China - Leveling mountains to build cities

“To close regional gaps in wealth and achieve balanced growth.” - don't make me laugh

China levels mountains to urbanize poor inland regions

In this poor Silk Road city here in Gansu province, more than 700 mountains are being leveled to create urban areas.

Asahi Shimbun

15 March, 2013

China is moving mountains, literally, and building cities in underdeveloped hinterlands such as Lanzhou to close regional gaps in wealth and achieve balanced growth.

Local authorities reap windfalls because land, originally owned by the state, costs next to nothing. But publicly developed housing is often beyond the reach of average residents.

About an hour's drive from central Lanzhou across the Yellow River, the village of Qingbaishi was clouded by dust and sand.

Residents are less than enthusiastic about the project.

“The best we can hope for is probably better roads,” said a general store owner in his 40s. “Houses will not be available at prices ordinary people can pay.”

The man also said he is worried about an adverse effect on the environment.

“The air is badly polluted by dust, and I wonder if geological conditions will be all right after so many mountains are torn down,” he said.

Xi Jinping, who was elected president on March 14, is focusing on “urbanization” to correct regional disparities.

Xi plans to raise the status of farmers and migrant workers from rural regions, who have faced discrimination in education and social welfare in urban regions, to transform them into more or less equal citizens.

Narrowing differences between urban and rural regions will be essential for economic development and social stability, two prerequisites for solid foundations of the Xi administration.

In Lanzhou, local governments and businesses are spending 22 billion yuan (330 billion yen, or $3.4 billion) over five years to develop 25 square kilometers for residential, commercial and entertainment facilities.

The area will be slightly larger than Tokyo’s Shinagawa Ward.

The undertaking is being compared to a proverbial old man who moved mountains outside his home with divine help. The anecdote, a rough equivalent to “Where there is a will, there is a way,” was a favorite of ex-leader Mao Tse-tung.

A new city is also taking shape near Lanzhou Airport in the suburbs under the slogan of creating another Lanzhou.

Residents were evicted, and saline, barren land was leveled. High-rise condominiums have been built, and an automobile factory of Zhejiang Geely Holding Group has been opened.

Plans call for the new city to be expanded to 806 square kilometers, four times as large as the inner city.

In both projects, large real estate developers raise most of the funds. Local governments sell completed homes and industrial plots and pay developers out of the proceeds.

Public coffers will bulge with profits generated by developing dirt-cheap farmland and wasteland. Bureaucrats, as well as those connected to them, will benefit financially.

But farmers who part with their land will get only token compensation and tiny housing.

Lanzhou is not the first to use land as a horn of plenty to leverage economic development.

Shanghai, Guangdong province and many other localities exploited the same approach, and it finally reached the remote Silk Road region after more than 30 years.

Large-scale “new cities” are being built in other inland provinces, such as Guizhou and Shaanxi.

In China, revenue from land sales roughly equals half of other local government revenue. It means not only businesses but also local governments can make more money if real estate sells for high prices.

The intertwined interest among those concerned has pushed up residential prices to levels beyond the incomes of many average citizens.

In 2011, per-capita income in Gansu province was 15,000 yuan in urban areas and 4,000 yuan in rural areas, the lowest in the country. The figures were less than half the levels in Shanghai.

“Housing costs nearly 10,000 yuan per square meter, and we cannot afford it,” a taxi driver said. “It can be bought only by a handful of wealthy people, public servants and state-owned enterprise employees who can take out long-term loans, and investors in affluent coastal areas.”

During the current National People’s Congress session, which runs through March 17, the government has targeted approximately 7.5-percent growth in gross domestic product for 2013, 0.3 percentage point lower than in 2012.

The GDP quadrupled during the 10 years under former President Hu Jintao from 2003.

Hu's administration was aware that high economic growth cannot be maintained if regional disparities are left uncorrected, personnel costs kept low and resources wasted.

Hu tried—and failed—to shift from an economic development model dependent on real estate investments and exports.

Xi hopes that urbanization will stabilize society by closing wealth gaps and fostering a sense of fairness and drive growth by lifting spending power and expanding domestic demand.

But local governments are targeting GDP growth rates far higher than the national level as they have done in the past.

Twenty-four provinces, autonomous regions and cities, many in inland regions, have set a goal of 10 percent or more for 2013. Gansu and Guizhou provinces are projecting growth in the 13-percent range.

Bureaucrats in rural regions can quickly move up the ladder if they achieve high economic growth. They tend to turn to large public-works projects, rather than expand social security, because the former can easily produce results.

But construction of new cities in inland regions, if it fails, will leave huge ghost towns and massive bad loans.

Vice Premier Li Keqiang, who was promoted to premier on March 15, is aware of the risks involved.

“The focus is to ‘urbanize’ people and make ordinary people rich,” he told a meeting in January. “We should not create cities that cannot accept people.”