05/08/2013 - 17:27

Paying for the great urbanization of China

Hal Harvey

Hal Harvey

Harvey is the CEO of Energy Innovation: Policy and Technology LLC and senior fellow for energy and the environment at the Paulson Institute. He is...


Consider the impact Pierre L'Enfant had when he laid out Washington, DC, or when Robert Moses worked his plans for New York, or when Daniel Burnham designed Chicago. These planners set patterns that have affected us ever since: They significantly determined how we get around, how our work and home lives connect, whether we live in welcoming neighborhoods, how much traffic congestion we suffer, and more. Their influence reaches into the industrial metabolism as well, as design choices affect our energy and material consumption. And the patterns persist for many decades.

Today China is in a formative urban moment -- but at a far greater scale than the United States has experienced. China is in the midst of the fastest, largest transformation in human history. More than 500 million Chinese have been lifted out of poverty in the last three decades. This was accomplished in large part by people moving from the countryside to cities, which are the economic engines of all modern economies. In 1978, only 200 million Chinese lived in cities; today that figure is more than half a billion, and by 2030, the country's population will grow by another 300 million people. That means that Chinese cities will add one United States-worth of population in the next 20 years.

I have traveled to China dozens of times in the past two decades and have had a chance to witness this transformation up close: It is clear that the choices Chinese leaders make today will last for many generations. The outcomes of these choices will determine whether China's cities are clean, low-pollution, quiet, and livable -- or the opposite.

And, for three reasons, it is deeply in the interest of the United States that these choices be well made. First, the United States and China purchase resources in global markets, and if China's economy is inefficient and gobbles up ever-increasing amounts of steel, oil, glass, and chemicals, Americans will all pay a higher price for them. Second, the global climate is indifferent to the source of carbon dioxide emissions, so an efficient China will benefit the entire world. And, finally, China's legendary particulate air pollution actually travels across the Pacific, affecting the air in the West coast. A recent study found that more than three-fourths of "black carbon" -- basically, unburned hydrocarbons -- on the West coast comes in airborne plumes from China.

So what can be done to make this huge urbanization successful for China, and for the world? There are four realms that Chinese leaders must tackle: urban layout, transportation, and buildings must be rethought, and the financial incentives that drive today's development patterns must be flipped. This last issue, finance, is perhaps the most neglected, but it drives all the other decisions, and so cannot be ignored. If China is to develop in an environmentally and economically sound way, it is going to need a new way of financing the infrastructure required for more livable, healthy designs of its cities.

Making livable Chinese cities. It is especially important to get urban layout right, given the permanence of decisions on the basic shape of public space; in China, the import of layout is further magnified by the sheer scale of the population. China is building dense cities, as is necessary in a country with a population of 1.3 billion and a shortage of arable land. But in their current approach to urban layout, the Chinese have adopted a pattern that creates congestion and forces long travel distances. Most Chinese cities separate housing from offices, and both of those uses are kept apart from shopping districts. Separate uses mean lots of daily travel. To compound this problem, Chinese cities are increasingly laid out with "superblocks" -- half-kilometer-square blocks interspersed with huge boulevards. This lack of urban porosity creates monster traffic jams and a hostile environment for pedestrians and bicyclists. Urban planners in China need to correct these patterns, and fortunately the fix is relatively simple: The Chinese need smaller blocks interspersed with smaller streets, and they need to mix uses.

Then there is transportation. Today, fewer than one in 10 Chinese owns a car -- yet China is already experiencing massive traffic congestion. Beijing apparently has earned the dubious honor of hosting the world's longest-lasting traffic jam, a pile-up that stretched some 60 miles and required 11 days to untangle. Moving eight miles across Beijing can be a two-hour ordeal. It is clear that increased automobile use will lead to decreased mobility. So China needs alternatives that are fast, convenient, safe, clean, and affordable. Two old practices -- walking and biking -- and one new idea can make the difference. Berlin, Copenhagen, London, Paris, and many other modern cities -- including parts of New York, such as the Wall Street area -- are turning to walking and biking, simply because they are more convenient and more pleasant for many journeys than motorized alternatives. When mayors build great bike and pedestrian facilities, they get lots of use. They are cheap and effective ways to combat gridlock.

The new idea: bus rapid transit. Invented in Brazil, this scheme achieves subway speeds and capacities at less than 10 percent of the cost of rail. The trick is to cleverly use surface streets and ingenious bus configurations to skip traffic, avoid the bottleneck of bus fares and bus loading, and move people quickly through the city. Doing this well is a high-design endeavor, integrating a dozen innovations, but the package does not come with a high cost. A recently completed rapid-bus line in Guangzhou, built in nine months, now moves 800,000 people per day at subway speeds. It is a triumph of intelligent system thinking. China has committed to build 3,000 kilometers of bus rapid transit in the new five-year plan: This goal needs to be pursued with vigor.

And, finally, China could improve development by constructing more efficient buildings. Last year, the Empire State Building was rebuilt to save energy. A one-time investment of $13 million cut the building's annual energy bill by $4.4 million, a 38 percent reduction. The investment will pay for itself in less than three years. Now consider the building pace in China: Five million buildings will be constructed from 2005 to 2025, including somewhere between 20,000 and 50,000 skyscrapers of 30 stories or more. A well-designed building with good insulation and modern heating, ventilation, and air-conditioning equipment uses only one-quarter of the energy of a poorly built counterpart, and the energy savings continue for decades. China simply must build top-quality buildings -- and efficient buildings require strong building codes, enforced with discipline.

Funding livable Chinese cities. The rapid pace of city building and the attendant infrastructure investments in China are largely financed by land sales (technically long-term leases). Mayors collect funds from developers and use those revenues to build their streets, water and sewage systems, and civic marquee projects. This kind of transaction is easiest when the city sells large plots of land to developers for single uses -- but that in turn encourages all the negative patterns that have characterized China's urban development to date: long commutes, super-blocks, huge boulevards, and so on.

To deal with its development problem effectively, China will have to turn to more conventional methods of municipal finance, using property taxes to pay the bills and municipal bonds for long-term capital projects. Local governments do not currently have the authority to impose property taxes, though several large cities have been conducting experiments (with central government support). Local governments do have some scope to gather revenue through pollution charges and betterment fees, collected from developers in recognition of the burden their projects impose on the public infrastructure, but these are currently assessed only at very low levels -- far too low to support local infrastructure needs.

Then there is the issue of borrowing for capital investments. Chinese local governments do not have the authority to borrow or issue bonds, though some have found ways around these limitations, using municipal entities known as Urban Development Investment Corporations to take on debt. But these corporations do not have adequate transparency or credit ratings to borrow the amounts needed to support quality urban design.

If China's urbanization is to take a more sustainable path, local governments will also have to engage in better long-term budgeting and investment planning. City governments should be required to submit capital improvement plans that prioritize investments across sectors, and they should be required to produce multiyear financial plans, covering both operating expenditures and capital improvements, to establish what revenue sources will cover spending commitments. In addition, the split of tax revenues between Beijing and the cities will have to be rebalanced toward the cities.

Such reforms will not come easily in China, where power and financial authority have historically been focused in Beijing. But in the absence of reform, the best urban plans will be obviated by the sheer velocity of real estate transactions, resulting in ever-more superblocks, single-use developments, 12-lane boulevards, and traffic.

The recommendations in this article were developed in consultation with dozens of urban planners, developers, and mayors in China and beyond; if adopted, they would produce a more varied and interesting urban texture, increase citizen mobility, and slash energy use and pollution. Perhaps most important, the changes would make Chinese cities more livable, establishing patterns that will mark those cities for many decades. When the design pen is handled with care and vision, it has the power to build the truly great cities that China needs to create -- for all our sakes.