Academic journal article The Geographical Review

Beijing and the Development of Dual Central Business Districts

Academic journal article The Geographical Review

Beijing and the Development of Dual Central Business Districts

Article excerpt

Among the world's largest metropolises, Beijing is notable for its ancient roots and current transformations. Founded more than 3,000 years ago, the city has served as the national capital of China for at least eight centuries - during the last five feudal dynasties (Liao, Jin, Yuan, Ming, Qing) and, since 1949, for the People's Republic of China. Over the past decade the city's urban landscape has experienced dramatic changes. A research trip to Beijing in the summer of 1997 allowed me to investigate these changes. The choice of Beijing was not accidental: I grew up there and studied geography and urban planning for seven years at Beijing University before I came to the United States in 1989. It is the city to which I have always felt closest. Although I was well aware that Beijing was going through many changes, nothing prepared me for the sweeping transformations that had occurred since my previous visit, in 1992. The urban landscape and people's way o life differed so drastically that initially I was not sure this was where I had resided for twenty-four years. Even lifelong residents have similar feelings: One friend told me, "If I don't go to this section of town for several months, many of the streets and buildings can become unrecognizable."

This note tracks one aspect of urban development in Beijing, the emergence of a central business district (CBD). Before I left China in 1989 I led a group of graduate students in drawing up a developmental plan for one of Beijing's major retail centers, Xidan. This site, we thought, would probably grow from a retail center into a CBD of Beijing (Peng, Zhou, and Qi 1989). Although the memory remained fresh, it took me no time to realize how obsolete our conclusion had become eight years later. The location of Beijing's CBD, however, remains an interesting matter.

The CBD is the most visible landmark in many Western and Third World colonial cities. Even with the decline of central cities in many metropolitan areas throughout the united States, the unmistakable cluster of high-rises in the middle of a built-up urban area is as conspicuous as ever. Many high-level business services such as finance, advertising, and government continue to gravitate to CBDs, despite more-dispersed patterns of other sectors and so-called back offices, which conduct routine data and information processing instead of directly interacting with clients. But in Beijing visitors who want to find a visible CBD by scanning the landscape may face a challenge. Both as the capital of a feudal empire and as the epicenter of a centrally planned socialist economy, Beijing developed its enormous size and sophisticated urban structure without a CBD. This is changing, however, with advancing market reforms that have dramatically altered the urban structure and landscape of Beijing.

Yet the market reform has not transformed Beijing into just another capitalist city. The entangled relationship between state bureaucracy and market forces, including the notable complications of urban land markets, has produced a unique spatial configuration in Beijing, represented in part by its CBD. In Beijing there is a marked spatial divide between the international and trade-oriented eastern business center and the government- and finance-oriented western business center, almost symmetrically located on two sides of the old city [ILLUSTRATION FOR FIGURE 1 OMITTED]. During my summer visit I interviewed numerous planners, scholars, real estate developers, entrepreneurs, and ordinary citizens in the city and collected information from various publications. This record note summarizes some of my findings about how and why the duality arose.


It is not difficult to understand why Beijing did not have a CBD. Throughout its feudal history, the city was always a political center of China. Government and bureaucracy were its main foundation, overshadowing even its economic importance. In fact, until Beijing became the capital of the People's Republic of China, it had never been known to be an economic center: The city tended to be overrun by royalty, ministers, generals, or government officials, but its population of merchants was relatively small compared with Shanghai and Tianjin. Under the Communist regime until the early 1980s, Beijing was the center of political and economic decision making of China, and it also took on an important manufacturing role. But because most economic decisions were monopolized by the government, such higher-level tertiary activities as finance, advertising, legal services, and management, which are prevalent in market economies, were either poorly developed or nonexistent in Beijing. Except for retail sectors and government ministries there were no "businesses" to speak of. In addition, until the mid-1980s, urban land was publicly owned, and land distribution and land transfer were administrated by bureaucrats. The state was the chief agent of land development and allocation, and the Beijing municipal planning bureau was in charge of planning and maintaining overall land use for the city. Because land theoretically had no value of its own prior to 1985, competitive bidding for sites was not allowed, and there was no reason for it, except among some retail stores. The economic structure of Beijing under the planned economy therefore produced no mechanism either for "business" or for a "district,' in the sense of a spatial cluster formed by market-driven bidding for locations.

Furthermore, it is impossible for any major high-rise clusters to be "central." The core of Beijing is the old city, defined by the Second Ring Road. The newly developed area extends in all four directions. Much of the old city was inherited from the Ming and Qing Dynasties and largely comprised one-story buildings (Zhang 1997). The magnificent palace of the Forbidden City rises in the center, high above the ordinary gray residential structures. Being concerned that any high- rise in the center of Beijing would destroy the deliberate spatial configuration of this ancient capital and make the Forbidden City seem less "forbidden" the Beijing master plan has long controlled the height of buildings within the Second Ring Road. From the Forbidden City to the Second Ring Road, the building heights are limited to a maximum of 18 meters, gradually increasing outward from the center. Only occasionally are buildings allowed to reach 30 meters. Outside the Second Ring Road the height can reach 60 meters (Beijing Municipal Institute 1992a). As a result of height control, Beijing's skyline forms a unique bowl shape, with a low center and a higher rim (Gaubatz 1995). The vibrant urban center within the city was dominated by three major retail centers - Wangfujing, Xidan, and Qianmen - triangularly located around Tiananmen square and all within the limits of the old city [ILLUSTRATION FOR FIGURE 1 OMITTED]. None of these centers had high-rise buildings, however. Beyond retailing, they performed few major business functions.


The transition to a market economy has brought fundamental changes to Beijing, among which is an emerging concern for the location of offices and other business functions. After the early 1990s, Beijing seemed to emerge overnight as a service giant and international business center. In 1980 the tertiary sector produced 26.8 percent of total urban output; in 1990, 38.8 percent, and it is projected to generate about half of the city output by the year 2000 (Beijing Municipal Institute 1992b). Higher-level service sectors emerged, from life insurance to real estate and marketing.

Beijing's national-capital status also induced a flood of foreign ventures. From 1989 to 1995 enterprises based on foreign capital or joint ventures grew almost tenfold in Beijing, from 1,217 to 11,202 establishments (Lin 1995b, 7). According to a 1997 analysis, 23 of the top 100 Global Fortune 500 companies established first-level subsidiary offices in Beijing (Godfrey and Zhou 1998). In addition, thousands of Chinese enterprises or regional organizations all over China have opened branches or set up offices in Beijing. These new ventures have generated a huge demand for office space in a city that never had an office market. Previously, office buildings in Beijing had been built by or assigned to government organizations. Foreign and Chinese firms that did not enjoy this privilege were forced to use hotels or apartment buildings as offices (Gaubatz 1995). As demand soared, the extreme shortage of office space pushed Beijing's office rents up dramatically. In 1994 it had the world's fourth-highest rents for office buildings, after Hong Kong, Singapore, and Bombay, rates substantially above those in Shanghai and Guangzhou (Lin 1995a). The high profit and quick return on investment lured many investors into office construction. A number of real estate people I interviewed estimated that in 1995 it only took three or four years to have a full return on investment in office buildings.

Meanwhile, urban land reform started to introduce market mechanisms to a formerly bureaucratic land-distribution system. Since the mid-1980s, through a series of debates, experiments, and numerous revisions of land laws, a market for land and real estate has emerged and gradually stabilized. Under the newest land law, all urban land is owned by the state, but the right to use the land is held by the entities that occupy it. Such rights can be traded or rented to other parties. The Chinese government intended to make land distribution governed as much by the market as possible. Yet the birth of a land market in a crowded national capital of 8 million is necessarily complicated. The land market cannot guarantee that everyone pays the same price to develop identical pieces of land. Nor can it promise that locational advantages will be reflected in the cost of the land. It all depends on who the developers are and who holds use rights. For example, if an organization already has the right to use a parcel, it only needs to pay the construction cost to develop it. In Beijing, national government organizations have long enjoyed generous allocations of land by the state. Over the years, many of them acquired surplus land under various pretenses. With market reform, the land suddenly became profitable, and many land-rich organizations have since been developing it for commercial use. On the other hand, if a developer, most likely private or foreign, lacked such privilege, the right to use land had to be acquired at a considerable cost. Depending on who developers are, land costs differ greatly.

Between 1985 and the mid-1990s there were few guidelines to determine the market value of land, because so few transactions took place. Land prices were usually negotiated on a case-by-case basis, often to cover relocation costs and provide reasonable compensation for the original occupants. This introduced another major discrepancy. For example, if the occupant was a small neighborhood factory - a common feature inherited from Beijing's era of industrialization - the negotiation might be relatively simple: By moving to the outskirts of the city, where land is cheaper, the factory can receive a handsome payment for land-use rights or extract a substantial rent. Many such factories are obsolete and are often in deep financial trouble, so they generally welcome such a move. However, if the site is residential, the relocation can be lengthy and costly. Residents are usually reluctant to move far from the city, where they face the loss of their community, reduced access to good schools and services, and longer commutes. With the government requiring developers to provide transitional housing and compensate the residents financially at least in part at a commercial rate, residential areas are generally slower and more expensive to develop (Liu and Liang 1997; Zhang 1997).

The variations and irregularities have produced a chaotic spatial pattern of office construction. Developers' sensitivity to location is regularly outweighed by the speculative rush and unevenness of the land market. Often, offices have been thrown up wherever land was first made available. Many were built on factory sites in the middle of residential areas without clearly marked entries, so finding a new office building in Beijing can be quite a guessing game. Even though the overall pattern is fairly scattered, some concentrations have emerged, particularly around the Second and Third Ring Roads, signaling at least an incipient desire for convenient and clustered locations.


The rapid development of tertiary activities and the formation of a real estate market make the absence of a CBD in Beijing an increasing problem. Many planners believe that the scattered pattern of office buildings is not efficient, cannot create an economy of scale, and is difficult to organize with regard to transportation, communication, and other social services. Some planners suggest that, given the immaturity of the land market, a CBD should be planned to accommodate future growth (Ji 1993; Wang 1993). Initially, it was hoped that one of the three retail centers in the old city would mature into the CBD, which was our research group's suggestion (Peng, Zhou, and Qi 1989). But the conversion of the Second and Third Ring Roads from regular streets into expressways made that impossible. The two express loops, combined with the boom in transportation by private automobiles, have significantly reduced the accessibility of the old city. Not only did the ring roads turn into physical barriers encircling the old city, but the narrow streets and lack of parking within the old city also made traffic a nightmare of constant congestion. In addition, the development of major shopping complexes outside the Second Ring Road have reduced the previously undisputed dominance of the retail centers in the old city. The height limitation in the old city further discouraged many office developers. It is clear that Beijing's new CBD would have to be away from the geometric center of the city, most likely outside the Second Ring Road (Ji 1993).

In Beijing's latest master plan, issued in 1992, an area on the eastern side of the city, between the Second and Third Ring Roads, was designated as the Jianguomen CBD. The selection of this site reflects a peculiar understanding of CBDS in China. In Beijing, discussion of a CUD is associated not so much with the explosion of office buildings or the land reform as with ongoing globalization. Wu Lang Yong, one of the most respected figures in Chinese architecture and urban planning, commented that characteristics of an international city would necessitate the establishment of a CBD (Wu 1995). Beijing, as the national capital and a city of 8 million, would obviously need to have one of its own. Therefore, rather than viewing the CBD as a product of market competition, Chinese planners see it as a status symbol essential for transmitting and refining the image of Beijing as an international city.

From a planner's perspective, if international linkage is the key to a CBD, there is no better location than Jianguomen. It is close to the foreign-embassy district and has easy access to the international airport. The area contains or is close to some of Beijing's most luxurious hotels and apartment buildings, many of which have long served as offices for foreign agencies. A few major office towers financed by overseas capital had already been built there. The two most upscale shopping centers that cater primarily to foreign customers are nearby, as are the customs bureau and the foreign trade center. After Beijing's 1992 master plan was issued, construction of foreign-oriented hotels and offices intensified (Gaubatz 1995). Unlike what planners expected, however, many development projects failed to locate inside the designated block, spilling instead into nearby areas before the block ever filled up. This should hardly be surprising, given the irregularity of the newly formed real estate market. With many high-rise buildings going up simultaneously in numerous other locations around the Second and Third Ring Roads, this planned cluster is anything but obvious in the city skyline.

An even bigger problem for Jianguomen is that its status is not universally acknowledged in Beijing. Planners are among the clearest defenders of Jianguomen; real estate agents and other businesspeople are ambivalent, asserting that the location of Beijing's CBD is not clear to them. One major challenger, the so-called Financial Street, emerged on the western side of the Second Ring Road in the mid-1980s. It is dotted with many of China's major bank headquarters - the Bank of China, the People's Bank, and the Industrial and Commercial Bank, to name a few - and a number of large insurance companies and a cluster of general office buildings are nearby.

Financial Street predates Jianguomen and the land-market reform, and it was very much a product of administrative forces. It started when the Bank of China elected to build its headquarters on the western portion of the Second Ring Road. As a national-level government agency, the Bank of China had considerable autonomy in selecting the site for its offices. Other banks followed suit. This part of the Second Ring Road is desirable, for it has ready access to both the expressway and the subway. More important, it lies on the city's western side, locus of the national administrative center, the largest concentration of national ministries, bureaus, and departments in Beijing [ILLUSTRATION FOR FIGURE 1 OMITTED]. Banks and government institutions have found it preferable to be closer to these ministries than to the foreign embassies and agencies concentrated on the eastern side. Local district officials, seizing the opportunity to attract investments to develop their land, were enthusiastic about selling the idea of a financial district. They were able to convince the municipal government to bring more banks, despite the objections of the Beijing municipal planning bureau, which claimed that height controls were being violated. To demonstrate the support of the highest levels of government, boosters displayed signs for Financial Street in the calligraphy of Chen Mu Hua, then China's vice premier responsible for the financial sector. Although Financial Street has not developed as rapidly as has Jianguomen, it has attracted sizable office activities and is particularly favored as office space by representatives from other parts of China because it is close to central government headquarters. As a result, Beijing has developed dual centers of relatively concentrated business activities.

What is interesting about the dual centers is a marked spatial separation of functions that usually are grouped in a single CBD in Western cities. Domestically and internationally oriented activities are separated, and so are the financial sector and foreign trade-related activities. These separations, I would argue, are not random phenomena due to the imperfect market or inadequate planning but symptoms of a deep institutional fault in China's transitional economy.

The coexistence of the state bureaucracy and market forces are the major factors underlying the locational choice of any organization in China. Jianguomen is almost universally preferred by foreign companies because of its well-established communications network, Western-style hotels, shopping, and entertainment facilities. Although these companies deal with the Chinese government, their contacts are limited to certain departments: the foreign trade center, the customs bureau, and the foreign business management bureau. Most transactions and interactions are among other foreign firms concentrated on the eastern side of Beijing. In contrast, Chinese domestic firms, particularly those from other regions of China or private firms, are far more concerned with access to government organizations, the ever-changing policies of which have a direct impact on their operation. Unless firms are international trade-oriented, they prefer proximity to state policymakers, ministries, departments, and financial institutions. Many are indifferent to the representatives of foreign companies in Jianguomen and see no reason to pay the higher rent there. Locating along Financial Street in western Beijing better serves their needs.

The spatial separation of Chinese bank headquarters and international trade activities also illustrates unique characteristics of China's economic institutional structure. Most Chinese banks are not commercial ventures at this point, though reform is under way. They are, in fact, government funding agencies with discretionary power guided not by financial accountability but by government policies. The nature of their operation and the networks of their transactions link them far more closely to other government organizations than to commercial organizations. Although many banks have branches in Jianguomen for its trade-related finance, their headquarters gravitate to the western government district. From this perspective, the spatial split of the CBD in Beijing is not so much a regrettable mistake, as seen by some Beijing planners, but a perfectly rational outcome of Beijing's transitional economy.


In the Western world the common sight of a CBD makes it almost natural to expect every city to have one. Beijing's experience, however, reveals the deep structural and institutional foundations of the CBDS. As Beijing changed from the headquarters of a planning economy to a center for international and national market economic activities, business districts emerged. Rather than assemble an integrated CBD, Beijing has produced two competing centers in a rather chaotic urban landscape. The spatial separation between the city's eastern and western business centers reveals a disconnect between international and domestic economic activities and between financial and international trade-oriented activities. That disjunction is the spatial expression of an institutional fault in China's transitional economy. With China's economy increasingly being penetrated by market forces and internationalization, it is possible that there will be more integration between domestic-oriented and international-oriented firms and between banks and trade business. However, restructuring these political and economic institutions is likely to be a far more difficult and slower process than repaving every street in Beijing. The spatial split of the Beijing CBD, as a result, will remain for a long time.


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DR. YU ZHOU is an assistant professor of geography at Vassar College, Poughkeepsie, New York 12604-0465.

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