Academic journal article China Perspectives

Financing Urban Growth in China: A Case Study of Qujing, a Medium-Sized City in Yunnan Province

Academic journal article China Perspectives

Financing Urban Growth in China: A Case Study of Qujing, a Medium-Sized City in Yunnan Province

Article excerpt

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Introduction

China is currently experiencing a period of overproduction in real estate, which especially affects medium-sized cities, otherwise known as third and fourth-tier cities,(1) the population of which is between half a million and two million.(2) Since autumn 2014, the central government has been encouraging property purchases, and various restrictions put in place from 2010 onward have been gradually lifted.(3) Although these measures were put in place as a result of (unacceptably) high housing prices, mainly in big cities between 2008 and 2010, the current incentives are aimed at avoiding a price drop in real estate, which would be even worse.

State monetary policy and regulations within the real estate market refer more generally to the financial mechanisms at the heart of the urban growth strategy in China. For many scholars, land has been a financial tool that has driven the country's urbanisation and economic growth since the end of the 1990s.(4) At the centre of a decentralised system that allows local governments® to plan urban development by transforming rural land into urban land, revenues linked to land-use rights commodification have been the basis for the Chinese "land-driven growth model," brought about by entrepreneurial local governments.(6) Contrary to this, other scholars have shown that the decentralised system for urban development in China has gone hand-in-hand with the huge cost of urbanisation borne by local authorities.(7) According to national budgetary laws, local governments may not get directly into debt, and have been encouraged to finance their infrastructures indirectly via local financial platforms,(8) especially since the economic stimulus plan from 2008 to 2009. The result was an explosion in local debt, which pushed the state to intervene from 2015 onward and restructure the debts by allowing urban governments to issue bonds in order to finance their infrastructure.

These two areas of literature provide us with information on the financial mechanisms that form the basis of Chinese urban development. However, the sale of land-use rights is only a part of the accumulation of capital in cities and of the creation of urban value. A "virtuous" urban capital accumulation in China has only been possible due to the production and sale of residential and commercial properties through the real estate industry. I would like to first thank the Swiss National Science Foundation (SNSF) (P300P1 _147823) and the FINURBASIE (French National Research Agency) research project. I would also like to extend my thanks to all those who agreed to be interviewed. Finally, I would like to thank my wife for her invaluable help in connecting me with people and translating during the case study.

However, until now, the ways in which local property markets work in relation to demand and, very importantly, their financing, have not been welldocumented within the field of urban geography, or more widely in urban studies.(9) In bringing together three fields of literature, this article develops, in its first part, an interpretive and theoretical framework for the financing of urban development in China and subsequently suggests a continuum of the interrelations between land, urban infrastructure, property development, and the financial system. This framework is illustrated in the second part by a case study carried out in the city of Qujing in Yunnan Province. Qujing is representative of the land-based urban growth model of several hundred medium-sized Chinese cities, which are today affected by overproduction in the property market.

Land-based financing for urban development in China

This section develops an interpretative and theoretical framework for land-based financing of the urban growth model (see Figure 1). In order to understand that the accumulation of capital in a Chinese city is based on the continued increase in land and property prices, one must look in detail at the role of the financial system in the links between land and the production of urban infrastructures and property. …

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