Interview with Professor Ni Pengfei

Prof. Ni Pengfei, a member of UrbaChina, is Director of the Urban and Real Estate Economy Research Unit in the Institute of Finance and Trade Economics at the Chinese Academy of Social Sciences. The interview with professor Ni was conducted by Wang Ang, the host of the TV show, Caijing mingren fang[財經名人訪], in August 2012, at China Central Television .

Wang Ang:  What changes have occurred in urban competitiveness in China in recent years?

Professor Ni:  In general, no significant changes have occurred regarding the higher urban competitiveness of the southeast coastal areas, compared to other areas in China. But we have seen some interesting phenomena. In the past decade, the growth rate of competitiveness in eastern China and the south-eastern coastal areas has decreased. Some cities have even showed declining urban competitiveness. In other words, from an overall perspective, the difference in urban competitiveness between various areas in China is decreasing.

Wang Ang:  Has Chinese urbanisation faced a period of bottleneck?

Professor Ni:  Chinese cities have developed rapidly in the past decade, a remarkable period of ten years that has seen the rise of Chinese cities. However, we have found that the efficiency of urbanisation in China has been low, because urban transformation encountered a bottleneck, resulting in the slow progress of cities in the past decade.

After the Chinese economic reform, the competitiveness of eastern China was substantially increased because the open policy attracted foreign capital, thus promoting economic development in the area. However, development in the eastern area involves a low level of technology and thus can be easily be transferred to other areas.  If the open policy is applied to inland cities in China, they too will attract foreign investment. As inland cities have the same sort of advantages as the eastern area, such as cheap labour, etc,, the eastern area will become relatively less competitive. Therefore, cities in eastern China should upgrade their industry and increase urban competitiveness. Unfortunately, they have not properly done this, and as a result improvement has been slow over  the past ten years.

Wang Ang:  Some experts contend that China’s urbanisation rate may be overestimated because of the high floating population. How would you answer this argument?

Professor Ni:  In terms of population, there are three approaches to evaluating urbanisation in China. The first is to take the resident population of cities and divide it by the national population. According to this method, the resident population is defined as the residents who have lived more than 6 months in the city, including the floating and household populations. Based on this statistical method, China’s urbanisation rate has reached 50%. The second approach is to take the household population and divide it by the national population, a figure obtained from China’s sixth population census. According to this method, the urbanisation rate of China comes to approximately 33%. The last method uses the ratio of the resident and temporary population in cities to the national population, resulting in an urbanisation rate of more than 60% in China.

Disputes arise between experts using different approaches for calculating urbanisation rates, and experts thus have differing perspectives when answering questions such as “What level of urbanisation has been reached in China?” or “What is the quality of urbanisation in China?

Wang Ang: Two typical cases of urbanisation in Western countries are the United States and the United Kingdom, who respectively took 120 years and 80 years to increase their urbanisation rate from 20% to 70%. In your opinion, is the rate of urban development in China fast or slow? What are the current problems of China’s urbanisation?

Professor Ni:  The background history of urbanisation varies from country to country; therefore I think we cannot simply compare the case of urbanisation in China with the United States and the United Kingdom. They are incomparable.

Wang Ang: What are the characteristics of urbanisation in China?

Professor Ni: 

  • First, China’s aim is economic development: a rapid GDP growth rate is an important goal.
  • Second, urbanisation is linked to the degree of industrialisation. To achieve economic development, industrialisation is essential.
  • Third, in the urbanisation process, the government plays an important role in directing urbanisation.
  • Fourth, urbanisation depends on land. As mentioned previously, the main objective of Chinese urbanisation is to develop the economy. Foreign and overseas capital, as well as industrial land for factories is required. Therefore, the government must convert rural land to urban land. Because of the financial stress caused by the tax sharing system after 1994, local governments intend to increase fiscal revenue through land auction and real estate speculation. Subsequently, benefits obtained this way are to be used to construct infrastructures and to invest in economic projects. This indicates that, in the process of China’s urban development, labour is considered to be the factor that helps promote economic growth. The objective of urbanisation is not to improve residents’ quality of life.
  • Fifth, there are two dynamic directions present in China’s urbanisation: impetus and traction. The power of impetus is mainly a result of labour from outside the city and work in industry. Migrant labour encourages urbanisation in China. The power of traction results from industrialisation and economic growth, which helps promote urbanisation in China. However, China has focused on technical innovation and has neglected the quality of human capital, thereby preventing urbanisation   from attaining sustainability at the present stage.

This urbanisation pattern has led to unsustainable situations in China and has also caused several problems. We can define these problems as cases of imbalance in China’s urbanisation. (1) Imbalance in the structure of demand: the main economic resource in China is investment. This phenomenon reflects the relatively weak consumer demands in China. (2) Imbalance in the structure of industry: this imbalance results mainly from the real estate industry. Excessive expansion of the real estate industry has resulted in the problem of real estate bubbles. (3) Imbalance in industrial upgrading: when the real estate industry expands, the high benefits attract a portion of private companies in the manufacturing industry, who convert to real estate, thus resulting in a decline of competitiveness within the manufacturing industry.

Wang Ang: In your opinion, how can we solve these problems?

Professor Ni:  First, I think the fiscal and taxation system in China should be reformed to help coordinate local governments’ financial demands and their construction plans for infrastructure (China’s current fiscal system works this way: the local government pays a certain percentage of the levied tax to the central government, but the needs of the local government for the funding of infrastructure is not taken into account). Second, the land system should be reformed. Currently, the government has a monopoly on land, and auctions it off on the market, thereby inducing high and competitive prices for land. The real estate industry should also be reformed along the same lines.

Wang Ang: In your opinion, which city is undergoing a rational urbanisation process in China? Please name one.

Professor Ni:  From the economic perspective, I think cities such as Foshan [佛山] and Zhongshan [中山] have undergone a relatively rational process of urbanisation.

Wang Ang:  What are the characteristics of their development models?

Professor Ni:  As I mentioned previously, over-development of the real estate industry has led to declining competitiveness in the manufacturing industry. However, I noticed that Foshan city has developed stable private businesses and manufacturing industries. The real estate bubble is not a major problem in Foshan. In the case of Zhongshan, I have noticed that the city’s economic, social, and environmental development has maintained a balance.

Wang Ang: The household registration system is a key factor hindering China’s urbanisation process. In your opinion, what impact would the reform of the household registration system have on urbanisation?

Professor Ni:  The household registration system is linked to both public services and social welfare issues. Theoretically, the restriction of household registration should not exist, and many experts and policy makers have long been aware of the problems inherent in this system. In recent years, the government has introduced a number of new policies in many cities. For example, the household registration system is open in certain cities. However, we should not ignore the problems that arise from the open policy of the household registration system.

The first problem arises from the difference between the various regions in China. These differences involve public services and social welfare. If we liberalize the household registration system, many people may flood into the regions where they can benefit from better public services and social welfare. This phenomenon has been observed in our research. For example, in Beijing, the average salary is higher and labourers receive more public services and social welfare than in other cities. If labourers can be registered in a Beijing household, an imbalanced may thus occur.

In addition to this, we must consider two important questions: (1) How can we solve this problem if we open household registration in metropolises like Beijing? (2) How can we balance the quality of public services and social welfare between the different cities?  If there is no difference in public services and social welfare from one city to the other in China, people will not migrate between cities, and the problem of excess population immigrating to certain metropolises will therefore be solved. In developed countries, there is no difference in public services between cities.

Wang Ang:  Would you please summarize the main challenges and problems that require urgent solutions by 2015 in China’s urbanisation?

Professor Ni:  The main challenge encountered by China is the transformation of its urban development. Currently, urbanisation in China has focused on economic growth. However, urbanisation should focus on the civilization of the people. In other words, the urbanisation process should be transformed from solely material urbanisation to a form of urbanisation that incorporates spiritual and cultural aspects.  Urbanisation should be comprehensive: instead of focusing on economic issues only, social and cultural aspects should be taken into account. Urbanisation cannot simply be a commitment to industrialisation; instead, industrialisation and urbanisation should develop hand in hand. Furthermore, at the present stage of China’s urbanisation process, which is progressing from metaphase to anaphase, the influence of urbanisation on China’s development may well increase.

 


Chi-Han Ai

Ph.D. candidate of EHESS ( École des hautes études en sciences sociales, Paris) focusing on regional economic development in China and Taiwan.

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