Tag Archives: financial issues

Financing Chinese cities

In a recent article published in a multi-author volume on the financing of urban centres in developing countries1, Christine Wong examines the financing of Chinese cities.

One of the many strengths of this article is that it introduces readers to how Chinese cities are financed and the evolution of this process over the last thirty years. The author offers us a very pedagogical picture of China’s fiscal system and its main challenges.

Wong starts with a review of the recent history of urbanisation in China. For her, this rapid urbanisation of China is only a catching-up process; China is still not as urbanised as other middle-income countries.

She then looks at the administrative structure of local governments and its impact on local finance. She highlights three important facts to help understand China’s local finance. Firstly, local governments are in charge of most of the spending from infrastructures to basic services (education and health), but lack taxing powers. Secondly, there are huge discrepancies of revenues between localities. Thirdly, because economic growth was the main objective, the central government closed its eyes to local governments using backdoor practices to finance their budget.

In order to finance new infrastructures, local governments needed economic growth, and so real estate became a main pillar of local government finance. Land lease sales became a major fiscal resource for local governments, who profited from the transformation of rural land to urban land. However, Wong stresses the unsustainability of such a system, as land can only be sold once and it is a finite resource.

Wong also introduces the reader to the local investment corporations (LICs) and the way they have been used by local governments to finance their infrastructures. As local governments are not allowed to take out loans, they use these LICs to borrow money. However, because of poor supervision, Wong warns against potential debt issues in China.

The author makes a plea for the complete renovation and rationalization of China’s fiscal system. She argues that the economic and social transition undergone by China makes necessary the creation of a new fiscal system that would be more sustainable.

  1. Wong, C. (2013) Paying for urbanization: challenges for China’s municipal finance in the 21st  century. In R. Bahl, J. Linn & D. Wetzel (Eds.). Metropolitan government finances in developing countries (pp.283-308). Cambridge, MA: Lincoln Institute for Land Policy. Retreived 20 January, 2013 from http://chinastudies.unimelb.edu.au/sites/www.chinastudies.unimelb.edu.au/files/1%5D%20metro%20paper_chapter_11.pdf []

Sebastien Goulard

Ph.D. in political science (EHESS, Paris); M.A. in social sciences (EHESS, Paris); M.A. in international relations (IRIS, Paris), B.A. (Hons) in international political studies (ESE - Nottingham Trent University)

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袁志刚教授谈中国城镇化问题

访问回复内容由袁志刚教授撰写

您认为城镇化是否能减低内部与东部省份间的差距? 中央政府如何减少城市间的相互竞争? 中央与地方政府如何打破在城镇化过程中对于土地的依赖?

目前中国的城市化对于改善区域的不平衡有较为积极的影响,若户籍制度和跨区域土地流转等要素市场改革能更深入推进的话,这种正面的影响将更为显著。
中国的本身的幅员辽阔,珠三角、长三角之间的禀赋也存在诸多差异,区域间直接的竞争关系不明显,竞争更多的存在于各区域的内部之间,如广州和深圳,这种竞争目前尚未有比较好的协调机制,在某种程度上造成了一些重复建设和资源错配的情况。
在中西部,部分县市存在着过度开发、超前开发的情况,短期而言,中央政府可以在资金供给和项目审批等方面进行调控;长期来说,改革现有的财税体制,扩大地方政府发债的权限,由市场来为基础建设投资指路,有助于从根本上解决这一问题。

您认为现阶段的保障房实施办法有何问题与挑战?

近期,北京、上海、广州等地所公布的保障房实施办法均表示将把非户籍人口纳入社会保障,但对于非户籍人口的申请条件往往较为苛刻,非户籍人员需要出具纳税证明、社保证明并满足工作达一定年限等准入条件。然而保障房面临更大的问题在于空间分布的不合理,最新的数据显示保障房新开工套数东中西部的比例为30:34:36,作为人口导入地的东部地区新建的保障房数量偏低。即便是针对户籍居民中的低收入人群,社会保障也还须面对信息不对称的问题,需要设计让人讲真话的机制。有时这种机制很冷酷,例如廉租房要建的很小很简陋,从而保证它落到真正需要帮助者手里。

您认为城中村的根本解决之道?

我国的“城中村”是在城市快速蔓延的过程中出现的——由于开发主体为了规避高拆迁成本而采取 “征地不征村”,造成“城市包围农村”。受城市化的增值效应带动,“城中村”中存在着活跃的农房租赁活动,低廉的租金吸引了大量贫困人群。村民的逐利意识更随之空前觉醒,对土地资源进行了掠夺性使用,对社区居住环境、卫生、治安带来极大负外部性,形成“城中村痼疾”。为贫困人口提供可负担的住房可以引流走部分城中村租客,但远不是根本解决之法。城中村问题的根源是极不稳定的土地产权关系——村民随时面临拆迁的可能,因此其行为有短期性的特点,对房屋或社区的投资严重不足。因此,根本解决之道是转变城中村土地性质和农民身份。结合城市土地利用升级的需要,城中村的“清理——重建”是一条路径,但是,城中村的推倒必须同时为其廉租屋功能寻找到替代实现之法,否则城市可能出现新的流动的贫民窟。而现阶段最重要的问题是,政府主导的廉租房体系还远未形成。

目前中国部分城市已开放申请城市户籍,但我们也可以观察到有些农民更改户籍的意愿不高,您如何看这个现象?

解放后建立起来的户籍制度的目的是固定人口、维持社会稳定,而改革开放三十年以来的城市化与市场化要求要素的流动性,因此产生了户籍制度改革的需求。但需要清楚的是,户籍制度改革是为人们提供选择权,而不是剥夺。户籍关联了本地福利和特权,所以人们的户籍落在哪里,是经过一番成本收益计算的。我们通常只看到由于城市财政压力过高而难以放开户籍制度,却忽视了农业户口也有附加值。一方面,农村集体成员权与保障挂钩,在当前土地制度下,农地承包权和宅基地使用权都有福利分配的性质;另一方面,农村集体成员权与其财产权利挂钩,一旦放弃农业户籍,就得放弃土地、房屋等财产,也得放弃获得集体经济组织分红的权利。所以很容易理解,某些农民亦不愿意放弃农村户籍。

袁志刚教授近期出版书籍包括: «城乡统筹劳动力市场建设与国家竞争力研究», «中国居民消费前沿问题研究» 等书,其他有关袁志刚教授的著作请点击此连结

 

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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Land rolling development in Shanghai

Throughout the process of urban development in China, land development is important because the government must use land to obtain financial support and to subsequently improve urban infrastructures. In most places in China there exists a dual system of land ownership between the city and the rural areas: state-owned land and collectively-owned land. This means that land in the cities is owned by the state, and land in the rural and suburban areas is owned by collectives. Therefore, when urban development reaches a certain level, and more land is required, the government first appropriates the collectively-owned land in the rural area and converts it into state owned land to be used for urban construction. More precisely, the government appropriates the collectively-owned land in the rural area and compensates the owners before converting the land into state owned land. Subsequently, the government launches the process of primary land development, which involves investing in the land and developing it before contracting this new urban land to developers. This is commonly known as changing “raw land” into “cultivated land”.1

Primary land development includes land acquisition, land consolidation, and land reserve. Land reserve means that the ownership of land collected by the government is stored in the land reserve centre. These three processes must satisfy the requirements of the indicators for municipal underground infrastructures, as well as the requirements of urban planning, in order to carry out demolition, land levelling, and construction of public facilities in order to meet the land transfer standards. The executive bodies in primary land development are the local gov ernment, or the companies designated by the local government, such as urban investment companies and land reserve institutions. When the process of primary land development is completed, raw land is changed into cultivated land, which can be traded at the land transaction centre. The government holds auctions where developers can bid on land. Since 1994, the Tax Sharing System has been applied to local finances. Because of the Tax Sharing System, the local government cannot receive tax compensation from the central government. Therefore, the local government attempts to raise land prices through auctions to acquire higher land revenue. From the perspective of land developers, it is now possible for them to gain profits from the development of the acquired land. Likewise, the government can use the funds collected through land auctions to improve urban infrastructures.

If we look at the models of land development for the four development zones of Jinqiao, Lujiazui, Waigaoqiao, and Zhangjiang, we see that Shanghai is different from other cities in China. The Pudong New Area government, rather than the Shanghai city government, is in charge of these development zones. Because the Pudong New Area government is responsible for promoting investment and setting up infrastructures with limited financial resources, the government has designed a special model to finance and build the development zones. This land development model is called the “land rolling development model”.

First of all, the Pudong New Area government evaluates the price of rural collectively-owned land, and then pays 30% of the estimated price as the “land pre-acquisition costs” to the rural collectively-owned land owner to convert the land into state-owned land. “Land pre-acquisition costs” convert the land ownership and the land management. Then, the Shanghai Municipal Finance Bureau sets up the Development Zone Company. The fund provided to the company is equal to the estimated price of the rural collectively-owned land. When the Development Zone Company receives the fund, it purchases the development zone land from the Land Authority of Shanghai and signs the land use contract, thus acquiring the right to use the land. Next, the land ownership and the land management are transferred to the Development Zone Company. In this process, the flow of capital between the government and the Development Zone Company is counterbalanced. The land is transferred to the Development Zone Company without payment. In addition, the Development Zone Company may mortgage the land in order to receive loans to be used for the construction of the development zone. With the land loan, the Development Zone Company will need to pay only 70% of the property price to procure full ownership of the land and to develop it.2

 

The above graph plotted by Chi-Han Ai shows the difference between land development models of most cities in China and that of Shanghai. Please click to zoom in the graph.

This “land rolling development model” enables the Pudong New Area government to raise funds and complete the infrastructure of the development zone. However, this model has some underlying problems. For example, the government focuses on land and real estate development, but neglects industrial development. For the development of the industrial zone, the links between Industrial organizations are an important factor. However, the Chinese government still has room for improvement regarding industrial connections.

  1. Zhu Lingyi (2004) Fuxian zhong di difang fazhan xing guojia? Taibei nèi hu keji yuanqu yu shanghai zhangjianggao keje yuanqu de bijiao yanjiu 浮现中的地方发展型国家? 台北内湖科技园区与上海张江高科技园区的比较研究。Master thesis, National Taiwan University, Taipei. []
  2. Shanghai shi difangzhi bangongshi 上海市地方志办公室, Retrieved from http://www.shtong.gov.cn/node2/node2245/node64514/node64522/node64575/node64585/userobject1ai58313.html , last accessed 04 December 2012. []

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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