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29/10/2015

Planning for growth – International evidence from China

Fuzhou

Professor Fulong Wu – co-author of forthcoming RTPI-commissioned research into the value of planning in China – reflects on the relationship between planning and growth in the world’s second largest economy

One common misconception of planning in Britain and other liberal economies is that planning is only focused on regulating and inhibiting developments from the market.

In China, the role of planning has never been considered as an obstacle of economic growth. Local political leaders initiate new land developments and produce strategic urban development plans in order to foster local growth.

The Chinese example also illustrates some of the drawbacks of only focusing on economic growth, thus reaffirming the importance of regulatory planning  and broader social and environmental considerations in planning.

In China, the underlying rationale of the municipal governments is very clear. Instead of allowing the private market to have free rein over the locations and amount of residential developments that may result in negative externalities for the public, it would be more beneficial to coordinate the development of residential areas and the provision of public services through new town development plans.

However, the emphasis of new town developments does not lie in constraining land uses but instead it aims to use the plan as an interface between the government and the market in order to facilitate the project conceptualisation as well as strengthen the state’s role as the primary developer.

"In order to coordinate the development of the market, planning is used to limit certain market actions such as expanding into ecologically fragile areas"

In our forthcoming research paper - Planning for Growth – The International Evidence from China – we explore the relationship between planning and economic growth in China through five themes:

1. Stimulating the market through land development in China. Municipal governments have taken on the role of an urban entrepreneur and aim to attract investments through direct state actions that provide a range of incentives including infrastructure, cheap land, and fiscal incentives to the creation and promotion of development visions.

2. Shaping markets through planning. In China planning has become a key mechanism for shaping the market according to the needs of the state and the general public. The fierce competition between cities has resulted in the over-expansion of cities, which threatens to destroy the environment, and the surplus production of certain industries. In order to coordinate the development of the market, planning is used to limit certain market actions such as expanding into ecologically fragile areas. The market-shaping mechanism of planning also allows the government to open up new markets.

3. The role of planning in regulating markets in China. Another facet of planning is its ability to coordinate development by setting up a framework that allows the whole to be more beneficial than the sum of each market actor. For Chinese central and regional governments strategic regional plans are a helpful means to stop rampant urban sprawl and uncontrolled industrial expansions.

4. Building the capacity of planning. Building the capacity of planning can be understood as changing the mindsets of public planners and ensuring that planning professionals are well connected to a broad social network of other market actors. In the Chinese context, planning is widely considered as a tool that can facilitate growth and thus enjoys great popularity amongst political leaders.

5. The economic impact of planning. The impact of planning in China is wide reaching and cannot simply be understood as higher GDP growth. More importantly whilst planning is often being associated with economic costs for the general public as well as the government planning represents development and the creation of economic value.

"The system provides the necessary conditions and financial incentives for local governments to pursue land development and urban expansions"

Echoing current UK debates, namely housing provision and devolution, the evidence from China’s housing market also reveals that the regulatory nature of planning does not also represent poorer economic performance.

The central government adopts regulatory control of housing prices to ensure that housing prices are increasing at a natural pace rather than being driven by an artificial housing bubble. From the Chinese perspective, although regulation does not directly result in more economic growth, it also prevents any potential large-scale losses that would otherwise be much greater than the short-term gain from housing market speculations.

As to devolution, in China, the system provides the necessary conditions and financial incentives for local governments to pursue land development and urban expansions. It allows local governments to retain only 25 per cent of value added tax but instead all extra budgetary revenues and more importantly the revenue from the ‘sale’ of land can also be kept by local governments.

However, the role of the central government is important – for instance, by imposing regulatory policies to contain housing prices in order to prevent the emergence of a housing bubble and to keep residential prices at an affordable level for the general public. In this sense the central and the local governments take on very different positions, that are both necessary in order to balance the country’s needs.

Professor Fulong Wu is Bartlett professor of planning at University College London

Planning for Growth – The International Evidence from China will be launched on 2 December at UCL’s Bartlett School of Planning.
 

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