China’s Urbanization and Local Level Incentives

*By Margaret Myers, Inter-American Dialogue

 

China is moving full speed ahead with newly-approved “people-centered” urbanization efforts. By 2020, the Chinese government plans not only continue development of the urban clusters identified in the country’s 12th Five-Year Plan (2011-2015), but also to grant urban residency to around 100 million rural migrants residing in cities, rebuild rundown city areas and villages inside cities, and promote the urbanization 100 million residents central and western regions. The success of these measures is largely dependent municipal leadership, however, adding a degree of uncertainty to the equation.

Although considerable attention is given to demands from the central government, city officials in China operate with a surprising level of autonomy, and occasionally to the detriment of central government objectives. In pursuit professional advancement (and personal profit, in some cases), Chinese cities have taken on extensive debt for extravagant infrastructure projects — even as central government authorities attempt to control local-level excess. Efforts to promote rapid economic growth at the municipal level have also led to undesirable collective outcomes, especially in terms of land use and environmental degradation.

 

China’s cadre evaluation system is thought to have contributed to city spending sprees. Despite ongoing efforts to reform evaluation criteria (most recently as part of Xi Jinping’s anti-corruption campaign), China’s municipal officials still earn promotions on the basis of economic growth. Evaluations are increasingly tied to a wider variety of performance measures (environmental considerations, per capita income, worker safety, education, employment, social welfare, family planning, conservation of land and natural resources, etc.), but local officials remain committed to producing high levels of GDP growth in their respective cities.

To rein in excessive spending, China’s central government has put tighter limits on state-owned bank lending to municipalities, as David Barboza explains. But officials elude Beijing’s rules by using off-the-books investment companies. The China National Development and Reform Commission (NDRC) also monitors city-level planning by approving all major municipal projects. Local officials can avoid NDRC scrutiny, however, by dividing large construction projects into a series of smaller proposals.

 

The central government’s re-conceptualization of urbanization — from growth-focused to “scientific” to “people-centered” — isn’t happening instantaneously, in other words.

Latin America’s municipal officials also operate with considerable autonomy, although they are occasionally beholden to the broad set of policy objectives associated with their respective political parties. As elected officials, they are also theoretically more responsive than Chinese officials to the interests of their constituents, and — by that logic — more likely to engage in the so-called “people-centered” urbanization to which China aspires.

But democratic governance has also limited reform efforts. Latin American cities often struggle to develop to build and maintain broad social and political coalitions in pursuit of common goals. So while municipal overdevelopment threatens long-term stability in China, political stagnation limits critical reform efforts in Latin America.

China’s ongoing urbanization has largely driven cross-regional trade with Latin America — the region’s raw materials fuel China’s large-scale infrastructure development. Beyond continued trade cooperation, however, is fertile ground for exchange on a wide variety of topics, including city management and best practices in municipal governance. The scale and efficiency of China’s urban development initiatives is unmatched. But Latin American city officials would have much to contribute to any dialogue on urbanization, especially as China seeks to implement new “people-centered”  and sustainable development policy, including to efforts to improve access to services for marginalized populations in urban centers.