[SCMP Column] Megacities and urbanization

January 27, 2018

China’s “heavy reliance on Megacities viewed as risky bet” blazed an SCMP article headline this week, referring to local authorities data that is “adding to the debate over the risks of relying on a handful of metropolises to drive national growth”.
Pardon? What debate? What data? As far as I can see, the nub was the news that China’s four biggest cities – Beijing, Shanghai, Shenzhen and Guangzhou – are between them contributing about 10 per cent of national GDP, while accounting for just 5 per cent of the country’s population. Beyond that the SCMP article explored no further exactly what risks arise. I would suggest there are few, and expect no debate.

A little digging would reveal that many economies worldwide rely heavily on a rather small number of cities. London accounts for 30 per cent of the UK’s output, as does Tokyo in Japan. Seoul accounts for about half of South Korea’s economic output. Sydney and Melbourne together account for about 67 per cent of Australia’s GDP. Bangkok accounts for about 30 per cent of Thailand’s GDP, while Lima accounts for 34 per cent of Peru’s GDP. Manila accounts for 33 per cent of the Philippine GDP.
Need I go on? Many economies, whether developed or developing, rely extraordinarily heavily on such metropolitan powerhouses, and talk rather little about “risky bets”. The Brookings Institution’s Asia-Pacific Metro Monitor says that Asia’s top 100 cities generate 20 per cent of global GDP. That’s what cities do. They tend to drive economic growth, not increase risks.

In counterpoint to the SCMP’s anxiety about risky bets, China seems remarkably diversified, showing more similarity with the US, India, or Indonesia – all geographically large economies relying on rather a large number of city economies. According to UN numbers, China’s economy rests on the activity of over 600 cities. Around 160 of them are bigger than 1m people, and at least 14 are over 5m.

The risk and challenge is not over-reliance on one metropolis or another, but over the massive challenge of urbanization. Over the past 35 years, China has managed the movement of at least 500m rural people into cites, many of which – like Shenzhen – did not exist when Deng Xiaoping aroused the country from its Maoist introversion. It was only five years ago that for the first time in China’s history, more Chinese people were living in cities than living in the countryside.

Much of this migration was in the service of explosive growth of an export manufacturing economy in China’s coastal provinces, and here indeed there were many risks and some awful unintended consequences. Factories and factory towns thrown up overnight committed horrible environmental sins, creating thousands of gimcrack homes with shoddy infrastructure. The migrations broke up families, leaving millions of young children orphaned with grandparents. The world might have been in awe at China’s ability to maintain economic growth levels above 10 per cent a year for decades, but these were the horrendous practical unintended consequences of a growth convulsion on such a scale.

As Xi Jinping talks of a “New Era”, and “quality growth”, I am sure he is in part talking about repairing some of the harms done during this extraordinary period of unprecedented economic growth, and massive social upheaval.

As he talks about 11 new and massive city clusters (one of them our exciting new Greater Bay Area) as part of the 2014-20 National Plan on New Urbanisation, I am sure part of the intention is to tackle some of these ugly unintended consequences. Surely the priority must be to build intelligently integrated urban networks that can create the kind of civic infrastructure that is needed to make cities the livable, dynamic, exciting places that in many parts of the world they can be.

“Urbanisation didn’t happen (in China) because the government wanted the country to urbanise,” noted Alain Bertaud, urban planner and senior research scholar at the US’s NYU Stern Urbanisation Project: “The economy asked for it, and the people voted with their feet. The government have had to cope with urbanisation rather than it being a deliberate policy decision. In a way, they are paying the price of this rapid urbanisation now.”

Rather than risk China relying on a tiny cluster of mega-cities, the hallmark of Beijing policies back through 40 years has been to disperse economic activity as widely as possible – often in administrative defiance of natural economic forces that naturally preferred the resource-rich and export-connected coastal provinces. Remember the “Go West” campaign of the early 1980s which sought business support to build up industries in China’s poor interior provinces?

Many of these government-driven initiatives carried few commercial attractions, and left private sector businesses scratching their heads on how to engage – just as today so many in the private sector are puzzling over how they can invest, or build any commercially viable business, in poor and unconnected Belt & Road economies like Kazakhstan, Turkmenistan or Uzbekistan. Hence too Beijing’s conviction that the building of high-quality, high-speed infrastructure sits at the heart all their development efforts.

In spite of the inevitably lackluster private sector responses to Beijing’s long-term society-building visions, China’s planners have stayed steady in their conviction not just that the dispersal of economic activity across the country must step by step proceed, but that urbanization must play a critical part of this process. Evidence worldwide shows that it is cities – and the middle classes that populate them – that drive wealth creation and prosperity.

That is why today China has 160 cities with a population of over 1m people, and why so much effort is being put into smart city development – tackling the urban challenges of pollution, congestion, crime and social isolation, and beginning to capture some of the huge advantages of urban living – convenience, service efficiencies, improved education, and diverse employment opportunities.

There is obviously still a very long way to go, but Dr Yan Song at the University of North Carolina China City programme rightly notes: “The problem is not (city) population size. It’s poor urban management”. Whether China’s cities are mega or not, the risk is not their size – or whether there are four or 164 – it is making sure they are intelligently developed.
David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view. Opinions expressed are entirely his own. 
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