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Chinese Cities: Functions and Industrial Layout
During the era of the planned economy industrial production was synonymous with urbanisation and at the core of city functions. Industries clustered in the central areas of cities, while production-oriented and life-oriented service industries seriously lagged behind. When reform went in the direction of the socialist market economy, Chinese cities shifted focus to the coordination of production and service functions while life-oriented services still fell behind. Differential land rent paved the way for industries such as finance and commerce to occupy the heart of urban centres, while manufacturing industries shifted to the outskirts. This chapter depicts the evolution of urban industrial layouts along with changes to the dominant urban functions. It highlights the construction of Development Zones and new cities – the important spatial carrier of urban industrial development in China.
Major Functions and Industrial Layout of Chinese Cities
The function of a city refers to the role that it plays in regional or national economic development.1 When cities change from monofunctional small towns to metropolises of multiple functions, their dominant functions also change. Since industrial layout reflects urban functions in terms of space, the changes in dominant functions have led to the adjustment of industrial layout.2
Planned Economy Period: Production Oriented
At its foundation, the People’s Republic of China was a pre-industrial society, with an agricultural tradition stretching back for millennia. Cities were not, primarily, sites of production, but commodity exchange centres (markets). They were also centres of political and administrative jurisdiction, supported by the military power of the state. They were consumption-based rather than production-based. In 1952, national industrial production only accounted for 17.6 per cent of GDP. The expansion of industrial production was seen as essential in order to improve living standards and to consolidate the regime of the new government. Therefore, China gave priority to industrialisation.
From the 1950s to the 1970s, China’s urbanisation was guided by the strategy of restraining large cities while promoting the development of small and medium-sized ones. In addition, most counties were designated to develop five small-sized industries.3 The output of secondary industry increased continuously and reached 48.5 per cent of GDP in 1980. Due to the emphasis on the production function of cities and particularly on their role as the manufacturing base, heavy industry developed very fast while light industry and service industry lagged behind. There was a serious shortage of urban infrastructure, service facilities, and housing supply. During this period, productivity and the supply capacity of agriculture significantly dropped behind those of industry. Furthermore, the household registration system also hindered the transfer of rural surplus labour to non-agricultural sectors in cities. Industrialisation was not accompanied by urbanisation. From 1949 to 1980, the number of cities rose from 136 to 193, with an average annual increase of 1.84. The proportion of urban non-agricultural population and the total population increased from merely 9.1 per cent and 10.6 per cent to 13.7 per cent and 19.4 per cent respectively.4
Reform and Opening-up Period: Equilibrium between Production and Service
From the mid-1980s, China began to establish the leading role of large and medium-sized cities for regional economic development. China started to support the development of enterprises under all forms of ownership, including SMEs (small and medium-sized enterprises) and rural township enterprises. This motivated a large number of surplus rural labourers to transfer to the non-agricultural industrial sector. The number of cities increased from 193 in 1980 to 668 in 1998, an average annual increase of 26.39 per cent. The proportion of urban non-agricultural population and the total population rose from 13.7 per cent and 19.4 per cent to 23.97 per cent and 30.4 per cent respectively. The role of the tertiary sector in economic development became much more significant. In 1980, it accounted for 21.4 per cent of GDP, and by 1998 it was 32.9 per cent.
The transition from production-oriented cities to service and life-oriented cities began in the 1990s.5 The fact that more than 50 per cent of the total employed now work in the tertiary sector is an important signal. The rapid development of the real estate, finance and insurance, transport, and postal services sectors gradually strengthened the leading role of the tertiary industry. The tertiary sector came to occupy large areas of land in city centres previously allocated for industrial use. The transition also transformed the nature and space of cities.
Development Zones: New Industrial Space
Development Zones have become an important carrier of urban development. Since 1978, the Chinese urban resident population has increased at a rate of ten million annually. Development Zones offered spatial and industrial conditions for the expanding urban population. The shift was characterised as ‘retreating from secondary industry while developing tertiary industry in central urban areas’.6 The Development Zones offered new industrial space on the periphery while central urban areas were reutilised to develop the service sector.
The Main Categories of Development Zones
Economic Development Zones, in a broad sense, include Special Economic Zones, Economic and Technological Development Zones, Bonded Zones (also known as the Free Trade Area), High and New Technology Industry Development Zones, National Tourism Resorts, and National Pilot Areas of Comprehensive Reform.7
Economic and Technological Development Zones
Economic and Technological Development Zones (ETDZs) are specially designated in suburban lots. Predominantly newly built, the ETDZ is export-oriented, covering an area of approximately three to five km2. It is home to processing industry, equipped with warehouses and necessary commerce, service, municipal utilities, and administrative agencies. There are no permanent residents; dormitories are available for management staff. The construction of ETDZs requires infrastructure investment, generally funded by domestic investors, to attract foreign investment projects. The ETDZ has clear geographical boundaries. It is an integral part of urban land, but not defined as part of the ‘built-up area’ of cities.
Figure 2.1: Dongying Economic and Technological Development Zone8
Bonded Zones
Bonded Zones are places isolated from the impact of domestic economic policies. China’s Bonded Zones are enclosed with clear boundaries and without local residents, which are regulated by strict quarantine measures. All products are for export. Bonded Zones encourage foreign capital and advanced technology and management systems.
High and New Technology Industry Development Zones
Figure. 2.2: China’s First Free Trade Zone (Shanghai Waigaoqiao Free Trade Zone)
High and New Technology Industry Development Zones are established to encourage high-tech research and application of research findings. In essence, it is a knowledge-intensive and technology-intensive area. High and New Technology Industry Development Zones are designed to promote the commercialisation, industrialisation, and internationalisation of domestic high-tech achievements and accelerate the penetration and expansion of new technologies.
Figure 2.3: Zhongguancun Science and Technology Park
Zhongguancun Science and Technology Park
The park dates back to the ‘Zhongguancun Electronics Street’ in the early 1980s. In May 1988, the State Council approved the establishment of the Beijing New Technology Industrial Development Trial Zone (predecessor of the Zhongguancun Science and Technology Park). Thus, Zhongguancun became the first high-tech park in China. On 13 March 2009, the State Council approved the construction of the Zhongguancun National Demonstration Zone, and planned to build Zhongguancun a S&T innovation centre with a global influence. Later, the Development Plan Outline for Zhongguancun National Demonstration Zone (2011–20) was launched by the State Council on 26 January 2011.
National Tourism Resorts
National Tourism Resorts are tailored primarily for overseas visitors. Such resorts include: foreign real estate (mainly export-oriented villas, apartments, flats, office buildings, and other real estate projects), tourism and cultural entertainment (holiday villages and playgrounds, gyms, dance halls, bowling, etc.), tourism infrastructure facilities (roads and communication projects), foreign commerce and services (five-star international hotels and supporting facilities, Chinese and western restaurants, grocery stores and chain stores).
A Brief History of Development Zones
Development Zones are an important driving force in the Chinese economy. At the end of 2006, there were 11,568 national and provincial Development Zones, with a total planned area of 76.29 million km2. The history of Development Zones in China can be divided into three stages.
Figure 2.4: Taihu National Tourist Resort
Tourist Resort Area of Taihu Lake, Jiangsu
Taihu National Tourist Resort in Suzhou is one of 12 national-level tourist resorts in the country, approved in October 1992 by the State Council. It covers a land area of 173 km2 with a lake surface area of 854 km2.
It began with the construction of national Economic and Technological Development Zones and the establishment of national High and New Technology Industry Development Zones.9 China decided to open up Dalian, Tianjin, Guangzhou, and 14 other coastal port cities in 1984. It also approved the construction of 11 Economic and Technological Development Zones: Dalian, Qinhuangdao, Ningbo, Qingdao, Yantai, Zhanjiang, Guangzhou, Tianjin, Nantong, Lianyungang, and Fuzhou. The purpose was ‘to introduce advanced technology needed in China, to develop joint ventures, Chinese-foreign cooperative enterprises, foreign-owned enterprises and Sino-foreign cooperative research institutions, to increase foreign exchange income, to provide new materials and key components, and to absorb new expertise, new technology and scientific management experience.’10
This was followed up in 1986 when the State Council approved the establishment of Shanghai Hongqiao and Minhang Economic and Technological Development Zones. These state-level ETDZs played an important role in promoting industrialisation and urbanisation in China.
In order to promote technological innovation and apply scientific and technological research to industry, Zhongguancun Science Park, the first national High and New Technology Industry Development Zone, was set up in Beijing in 1988. During this period, the economy developed rapidly alongside the development of different types of Development Zone. The construction of Development Zones expanded from coastal cities to those along rivers, from eastern provinces to central and western areas in China. The country was ‘in a rush for Development Zones’.11 Over 700 Development Zones had been approved and constructed by the end of 1994. They included 32 national ETDZs, 52 national High and New Technology Industry Development Zones, 13 bonded zones, 11 national resorts, and China–Singapore Suzhou Industrial Park (SIP). All of the bonded zones and 91.7 per cent of the national tourist resorts were still located in the eastern coastal areas.
There are three main features of Development Zones in this period. First, the quantity and quality of foreign capital greatly improved. Multinational companies began to replace SMEs as investors. Technology-intensive projects and foreign R&D centres successively flowed in. Second, unprecedented achievements were made in industrial production, tax revenue, and economic benefits. In 1994, the industrial production in 14 coastal ETDZs rose by 858.2 per cent compared with that in 1991. Third, the economic output of Development Zones accounted for a growing percentage in their host cities. For example, industrial production in the Guangzhou Development Zone accounted for 11.2 per cent of the city in 1996. Development Zones have become the driving forces for the urban economy.12
After the 1997 Asian financial crisis, foreign investment in China’s Development Zones plummeted. Policymakers were alert to the risks of a one-sided export-oriented economy, especially in Development Zones. During this period, the guidelines for Development Zones changed. Previously, the priority was simply attracting foreign capital. It shifted to attracting both foreign and domestic investment, fostering sustainable development, and promoting industrial restructuring and upgrading.
Many problems, such as poor economic performance and the waste of land resources, were exposed. Since 2004 many zones have merged and reorganised. By 2007, 1,568 national and provincial Development Zones were approved, 223 of which were national Development Zones (Tables 2.1 and 2.2).
Since 2000, Development Zones in China have enjoyed steady growth. During the Eleventh Five-year period, the number of state-level Development Zones increased to 116, their regional production output growing at an average annual rate of 23 per cent and accounting for 7 per cent of the country’s total GDP. Their proportion of industrial added value reached 12 per cent and their share of total exports accounted for 16 per cent and tax revenue accounted for 6 per cent. National Development Zones were the driving force for local economic development, accounting for more than 13 per cent of the GDP of the host cities.
The Impact of Development Zones on Urban Industrial Restructuring
Development Zones were established to attract foreign investment and develop High and New Technology Industry and export processing industry. Through the construction of Development Zones, many Chinese cities became more concentrated both in terms of industry and population in a relatively short time. Development Zones also play a significant role in promoting industrial upgrading, optimising urban spatial organisation and improving urban functions.
The interaction between Development Zones and their host cities has gone through two main phases. Mostly located in suburbs, Development Zones were separated from their host cities in the form of ‘isolated islands’, keeping a certain distance from the city and having clear geographical boundaries in the form of roads and rivers. During this period, the main function of Chinese Development Zones was similar to
Table 2.1: Types and Number of Development Zones in China (2007)
Table 2.2: Main Economic Indicators of the National Economic and Technological Industry Development Zone (2014)
Export Processing Zones. The connection between Development Zones and host cities was weak because raw materials and markets were not localised.
The number and the size of Development Zones increased rapidly in the mid-1990s. Almost all cities had Development Zones and some cities even had more than one. Since 1998, the focus of Development Zones has shifted from attracting foreign investment to attracting domestic investment too. Economic ties between Development Zones and host cities began to be strengthened, in the following ways:
- ■ Development Zones promote the spatial reconstruction of urban manufacturing industry. They aggregate the most competitive manufacturing industries.
- ■ They promote the suburbanisation of the urban population. Affluent communities are gradually formed in Development Zones.
- ■ They occupy a large amount of industrial land. The expansion of industrial land is a dominant factor in China’s urban development at this stage. Therefore, the expansion of Development Zones leads to the reconstruction of urban space.13
With the concentration of industries, population, and production factors, as well as the continuous improvement of industrial structures and urban functions, the visible and invisible ‘boundaries’ between Development Zones and other areas of host cities became blurred.
New Towns: Spatial Restructuring of Urban Industries
Figure 2.5: Zhujiang New Town, Guangzhou14
New towns in China can be traced back to the construction of satellite towns in the 1950s. For the purpose of developing industrial space, some large enterprises were located in the suburbs of metropolitan cities, such as Beijing, Shanghai, and Shenyang, as industrial satellite towns. Factory districts, residential areas, and public service facilities were built in these towns. In general, the supporting facilities were insufficient and were not desirable enough to attract residents. At the end of the 20th century, the development of China’s economy, society, and urbanisation showed a sustained and rapid momentum. However, excessive concentration of population and economic and social activities in large cities placed tremendous pressure on city operation. Thus, to develop new urban space, to optimise urban structures, and to enhance the overall competitiveness of cities became a key issue in the development of major cities. Some cities began to build ‘new towns’ to expand urban space in an effort to make a more reasonable distribution of industries and population. On the one hand, population in downtown areas could be dispersed, easing the pressure of population and industrial agglomeration. On the other, the government could motivate development of suburban areas.
Li Guiwen et al. (2011) summarised the causes of new town construction.15 First, agglomeration and diffusion are two complementary paths of urban development. Due to the limitation of resources and space, the existing urban space cannot accommodate all the newly added population. Consequently, urban functions have to be extended to the outskirts, which always leads to the birth of new towns affiliated to old cities.
Second, reform of land policies has changed the spatial layout of cities. Coupled with the development of the real estate market, price mechanisms help to improve the efficiency of land use. So, the central area of the city performs commercial, trade, and financial functions, while industrial, warehousing, and other functions are relocated to the outskirts. New towns in the suburbs of metropolises contribute to realising this transition.
Third, the reform of the urban housing system makes it possible for residents to choose where they live. In the second half of 1998, China terminated the old policy of housing distribution and initiated the new policy of housing purchase. On the one hand, the new policy brought about a boom in the real estate industry. On the other, housing commercialisation put an end to the previous practice of allocating houses as welfare through one’s work unit. Previously urban residents lived in workplace-centred settlements. Now, they live in stratum-oriented settlements, thus forming a new residential spatial layout.
Fourth, improved transportation infrastructure shortens the round-trip time between new towns and downtown areas. The development of urban rail transits and rapid bus systems connects the centre with the outskirts.