will they do, and who will provide for the range of public services that will be needed? Will Chinese cities be the “engines of growth” that some anticipate? Will some of them become centers of creativity and innovation? Or will urbanization in China simply reproduce the vast inequalities that now exist between rural and urban populations, as migrants fail to find adequate employment and housing? As one considers the impact of certain forms of transport, urban planning, power supply, food consumption, building design, and emissions, among much else, it is easy to see that we all have a stake in how China urbanizes.

The record thus far is not very impressive. China’s fiscal and political institutions greatly incentivize urban officials to treat urbanization as a pageant in which the grandest and in some ways least efficient designs and plans get advanced under collaborations with cronies in real estate development and construction firms. Even the greenest-looking of urban development projects, such as wetland and riverfront rehabilitation, often showcase the natural aesthetic at the expense of displaced residents. The proliferation of information technology parks and creative or artistic spaces can seem impressive to visitors, but very few have succeeded in incubating sustainable start-up technology firms or vibrant arts and culture districts. And as automobile sales continue to show, middle class urban residents are buying up cars in part because the cities they live in lack adequate public transportation infrastructure.

China’s urbanization is also influenced by the that fact that Chinese leaders, arguably since the founding of the People’s Republic of China (PRC), view cities as sources of political trouble. Hence, long-term restrictions are imposed on rural residents establishing residency in cities (they are allowed to come for urban employment but not to become permanent residents). And of course, cities are home to universities, blue-collar workers, intellectuals, and other sources of potential opposition and popular protest. This sensitivity about urban areas has led Chinese urban planners to adopt a diffuse pattern of urbanization rather than build mega-metropolitan regions (such as a Washington-Boston corridor). The much talked about Beijing-Tianjin-Hebei agglomeration is a potential exception to this rule, but there’s a political reason that China has over one hundred cities of more than one million people. Thus, a cost-benefit calculus for the Chinese leadership has pushed it toward accepting cities as a provider of jobs and GDP, but with inherent risks to social stability that must be carefully managed.

China’s urbanization also will determine future energy consumption and its environmental impact. As the world’s leading consumer of coal and leading emitter of CO2, China and its leadership are well aware of the need to move toward more sustainable sources of energy. Yet the construction projects involved in the building of new urban areas, and the energy consumption of those who inhabit the new cities, can create enormous amounts of particulate emissions and other pollutants. How can this be managed? Consider also the basic question of what temperature the average urban Chinese household will decide is comfortable for heating in winter and air conditioning in summer. How can power grids bear the tremendous stress? Will they fall back on coal as the cheapest alternative?

Finally, we have to worry about the local debt of Chinese cities. As numerous studies have shown, most municipal governments have leveraged high levels of debt through various transactions involving funds borrowed to build new highways, airports, civic centers, and so forth. As pressures to continue providing for an expanding urban population grow, many local governments lack the fiscal capacity to generate further investment. The PRC has rolled out an urbanization plan at the very time that its municipal governments are heavily in debt.

The creation of new cities and expansion of existing ones in China is a highly complex process, involving millions of detailed decisions on what gets built where and for whom. For this reason, China’s urbanization can hardly be controlled from central government agencies in Beijing. Nor is urbanization a topic for diplomatic dialogues or negotiations. But when it comes to talks on climate change and carbon emission goals, on bilateral investment rules (including procurement contracting), on access to service sectors, or on the nature of ownership in creative and intellectual property, the Chinese government’s ability to fulfill any proposed commitments will be heavily influenced by the patterns and outcomes of China’s urban transformation.