China’s Urban Dream Denied
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China’s Urban Dream Denied

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China is in the midst of an urban revolution, with hundreds of millions of migrants moving into cities every year.  Since 2011, for the first time in history, more than half of China’s 1.3 billion citizens (690 million people) are living in cities.  Another 300-400 million are expected to be added to China's cities in the next 15-20 years.  New Premier Li Keqiang recently proposed accelerating urbanization in China, and said urbanization is a “huge engine” of China’s future economic growth.With its unprecedented speed and scale, Nobel laureate Joseph Stiglitz has called urbanization in China one of the two main forces (the other being technological development in the U.S.) shaping the world in the 21st century.

Yet, China’s urban dream may be derailed by the lack of affordable housing in cities for the massive influx of urban residents.   

For almost five decades, Chinese cities were dominated by welfare-oriented public rental housing provided by either the government or public employers.  Severe housing shortages, residential crowding, and poor housing conditions were common problems in cities.  Over the last two decades, Chinese cities have experienced an unprecedented housing privatization, as the Chinese government has sold public rental housing at subsidized prices, encouraged developers to provide new private housing, and ended public housing provisions. 

With the influx of both domestic and international investment, there has been an unprecedented housing boom in Chinese cities.  In the decade leading up to 2010, according to the Economist Intelligence Unit, China constructed roughly twice the total number of houses currently in the UK, or about the same amount of houses in Japan.

These new houses were also much larger and of a higher quality than the ones they replaced; residential floor space per capita in cities increased from 43 in 1980 to 340 square foot in 2010, although this is still much smaller than in the United States (700 square foot per person).  75% of households in cities/towns(85% of all households nationwide) were homeowners in 2010, compared to 20% in the 1980s. This rate of homeownership is higher than in many developed countries.

Meanwhile, housing prices have skyrocketed in cities, with the national average housing price increasing by 250% in the decade between 2000 and 2010.  The housing price-income ratio classifies much of China as“severely unaffordable” in terms of housing. In big cities like Beijing and Shanghai, a modest apartment can cost multiple millions of yuan to purchase, and thousands of yuan to rent, making housing affordability the top concern of most low- and middle- income households. 

As a result, millions of migrants have been completely left out of the “Chinese dream,” with few owning homes in cities and most living in extremely crowded, poor quality dwellings.  Migrants are generally more vulnerable in the housing market due to their lower incomes and the discriminatory Household Registration System, or hukou system (often called an internal passport system), under which migrants are not considered “legal” residents in cities despite living and working in there over the long-term.  Without local urban hukou, migrants are not entitled to welfare benefits such as subsidized housing. Even in Shenzhen, the city of migrants, local hukou is required to access low-income housing.  In others cities like Beijing, several years of local hukou is required before applying for low-income housing. 

Comments
18
Paul
January 14, 2014 at 14:08

How can TDog even claim to be a neutral observer? He is clearly either a wumao masquerading as an American, or he’s brainwashed.

Liang1a
May 16, 2013 at 14:56

The problem with the Chinese economy is that the government still hasn't quite understood the larger picture about the uniqueness of the Chinese economy.  The government is still fixated on the exports as the "strategic opportunity" of the Chinese economic development.  I have said for decades that China cannot rely on exports but must rely on the urbanization of the rural residents to make the Chinese people productive in the urban areas to produce services for themselves to consume.   The point is to raise the standard of living of the Chinese and not to earn more money (dollar) through exports.  Since the Chinese government is still fixated on exports to earn more dollars, their goal is not to settle the rural residents into the urban areas as an end in itself but only to provide cheap migrant workers for the exports factories.  This is why for decades the Chinese government had not done any comprehensive urbanization and the migrant workers never settled down in the urban areas in any significant numbers.  In fact, the household registration system makes it illegal for rural migrant workers to seek permanent residence in the urban areas.

While this entire system is being changed, it is progressing slowly.  But if allowed to reside permanent in the urban areas, then at least more rural residents will in the future seek to establish permanent residence in the cities.  One of the big problem is that housings are very expensive in Chinese cities.  And with the wages of the migrant workers set very low, it is impossible for the migrants to afford housings in the cities.  One possible solution is for the government to allow the farmers to sell their land and use the proceed to buy housing in the cities.  Recently, the shadow banking system in China has expanded greatly with as estimated amount of some 21 trillion yuan and growing at the rate of 75% in the last 2 years.  Such rapid growth of shadow banking may provide loans to help the migrants to get settled in the cities by helping them to start businesses providing goods or services for local domestic consumption.

The problem of China's economic development is not just the lack of housings.  The problem lies in the obsession of the Chinese government with exports.  I'm glad to hear Li Keqiang saying urbanization will be the focus of the Chinese economic development.  I hop he understands that urbanization is not a means to an end such as providing cheap migrant labor for exports but THE END in itself.  Urbanizaiton is to settle 95% of the Chinese people in the urban areas so they can provide goods and services for themselves to consume at a much more productive rate.  Only by urbanizing all the Chinese people and allowing them to consume their own goods and services will China be able to provide $50,000 to $66,000 of per capita GDP (2010 constant dollar) to the Chinese people and give them a high standard of living.  Building more affordable housings is part of the urbanization.  The other parts of urbanizaiton is giving the people a higher education, advancing China's overall education and technologies, making China energy self-sufficient, reducing waste of energy and resources by reducing needless exports, etc.

matt
February 16, 2014 at 21:06

You’re wrong. Turning China into another consuming materialistic obsessed USA will just end in disaster.

Observer
May 16, 2013 at 11:03

Why don't you read this article from this very own website and see who did all the braggings = http://thediplomat.com/2013/05/08/back-on-track-pentagon-report-reveals-chinese-military-developments/comment-page-1/#comments

 

As I said, the empty drums are the loudest ones.

Derek
May 16, 2013 at 02:27

Truthfully no Chinese living in the conditions you describe would be bragging about anything.

It is more of China’s detractors crowing that China always be a ****hole and the peasants will always be peasants. Chinese officials rely on American ideals to preserve social stability. They take notes on how to convince the population that every year is more prosperous and better than the last.

The same way the underprivileged in America are manipulated into being optimistic wih the illusion of social mobility and free market capitalism. That said, all countries take notes on controlling their population in such a manner.

zo
May 15, 2013 at 15:29

Small point perhaps, but in no way can the author’s wish for housing that is not a literal one-person steel coop located 3 hours from work be described as a wish for the “dizzying heights of luxury”. Come on.

Tom F
May 15, 2013 at 07:28

@ TDog - "China's housing problem is not the result of poor planning or even callous indifference on the part of the CCP"

Can you be sure of that? I have friends and colleagues who are either Chinese expats, or are working in China, and almost all of them are of the opinion growth is out of control in China, and during a period of relative prosperity where they should have deliver much better quality growth. The low quality growth delivered will actually create liabilities long into the future (when fiscal conditions may not be as favourable as it is now).

I am told, out of control growth results in extremely poor planning and unsuited to Chinese culture or traditional way of life, and is brewing a modern day British high rise slums of the 70s. Home seekers has mostly shunned these highrise developments and there are entire cities of highrises sitting empty. Schools, hospitals, parks, and other community infrastructures are not keeping up with growth in housing for example. Like wise, utilities and services are not keeping up with demand, and we all have read about the quality of the environment, that in itself is the systematic failing of out of control growth and a liability on future generations. 

I concede there are now evidence of sustained efforts by the CCP to invest in infrastructures, but that effort is again subject to the spurious nature of growth in China and the benefits of the spending is not yet assured. Many are saying the CCP and their cronies are the direct beneficiaries of these infrastructure investments, and that money is not finding their way to the actual needs of the community. 

The one mindset that I perceive that is pervasive in China is that the CCP can't control everything, ie they rely on card carrying members to report non-compliance activities, but that can only go so far as the card carrying members aren't the source of non-compliance. Examples of the CCP loosing their grips are shockingly common and frighteningly close to home.

In communities, local officials (fresh from land resumption victories) are ignoring 'no banquet' edicts and celebrating in front of those who have just been made homeless. Protests are ignored and the organisers of the protests are arrested when the banquet is over.

At national level, food safety compliance is virtually non-existant, geomancy takes precedence over structural adequacy and pragmatic programs, contract laws relies on 'contacts' more so than contracts. The entire situation is best described as controlled anarchy, that is ineffect the essence of the growth, which is in reality a growth in future liabilities. If the rest of the world is not concerned, we should be, because parts of the world has seen this movie before, at a smaller scale, but at China scale, scary.

It's a globalised connected world now, if the world is not concerned about China, it should be. Australia alone is budgeting for $2.2 billion in spending on 'just' illegal arrivals, excluding extra spending on securities, border protection and foreign aid. What China is doing to Asia, to itself, has the potential to create a much bigger catastrophy, Just look at North Korea and see how hungry people with guns behave. 

Observer
May 15, 2013 at 04:11

Where did I say it should/could be done overnight?

 

Again, I will repeat. Before you brag about how great china will be, better clean up your own house before you brag. Also, poor chinese have to live in steel cages stacking on top of each other in slums, like animals in the zoo. Funny how chinese posters "forgot" to brag about that.

 

"Before you can run, better learn how to crawl, then walk first" – old proverb. Just saying.

 

Alfred, Melbourne
May 14, 2013 at 13:18

Urban Chinese need 3 times as much energy as those living in the countryside. Those tall buildings use enormous amounts of energy. In view of this, and the fact that China is already using half the entire world's coal production, it is clear that Chinese cities will have to start downsizing before too long. A lot of these people will have return to the countryside.

[...] by Youqin Huang via The Diplomat, China is in the midst of an urban revolution, with hundreds of millions of migrants moving into [...]

[...] Submitted by Youqin Huang via The Diplomat, [...]

[...] Submitted by Youqin Huang via The Diplomat, [...]

[...] Submitted by Youqin Huang via The Diplomat, [...]

[...] Submitted by Youqin Huang via The Diplomat, [...]

[...] Read Here – The Diplomat [...]

TDog
May 14, 2013 at 08:28

There are two schools of thought on China: those who believe that if China hasn't done it, it will never be done and those who believe that China will do it all.  This particular article, while highlighting the obvious problems China faces, suffers from the former.  China is, according to the article, on the verge of failrue because it has not accommodated everyone to the dizzying heights of luxury the author thinks they should have been, ignoring the fact that things take time.

China has often taken the approach of tackling one priority at a time.  Despite China's growing economy and massive cash reserves, even they do not have enough of everything to do everything all at once.  We pick and critique at them for everything.  If they put housing up, we criticize them for environmental degradation.  If they leave areas pristine, we bemoan the fact that oh so many Chinese are missing out.

For the majority of China watchers, it's a game of casting China in a negative light regardless of what they do.  Mind you, it's one thing to point out a problem, but another thing entirely to point it out with an agenda in mind.

We often choose to ignore or perhaps, due to a lack of study, have no choice but to ignore the fact that when we look at China, we're looking at a replay of our own experiences with industrialization and modernazation.  When we as a nation were taking our first steps onto the world stage, many folks were left behind and many outside parties derided us as somehow inferior for not being a first rate power overnight.

China's housing problem is not the result of poor planning or even callous indifference on the part of the CCP.  It's a result of the nature of human and national development.  The raising of standards of living will always be uneven and no amount of pontification will make it otherwise.

TDog
May 14, 2013 at 08:18

"The empty drums are loud indeed."

As are those who think everything can be done overnight.

American mindset: if it wasn't done yesterday, it wasn't done right.

Observer
May 14, 2013 at 04:59

So there are million and million of poor immigrated chinese that are living in slums as "ants" and "mices", we have chinese posters that kept on bragging about the "soon to be create" $100 Trillion USD economy. How about clean up your own house before you brag?

 

The empty drums are loud, indeed.

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