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Reflections on Urbanization
Editor’s note: On June 15, the 2020 Chinese Cities 100 Summer Forum convened an online seminar on “Reshaping Resilient Cities: Response to COVID-19 and Reflections on Development.” Li Yang, chairman of the NIFD and member of the CASS, was invited to the seminar and delivered a keynote speech entitled “Reflections on Urbanization.” Professor Li Yang pointed to weaknesses in China’s public health system revealed by the COVID-19 outbreak. Urban development should put people first, follow science-based principles, and promote urban-rural integration. The post-pandemic era is overflowing with opportunities to integrate urban and rural infrastructure and public services. This paper is a transcript of Professor Li Yang’s speech, and has been reviewed by him.
Good morning, ladies and gentlemen!
COVID-19 highlights the importance of urban development in China - a topic which contains various issues that need to be discussed. On this occasion, I would like to offer my views on the following two matters.
1. Put People First, and Respect Science
COVID-19 has presented a great many challenges that should motivate us to reconsider most of our traditional development concepts, among which urban development and management are the most relevant to today’s forum. I believe most of you agree that COVID-19 has exposed the inadequacy of our public health and disease prevention systems. During the COVID-19 outbreak, I asked some experts about this and they told me some very interesting things. For instance, there are 889 fever clinics in Singapore, a city-state with a population of 6 million people. Just so you know, I checked this figure to be sure it was accurate. Obviously, having enough medical institutions allowed the Singapore government to cope easily with the pandemic. Yet Shanghai only had 117 fever clinics for its 20 million residents on the eve of the COVID-19 outbreak, and added another 182 later. Even so, Shanghai still has a lot fewer fever clinics than Singapore, fewer in terms of both absolute and per capita levels.
In Beijing, a city of 20 million, there are only 100 fever clinics, and not many more were added after COVID-19 outbreak. Obviously Singapore did much better than Shanghai or Beijing in coping with the crisis, showing the excellence of its public health management. Of course, our systems also have their good points. For example, we were quickly able to implement nationwide lockdowns to swiftly bring the outbreak under control. Yet there is room for improvement. If we had many efficient disease control centers ready and able to collect and analyze information about epidemic outbreaks, we wouldn’t have to start from scratch every time an epidemic breaks out. As new COVID-19 cases re-appeared recently in Beijing, we found ourselves starting over again from scratch and once again closing neighborhoods; yet it is possible that nothing we did over the past few months helped curb the COVID-19 infections. Our piecemeal response to this crisis has revealed the inadequacies in our city management.
Science tells us that as cities expand and become densely populated, infectious diseases will become much more likely. The previous speaker, Minister Wang, said that he wrote an article years ago expressing similar concerns. Though I did not read his article, I am convinced that from a science-based perspective, when a city expands to a certain extent, especially when the number of people in a physical space goes beyond a certain threshold, there will be a sharp increase in the incidence of communicable diseases. We should be wary about this dangerous prospect. In China, there are dozens of densely populated cities that are beyond the threshold - dozens of cities that are vulnerable to public health emergencies and epidemics. Such cities are ripe for the spread of infectious diseases. Over the years, China has built numerous large cities with skyscrapers and bustling streets, and people’s incomes have been rising steadily. Yet our cities have failed to create a desirable living environment for their inhabitants.
On various occasions, President Xi Jinping has pointed to a shortfall of underground facilities in Chinese cities. He said that despite high-rises, boulevards, parks, clean streets and nice skylines on the surface, Chinese cities tend to have poor underground facilities, which inconvenience their residents. He gave Paris as an example. He said that Paris below ground was as good as Paris above ground. As a resident in Beijing, I and my fellow citizens often hear about floods in many parts of Beijing after a heavy rainfall. A few years ago, news about a driver drowned to death under a flooded bridge made national headlines. In every rainy season that followed, many Beijing government officials hurried to the flooded areas to see that pumps were in place to drain floodwaters. Their hard work is commendable. Yet we need to find a permanent solution, which requires great determination. We cannot always look to government officials being present for flood control. All in all, COVID-19 reminds us that it is important for cities to develop in balanced, comprehensive and healthy way. It is increasingly understood that cities are not just conglomerations of cement buildings and wide boulevards. While striving to raise per capita GDP, we should also build our cities in a way that offers a comfortable and secure living environment for our citizens - one in which communicable diseases and natural disasters will not catch us unaware.
Minister Wang mentioned the concepts of smart, resilient, sponge and green cities, which are all very important. Yet COVID-19 reminds us that we need to ask whether our cities are designed for people - average people - to live in comfortably? Concepts like smart, sponge and resilient cities should serve people. If people in a city feel insecure, uncomfortable and have to flee whenever disasters strike, we cannot call this city livable. In a word, COVID-19 underscores the importance of rethinking what we want from China’s urban development.
In my opinion, two things are extremely important: First, we must put people first. Here, what I stress is the human, rather than political, aspect of people. Second, we must follow scientific principles. There are scientific rules behind everything. Following scientific principles, we may model COVID-19’s spread and containment. We should respect science and Nature. One thing is clear: Larger and more densely populated cities are more vulnerable to infectious diseases, pollution, and natural disasters like hurricanes and earthquakes. COVID-19 will not be the last pandemic. With scientific methods, these can be predicted and prevented. Science should be at the heart of our urban planning.
2. Urban-Rural Integration Offers the Best Solution
In most cities across China, we have worked very hard to bring COVID-19 under control. Now it is time to discuss other important issues. First of all, we need to reopen our manufacturing industry - a slow process which takes a few years to complete. Many of you are also interested in the real estate market. Just now, Director Yang mentioned housing. He said that the COVID-19 outbreak was followed by higher housing vacancy rates in most Chinese cities, where the housing price dropped. Yet in some regions, real estate developers have sensed new opportunities from COVID-19.
Some argue that in the post-pandemic era, people will want to live in low-density neighborhoods and shun high-rise buildings. As we know, COVID-19 is more likely to spread in crowded areas like elevators, supermarkets, shopping malls, farmers’ markets, restaurants, and hospitals. In a high-rise building, one infected occupant will spread the disease almost immediately. This concern has prompted a search for new architectural models. Yet our cities have already exhausted large chunks of land available for housing development. The shortage of land is closely related to the direction and pathway of urbanization. The topic of my discussion today is “Reflections on Urbanization,” with which I intend to bring out the root causes behind various challenges for your consideration.
Despite extensive discussions on urbanization, we found little international literature, historic record or monograph on this topic - a topic often regarded with strategic importance in China. Many Chinese academics believe urbanization is vital to China’s economic growth in the coming decades. Most studies on urban and regional development, including the Greater Bay Area, are descriptions based on China’s recent development. There is a paucity of science-based and systematic research specifically on urbanization. We know from experience that the likes of urbanization could be a unique concern in China.
When I was a college student, I was told by my instructor that things like the urban-rural divide and the price scissors between industrial and agricultural goods were the “remnants of old society” left over from capitalism. But when I took a closer look at the history of capitalism, I found something more to it. At least in advanced market economies, the countryside has never been worse than cities. Yet in China, systematic disparities exist between cities and the countryside. In market economies, prosperous cities seldom co-exist with a poor, backward countryside. Throughout history, very few countries have divided their citizens into urbanites and country folks and demarcated their territories as urban and rural land.
History suggests that such urban-rural divide in China originated from the Soviet Union. Neither Karl Marx nor Frederik Engels gave any systematic description of urban and rural differences. The origin of urban-rural disparities that exist in China can be traced back to the Soviet Union with modifications and distortions from their original versions.
The concept of the urban-rural divide can be traced back to the Soviet Union’s industrialization process and development theories. Upon its founding, the Soviet Union diverted all resources to industrial development in cities. This strategy was underpinned by two theories. The first theory concerns the development of productivity. It argues that manufacturing and industry should develop in cities. Soviet leaders believed that priority should be given to developing industries, particularly heavy industries, to catch up with developed countries such as the United States, Britain, Germany, and France. In their view, economic surpluses should be extracted from the countryside, agriculture and farmers to hasten the country’s development. In this context, scholars came up with such theories as the “price scissors” between industrial and agricultural goods and the “surplus grain collection” system. Literature reveals that such systems do not exist in capitalist countries, they only existed in a few countries like the Soviet Union and China.
The second theory is related to ideology. In the Soviet Union’s theoretical system, cities are socialist in nature, and the countryside is capitalist and even feudalistic. Although the collective farm system did away with rich farmers, it was still “collective” in nature and existed as a rudimentary form of public ownership to be reformed into public ownership in earnest. With this in mind, Soviet leaders extracted resources from collective farms in the name of building socialism. These two theories underpinned the urban-rural divide and institutional arrangements which gave priority to industry and cities over agriculture and the countryside. Admittedly, the Soviet Union resorted to these practices under very specific historic conditions. According to Soviet leaders, their choice of “war-time communism” was a last resort to bring about an otherwise slow economic recovery to a war-ravaged country. The problem is that this temporary arrangement, once equated to a socialist path or social advantage, will cause endless harms.
The consequences of the urban-rural divide are all around us - while China is about to complete industrialization, there are still hundreds of millions of farmers struggling for subsistence, our countryside remains backward, and our agriculture still requires state support. As a watershed event in world history, the Industrial Revolution generated tremendous benefits to farmers and the countryside by turning land into capital. The Soviet economy became distorted as it failed to benefit farmers and the countryside. Regretfully, farmers and the countryside are left out in China as well. In China’s industrial development, most capital gains from land have been acquired by local governments and real estate developers in cities. Specifically, local governments acquired rural collective land plots from farmers at a fraction of the resettlement cost compared with proceeds from land auctions to real estate developers. The price difference allowed local governments to fill their coffers. In short, farmers and the countryside were excluded from benefiting from the capital gains of land. For this reason, we still have 500 to 600 million farmers who live on allowances for subsistence and swathes of countryside in stark poverty at a time when our nation is about to complete industrialization.
You may or may not notice that when discussing urbanization, we take it for granted that the countryside and rural residents are isolated from cities and urbanites. With a 60% urbanization rate, we label the remaining 40% of our fellow countrymen as “rural populations.” In a socialist country that claims to put its people first, how can its people be born to be urbanites or rural residents and how can they be treated differently in many important ways?
I noticed that President Xi had these questions in mind. He called for integrated planning for industrial, agricultural, urban and rural development and the building of a new countryside in tandem with urbanization. In 2018, he further noted that “urbanization and rural development should reinforce each other. As cities thrive, the countryside should not be left out... While we continue to build our cities, we should bring elites to the countryside, and encourage farmers to start their businesses.”
At this point, it is high time that China discarded the urban-rural divide, integrated urban and rural development, and pressed ahead with modernizing our country. COVID-19 presents us with a rare opportunity for realizing this transition.
In fighting COVID-19, Chinese policymakers put infrastructure, both traditional and new types of infrastructure, high on their agenda. In my opinion, this approach makes sense. Amid a worsening international environment and flagging domestic consumption, investment holds the key to China’s future economic stability and growth.
The question is twofold: Where should we invest? And where will the money come from?
After decades of investment-driven growth, Chinese policymakers are having a hard time identifying commercially sustainable projects that generate profits and stable cash flows. What is left are less unprofitable and commercially unviable infrastructure projects. We predict that various types of social infrastructure will dominate investment projects in China, as they do in Japan, and that such investments will be made by governments at all levels. Yet as government revenues shrink in an economic downturn, these projects cannot be financed without raising government deficits and bonds. This year’s government work report explicitly calls for raising fiscal deficits, government debt, and special local bonds. This message sheds light on the severity of current challenges recognized by the Chinese government.
In the coming years, to sustain economic stability, China should continue to invest in social infrastructure using public funds and debt capital.
Investment should prioritize urban-rural integration through land market integration and the digital economy.
First, we must adhere to integrated urban and rural development by transforming our lopsided industrialization strategy enacted since the founding of the People’s Republic of China in 1949, eliminate all associated institutional defects, promote the free flow and exchange of urban and rural factors on equal terms, bring about synchronous development in new-type industrialization, information technology and agricultural modernization, and achieve common prosperity between industry and agriculture and between cities and the countryside. At the heart of this strategy is the integration of urban and rural markets, especially land markets. We must apply great innovations and delicate policy instruments to deal with farmers’ “three land plots,” i.e. contract land, collective land, and housing plots. The goal is to “convert resources into assets and equities and farmers into shareholders, and explore new ways to realize and operate rural collective economy.” This strategic arrangement is of vital importance. We expect that through such integration, some urbanites will disperse to the countryside, and those migrant workers will be able to settle in cities. I am convinced that such a two-way flow will facilitate urban-rural integration.
Second, we should vigorously develop the digital economy and the internet economy. On this occasion, I wish to respond to Minister Wang’s message that underscores the role of the smart economy, the digital economy and the information-based economy in spurring integrated urban and rural development.
I find it interesting to read the World Bank’s annual report The Changing Nature of Work, which describes a situation where most people will work in the gig economy rather than on a production line to complete a certain product. As we know, the gig economy is enabled by the digital and internet-based economy, which allows people to take odd jobs over the internet and assemble their parts of work into a final result. How should policymakers respond to a gig economy? I think we should focus on education and personal development. We need to prepare our workforce for the changing nature of work as the gig economy becomes the norm and moves from the periphery to the center stage of industry.
COVID-19 has hastened the transition towards a gig economy. If there is a demand, technology will always offer a solution. If this trend continues, there will be great advances in the development of cities, the countryside, and urban-rural integration. As I recall, a few years ago, President Xi attributed China’s overcapacity to a supply-demand mismatch. Such overcapacity will cease to exist and rapid growth will continue in the coming decades if we match demand with supply in the real economy by means of fiscal and financial instruments. I am deeply convinced of this.
Thank you for your attention!
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