Achievements and Problems

There is no question that the process of urbanisation and modernisation in China over the recent decades has made some remarkable achievements. The sheer scale of urbanisation is breathtaking, rising in population terms from 190 million (19 %) in 1980 to 742 million (54 %) in 2014, with 316m (23 %) living in city agglomerations of over 1 million [Source: World Bank: World Development Indicators WDI]. Urban China built c. 7 million housing units per year through the period 1998—2011, which contrasts with England’s 175,000 figure. Very large and solid achievements have been made in raising housing standards and in reducing the incidence of poverty. Residential floor space per capita in cities increased from 4.3 m2 in 1980 to 34 m2 in 2010, significantly higher than Hong Kong (Youqin 2013). The proportion of the population below the absolute poverty standard of $1.25/day has fallen from 54 % in 1987 and 28 % in 2000 to just 6 % in 2011 (WDI). Markets have been created (home ownership rising from 20 % in 1980 to 75 % in 2019) and shown to operate, albeit with some instability and need for government intervention.

These impressive achievements should not, however, conceal the fact that there are some major unresolved problems. Urbanisation has been accompanied by a rapid and unsustainable rise in energy consumption from fossil fuels, both for power generation and motor transport, and this in turn is feeding a crisis of air pollution across many cities. A third or more of the urban population are rural migrants without urban ‘hukou’ and hence no or limited rights of access to urban housing, public services or welfare, and this group typically live in poor housing conditions renting in urban villages or factory dormitories (Wang et al. 2014). Local authority growth machines have in some cases overreached themselves and ended up constructing ‘ghost towns’ of new housing which nobody wants to buy or live in— a strange parallel with the extremes of the boom and slump seen in both Ireland and Spain, as documented elsewhere in this volume. Inequality has increased—the top 10 % of income earners took 30 % of the total recorded incomes in 2010 compared with 23 % in 1987, whereas the bottom 10 % got only 1.7 % compared with 3.3 % in 1987 (WDI). This has added to the problem of housing affordability, as the higher-income group have bid up the prices of housing and made access more difficult for low and middle-income groups. China displays relatively high ratios of house prices to incomes, with some particular hotspots such as Shenzhen and Beijing as noted earlier. For example, Wang et al. (2013, p. 351) quote ratios of average house price to average salary in four key cities ranging between 11.5 and 24.1 over the period 2000—2008. Quantity may have trumped quality in urban housing construction, and there is certainly a lot of very repetitive high-density urban environments being created as well as reports of poor build quality in some instances.

Urban China has suffered from somewhat similar problems of house price inflation and volatility as have afflicted Hong Kong. Housing asset values are clearly a sensitive indicator for the government, which has intervened on several occasions to moderate the market—more recently it has intervened significantly to prop up stock markets. Explanations for house price inflation in urban China include a range of factors including low interest rates, entry into World Trade Organisation (WTO) leading to more highly paid international employees, expectations of a rising currency and migration by richer households to major and coastal cities (Wang et al. 2013). Price rises were only temporarily dented by the 2008 financial crisis, and tax and regulatory policies to limit price inflation were instituted in 2009 and 2010. Again, this is one of those cases which suggests that a high volume of new housing supply is not a sufficient condition for avoiding price inflation.

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