China’s “city-making process”: Investors’ power in the People’s Republic
TCA Think Tank
by Pier Alessio Rizzardi. Zhang Hankun
16 August 2014

Real estate in Shanghai. Image Pier Alessio Rizzardi

The world is looking at the urban machine of Chinese cities, at the newly founded theme-cities and at the new urban economic investment areas around the cities. The buildings are repetitive, the areas are sometimes uninhabited, but the thing that leaves urban planners, architects and the public amazed is that these buildings are often completely sold out even before they are completed.

To buy these freshly constructed residences takes money, and over the last three decades the Chinese economic miracle served precisely to grow the per capita income. The reform of the economic system in 1978 was the driving force that triggered the mechanism of capital production. The reform led to millions of people migrating to the cities from the underdeveloped west of the country in search of higher salaries and a well-founded hope of revolutionizing their economic existence.

Real estate in Chongqing. Image Pier Alessio Rizzardi

Two Faces of the Same Nation
When the “economic miracle” began, development was very unbalanced. If we imagineChina not through its geopolitical boundaries, but through its socio-cultural characteristics, we find that China can be divided primarily into two macro-regions: the prosperous southeastern and the underdeveloped northwestern region. The government decreed that it was impossible to develop the whole country at the same time, so all efforts have been concentrated on the idea of giving limited areas the opportunity to develop faster so they could serve as leaders to help stimulate the rest of the country. This allowed some people to have large amounts of capital in order to develop the economic growth of the entire population.

Since the eighties, China has used a “planned economic growth” strategy focusing on the underdeveloped areas by granting special status to the private sector. Thanks to their success, these “Special Economic Zones” have now evolved into larger areas described as “Regional Economic Zones”.

Specifically, the Special Economic Zones began in southeast China (especially inShenzhen, but also Shanghai Pudong, Yangtze River Delta, and in the last years inTianjin). Very few things are left to chance in developing these zones; the government focuses its planning efforts on a relatively small area in which it is easy to control. The first experiment was in Shenzhen, which attracted huge amounts of capital from Hong Kong andTaiwan. Shanghai followed in 1990, and now Tianjin, where the origin of the investment has changed, coming mainly from abroad and from countries outside of Asia.

Real estate in Xi’an. Image Pier Alessio Rizzardi

The structuring of special economic zones and the granting of special status to the private sector played a key role in the modernization of China – this is the mechanism that is driving the development of cities.

This ‘City-Making’ is a financing strategy used by the state for the construction and expansion of cities. Thanks to the availability of capital derived from the concession for private companies to build, even the cities with limited resources can reinvest in infrastructure and public buildings.

The machine of development does not only focus on individual cities but also on a network of connections designed through a global vision of the state. This could suggest several reasons why the authority invests so much in City-Making: improving its political image and demonstrating a will to improve the conditions of disadvantaged areas.

This strategy would be impossible in a free market economy because these plans would not reflect the market trend and would leave the underdeveloped part of the country unchanged. Ultimately, the system could not exist in either the total control of the government or, more disastrously, by a total absence of regulations.

Chinese real estate adverts. Image Pier Alessio Rizzardi

City-Making Process
The state is the only one who can apply property rights and that can allow people to build.

The government grants planning permission to companies or developers, in exchange for funds from the private sector. The expected building life in China is 35 years (much less than in most Western countries) and the long-term contract of ownership is 70 years, allowing investors to rebuild on the same site, and enabling the government to collect extra taxes from the second or third construction. The government controls the land use planning through the enforcement of a master plan that makes land planning partly public and partly private.

When neighborhoods and towns are built, investors must bear the costs of infrastructure, and sometimes they have to engage in the construction of entire administrative districts for the government. Investors adhere to this basic model if they want the huge rewards available through the City-Making Process.

The state maintains a laissez-faire attitude toward the design of developments, providing rules on logical function, limits on buildable cubic meters and on minimum services, but no rules or standards on a building’s form. Whether developers exploit these possibilities comes down to convenience – however new developments are usually limited to tried and tested typologies.

The building boom affects the price of raw materials; after decades of decline, prices began to rise steadily. The demand for raw materials in China is almost half of global demand but it is also the main producer (for coal, 46.9%; steel, 45.4%; zinc, 41.3%; aluminum, 40.6%).

Infographic. Image Pier Alessio Rizzardi

This is interesting data considering that the country generates less than 10% of the global GDP [1]. This difference between demand and GDP shows how much the Chinese government is investing in construction. However, all this growth and production has a price.

In 2012, the number of empty houses was 64 million, 20 new cities were built each year, and in the main cities real estate prices were overestimated by up to 170 percent.

The demand for homes is incessant and the big investors want to fulfil the request. Small investors continue to buy new homes, even if these remain empty for some years, because the projected return on investment continues to rise.

Expectations drive house prices higher and higher. After years of rapidly rising prices for real estate, consumers driven by uncertainty would do anything to buy a property today and this artificially increases the demand for houses on the property market. Psychological pressure is the main cause of the continuous increase in prices.

Shanghai real estate adverts. Image Pier Alessio Rizzardi

Slaves of the Loan
The owners are “slaves of the mortgage”. They work for 15-20 years to scrape together a down payment and they work another 20-30 years to pay off the mortgage. However, their stable situation does not last long because the houses will be the subject of future renovations or demolitions. In addition, the property remains state-owned and once the 70 years ownership is completed the state may decide to remove them and make room for other buildings.

Once the growth is stimulated, the government tries to limit the “collateral damages”. The government has understood the problem of rising prices and the loss of agricultural land and is trying to crack down on property speculation with capital controls, increasing taxes on the property, and limiting ownership to only one house per person. However, none of these methods is having the desired effect, and the questions of wastage and inflated prices remain.

What Happens To Architecture?
We can argue whether this attitude is sustainable or not but instead let’s talk about architecture, and try to understand how architecture is influenced by such a huge production.

The government cannot do anything but plan the urbanization – it does not have power over the architecture. The architects define the buildings, while the government sets the rules within which private enterprises create the city.

The characteristics of this architecture are the low expenses, the simplicity of the finishing and the reduction of time for the design process and construction. The formal result of the architecture of City-Making is architecture of cheap and repetitive features but that is cost effective and efficient at the same time. The limits of the site are explored in every direction to achieve the maximum volume possible. The typologies are usually imitations of those used previously.

Fake shops at a real estate development in Xi’an. Image Pier Alessio Rizzardi

The result is the architecture that has been built in recent years in China. New areas of construction follow the height limits of the building code, creating belts of towers of the same height around the centers of historic cities like Beijing. This is the materialization of construction laws that establish limits and the desire of the private sector to maximize revenue.

Architects are not free but bound in a system from which they cannot escape. Architects receive directives from clients/developers, while the power of the state remains in the background. Ultimately, it is the developers that create the city, not the architects nor the state.

Repetition is useful to China. Building types which have already been tested restrict the possibility of failure. This shortens the production time of architecture, enabling the architectural production of City-Making, which is one of the driving forces of the economy in China.

Everything apparently works until proven otherwise.

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