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Finance & Economy

China’s most severe economic downturn in decades; city transformation vital to changing future

Shanghai Urban Planning Model

Shanghai Urban Planning Model

China is experiencing its most severe economic downturn in decades, and revitalising its economic model is critical to future prosperity — not only in China, but around the world.

Central to that effort is the transformation of China’s cities. By adopting a new approach to urbanisation, its leaders can assure more balanced investment, address a major source of debt, achieve a consumption windfall and clean up the country’s environment. Otherwise, China’s economic and environmental problems will worsen, with vast implications for the rest of the world.

China’s success has been built on two pillars: investment and exports. But after decades of growth, this model is delivering diminishing returns. There is little doubt that China must change to a new model, one that relies on consumption to generate growth, while addressing debt and broadening the use of sustainable energy and environmental practices.

Cities, home to hundreds of millions of Chinese consumers, lie at the core of this problem — and offer a potential solution.

A flawed system of municipal finance is driving debt, corruption and dissent, while unsustainable urban planning has yielded polluted cities that are destroying China’s ecosystem. Yet China’s future requires continued urbanisation, which, absent a new approach, will only make the problem worse.

Cities can, however, be part of the solution: better urban policies can put China on a healthier path forward, economically and environmentally.

For one thing, municipal financial reform is essential because debt is crushing Chinese cities, leaving mayors with no means of financing the central government’s policy mandates. Mayors have developed creative ways to raise revenues, including appropriating farmers’ land and seizing land on the outskirts of cities to sell to developers. But these practices contribute to urban sprawl and often feed corruption.

Among other changes, China’s cities need transparent budgets and the devolution of more tax authority to cities.

More innovative urban planning and design are also needed. To achieve the country’s goals of raising living standards for a broader share of the population, cities must be better designed to yield energy efficiency and environmental sustainability.

China’s potential is stifled by traffic and pollution. Gazing out my hotel window in Beijing on a recent trip, I saw air that was hazy and polluted — a stark contrast to the sparkling view of Lake Michigan I enjoy from my kitchen window at home in Chicago.

This isn’t just China’s problem. Experts found that dirty air from China contributed up to 20 percent of the ground-level pollution on the American West Coast in 2010. And that is when just one-tenth of Chinese own cars. Imagine what China’s air quality will become when this number triples, as some experts predict it will within the next several years.

Take another example: construction. Within city centres are countless “superblocks” — half-kilometre-square developments interspersed with huge boulevards that create monster traffic jams and skyrocketing pollution.

In response, an approach that featured smaller blocks and mixed-use neighbourhoods and accessible public transportation would alleviate these unintended consequences. Such “liveable cities” would balance economic development with energy efficiency, improve air quality and reduce congestion.

Getting China’s urbanisation right will matter to us all. Fortunately, many in China understand this, and cooperation with the United States government, corporate world and nonprofit sector, including my own research and advocacy institute, is bringing them the tools they need to prioritise design issues in their cities and adapt infrastructure plans now. These tools include instruction in sustainable practices for government leaders, public education in environmental issues and specialised training for the country’s urban planners.

China must adopt this new approach quickly, before vast infrastructure investment makes the current model irreversible. By 2025, China is projected to have a staggering 200 cities with populations over one million. America has just nine.

Global prosperity depends on China’s continuing to be an engine of growth. We all need China to reinvent its economic model. Working together on urbanisation creates progress toward joint solutions to the challenges the world faces from overwhelming pressure on natural ecosystems, resources and commodities.

We need Chinese cities to succeed, and we can help ensure that they do so.

Source: New York Times “How Cities Can Save China”
Henry M. Paulson Jr., a former chief executive of Goldman Sachs and Treasury secretary, is the chairman of the Paulson Institute

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