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
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
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
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
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 . 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
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
Everything apparently works until proven otherwise.