The following is an invited contribution to the China Policy Institute Blog (thanks to Jonathan Sullivan for the invitation and editorial support). The theme of the blog at the time of the invitation was ‘environment’, and to me, this cannot be detached from the issue of China’s speculative urbanism that has been sweeping the country for years.

  • Updated on 12 October 2014: A related piece is published in the CITY journal in September 2014. It is entitled Contesting Speculative Urbanisation and Strategising Discontents. Click here to read the paper. Related blog post can be found here.

China Policy Institute Blog » China’s Speculative Urbanism and the Built Environment

Published on 24 April 2013

Critics have been speculating since the 1990s that China had already entered an ‘urban age,’ with a large number of migrants unaccounted for in the national census. But it was not until 2011 when the majority of the country’s national population were to be found, officially, in urban areas for the first time in history. From the viewpoint of the built environment, China’s urbanisation has entailed a massive accumulation of the country’s fixed assets through investments in infrastructure, facilities and real estate properties. Key cities have led the way. For instance, in the case of Beijing, the city’s share of total fixed asset investment in its gross regional product was more than 40 per cent for much of the 2000s. More than half of Beijing’s fixed asset investment during this period went into the real estate sector. Such a mode of urban accumulation plays out in a geographically uneven way. In comparison with Beijing, the share of Tianjin’s total fixed asset investment in its gross regional product was more than 50 per cent in 2008, and rapidly rose to 71 per cent in 2010, but the city’s investment in the real estate sector remained around 20 per cent or less during the first eight years of the 2000s.

With the rapid accumulation of wealth at both household and municipal levels, China’s urbanism has displayed what Michael Goldman refers to as ‘speculative urbanism’. Unlike the case of Bangalore in India that was the subject of Michael Goldman’s discussion, China’s speculative urbanism goes beyond the scale of individual cities, and spans across the entire nation, coordinated by the local and central states in scalar politics that play out in a negotiated, less-conflictual way. The local and central governments have led the way by financing infrastructure projects to transform China into an urban, industrial and modern country. So-called first-tier cities such as Beijing, Shanghai and Guangzhou have strived to promote themselves as ‘world class cities’, often with the help of large-scale mega-events such as the Beijing Olympic Games, Shanghai Expo and the Guangzhou Asian Games, which justify targeted developmental projects (see Shin, 2012 for more details). Urban redevelopment has also become a key area of government intervention, as urban spaces previously organised according to the socialist values face commodification.

At the centre of the urban transformation in China lies the importance of land resources as a means to finance development. Various direct and indirect taxation and most importantly, conveyance fees upon the transaction of land use rights from the state to end users (developers in particular), have become the major contributors to government finance. Under the system of tax sharing between local and central governments, land revenues are fully retained by local governments as extra-budgetary revenues, which propel growth-driven local governments to pursue the grabbing of more land resources (see Hsing, 2010). This happens in three ways: the expansion of existing urban administrative boundaries (including merging with neighbouring counties) to bring more rural lands under the control of urban governments; the use of special economic or development zones to leap frog development, resembling what Stephen Graham referred to as splintering urbanism; and finally, the assembly of existing land resources within urban boundaries to put them into a higher and better use through redevelopment.

In China, speculation emerges on various fronts, including real estate speculation and developmental projects that are implemented in a pre-emptive manner, often supplying more than what can be consumed and with the expectation that demands will follow. State-funded high speed railway projects in recent years or the construction of so-called ‘ghost towns’ where new flats remain largely vacant are only some of the numerous signs of China’s speculative urbanism. Housing prices in the commercial housing sector have risen beyond the financial means of average urban households, driving young families to become ever more dependent on the support from extended families to set their first steps on the property ladder.

In order to raise land-related revenues for local governments and secure profits from putting existing land use into a higher and better use, the speculative urbanism incurs the assembly/expropriation of urban and rural lands, the demolition of neighbourhoods and villages, and the mass displacement of existing residents. This increases the possibilities of local unrests as a result of disputes over who is to benefit from new developments. Until now, most localised disputes by individual households have remained isolated, although the scale of urban residents’ displacement has been phenomenal and some of the individual protests against eviction have grasped the nation’s attention (see Shin, 2013).

As land resources are finite, there are limitations on cities’ horizontal territorial expansion and the current mode of urban accumulation based on the mobilisation of land resources will eventually hit the ceiling. The central state seems very much aware of this eventual ‘doom’, and has begun to experiment other supplementary measures such as imposing property taxes on households purchasing second homes, which began in Shanghai and Chongqing in January 2011. While the property tax experiment was initially proposed as a means to curb the real estate speculation, it would as well become a new avenue of raising property-related government revenues, though it is questionable whether this will have any profound impact on the way people perceive housing as exchange value.

The heavy investment in the built environment in the forms of fixed assets has been the biggest contributor to the country’s macroeconomic growth in recent years. Although the central state has begun to emphasise the importance of consumption as the next engine of economic development (hence the focus on strengthening the ‘middle class’), the importance of fixed asset investment will continue and will become more pronounced, especially as speculative urbanism spreads from the eastern coastal region to the hinterlands in central and western regions. The new leadership led by President Xi Jinping aims to achieve a 60 per cent urbanisation rate by 2020. This is a political statement of aspiration that delivers a clear message from the Party State, which is likely to continue to promote urban-based accumulation and to make use of its economy of scale as a means to protect the domestic market vis-a-vis the cyclical turmoils of global economic crisis.

What will be the implication of speculative urbanism for the future of Chinese cities and their built environment? One of the obvious consequences is the continued commingling of urban revolution with speculative urbanism, which aims to demolish and reconstruct existing structures in order to put them to higher and better use. In cities such as Beijing and Shanghai, investors will look for ways in which urban spaces can be put to further developmental projects on the basis of (both aesthetic and functional) obsolescence rather than physical dilapidation. Urban spaces are expected to be further subject to consumption based affordability and accumulation needs, as cities are increasingly restructured to meet the needs and aspirations of emerging middle classes (whose consumption and spending are emphasised by the political elites) and of domestic and global investors. The built environment therefore reflects and embodies the growing degree of inequality and injustice emerging from economic, social and political disadvantages experienced by the new urban poor, unskilled migrants as the new ‘underclass’ and ethnic minorities. For the moment, social, economic and political stability are finely tuned by the local and central state, which are endlessly engaged in scalar politics for exercising their power in the context of China’s rise as a geopolitical superpower in both economic and political terms. The balance is so subtle that any crack will certainly raise the alarm for the nation’s leadership.