India chasing growth via urbanisation; but will it pay off?

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Updated: Aug 25, 2016 9:54 AM

Earlier this year, I traveled a few hours north-east of Beijing. Here, the distance between Beijing (municipality) and the coal-belt region of Shaanxi (province) is palpable. The countryside plays...

Deserted construction or “ghost cities”. Local governments are buckling under debt from building such cities. (Reuters)Deserted construction or “ghost cities”. Local governments are buckling under debt from building such cities. (Reuters)

Earlier this year, I traveled a few hours north-east of Beijing. Here, the distance between Beijing (municipality) and the coal-belt region of Shaanxi (province) is palpable. The countryside plays dead—the surrounding landscape is limpid, the air from the mining weighs heavy. Surprisingly here, which is literally the middle of nowhere, are acres of skyscrapers large, tall and impressive, both finished and unfinished but all bereft of the slightest quiver of human life. The taxi driver ferrying me shrugs nonchalantly saying there would be plenty other such “ghost cities” to be sighted en-route.

Deserted construction or “ghost cities”. Local governments are buckling under debt from building such cities. And then there are the costs of citizenising migrants into urban areas. The embrace of the urban dream in times of economic slowdown does not come easy. China’s “new normal” of lower growth (6.5-6.7% in 2016) unveiled the potential of urbanisation to drive demand and consumption.

Urbanisation was seen as the bridge between rural and urban China, turning farmers into urbanites—in times of overcapacity—and fueling demand for household appliances, infrastructure and durable goods. Agriculture employs 35% of China’s labour force, and a jump from farming to city-life was thus eased and anticipated. Urbanisation was seen as an opportunity to co-opt a part of the 280-million-strong migrants into urban life. This was the bottom-line of the State Council’s New Urbanisation Plan (NEP) 2014-2020.

In China, urbanisation (56.1% in 2015) far outweighs urbanisation in India (31% in 2011). China entered the urban era in 2011, when the urban population overtook the rural population for the first time from 17.9% in 1978 (170 million urban residents).

How does China chase its urban dream? The easiest route has been altering the topography of the countryside, resorting to what has been called a “short-cut to modernity”—by building “a city without a city”. A case in point (from among several others) was Chenggong, touted as a planned city (according to residents, again in the middle-of-nowhere) that would de-congest capital Kunming (of the south-western province of Yunnan). Provincial offices, schools and hospitals were to be moved to the new city—which would “help” the population to move. There was a great deal of local resistance, largely unreported by the press. Today, Chenggong has turned into a “ghost city”—it has all but residents.

The case of Kangbashi district in Ordos (Inner Mongolia province) was highlighted by the international media. Kangbashi, spanking new, was built on the back of profits from mining and speculation—a planned “smart city” with opulent architecture. But, with few people calling it home or any real activities happening in it, it joined the ranks of the ghost cities—reportedly, there are 12 such “cities” in the province.

Local governments have done their bit—such as gently coercing people to move—by merging local schools (at the village level) into large schools located in the towns and counties.

The other mechanism has been administrative re-organisation—a town is upgraded to a city or the county is upgraded to a municipality by redrawing administrative boundaries. Often, villages on the outlying areas of the city are co-opted within city limits. In other words, rural residents become urban residents without have to move bag and baggage—the city is at their doorsteps.

But driving half a billion to urbanise and become consumers takes a lot of effort. In attempting to boost consumption, the urbanisation of land has happened faster than urbanisation of the population. Local governments urbanise by building industrial parks and zones. Many build skyscrapers. Many others build dream or futuristic cities—for example, Zhejiang province has built a miniature Paris. Tianjin municipality has created a Manhattan in China. Whether these are sustainable is the real question.

Building the Manhattans of China has strained the coffers of the local government. These, as well as the parks, zones and skyscrapers were built on land acquired from rural collectives. The differential price (cost of acquiring land minus leasing to developers) became a significant source of revenue for cash-strapped local governments who can neither borrow from banks, issue bonds nor possess the lion share of taxes which accrue to the central government (1994 tax sharing reforms).

Many local governments floated Urban Development Investment Vehicles (UDIVs) to borrow money from banks—to finance infrastructure and housing to build “face-saving projects” as local leaders are evaluated solely on performance.

Given the limited avenues for investment in China, many citizens parked their money in real estate.

Also, there is no property tax in China. Today, in balance, some of the grand projects—are still in their gestation period and some, if not all, have gone kaput.

Incriminating evidence of reckless urbanisation comes from Landsat images and night imagery from the US Defense Department Meteorological Satellite Program (DMSP) which shows the dramatic build up of the urban sprawl—scholars such as American urbanist Karen Seto say that in the last decades, in some areas at least, there has been more than 364% increase in urbanised land (e.g. in the Pearl River Delta). Many Chinese economists such as Tao Ran say that more than one-fifth of housing in rural China is built on arable land.

Then, there is the problem of building all these cities—will the infrastructure keep apace? The Economist (2015) reported that China spends 8.5% of its national income on infrastructure, far ahead of America (2.6%) or India (3.9%). Certainly, while Delhi makes do with two ring roads, Beijing is building its seventh, and while Bangalore has taken several years to get the (aesthetically displeasing) metro rail off ground—it took just two years for China to build the Maglev Line in Shanghai. Whether it is Indian democracy or Communist efficiency, we can only guess—but China doing this in times of rising wages and increasing expectations of urbanites is not easy.

Finally, the “queen” of problems—making farmers urbanites has coaxed migration. Many migrants hope to become urban citizens. China’s migrant population decreased by 5.5 million for the first time in 30 years in 2015 (247 million migrants, National Bureau of Statistics). It is said that this dip occurred because the rural folk stay where they are, because services and opportunities have come to their door.

China’s NEP plans to grant 100 million rural migrants household registration (urban) by 2020. By 2020, the urban population is estimated to reach 60% and China plans to reach the household registration (hukou) to 40% of the population. This plan has to put in place for the migrants-turned-citizens infrastructure, education, pension and health services.

China’s slow growth pushed urbanisation to boost demand and consumption. In doing this, it has left a trail—there are “ghost cities” with grand projects like Manhattan and Paris, which look good but are empty shells with little utility—what has been called “fake urbanisation”. And then there are huge costs of “citizenising” migrants and piling debts of local governments.

The author is a Singapore-based Sinologist and adjunct fellow at the Institute of Chinese Studies, New Delhi. She is the author of Finding India in China

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