2013 Mayor’s Forum on China’s Future Urbanization

Nov 04-2013   

    

Peking University’s National School of Development (NSD) was the academic support unit for the ‘Mayor’s Forum on China’s Future Urbanization.  Held on 19 October 2013, by Xinhua News Agency’s ‘Economy & Nation Weekly’ magazine, the topic for the forum was ‘New Urbanization’, bringing together firms and capital to promote urban development.

Many of the NSD’s professors were involved, including Prof.  Zhou Qiren and Prof. Huang Yiping.

The City’s ‘Administrative Coat’

In his speech on Cities’ ‘Administrative Coat’, Prof. Zhou took the city, a densely populated social phenomenon and likened its need of administration and an administrative framework to a person needing to wear a jacket. How to make this ‘administrative coat’ a good fit was the subject of Prof. Zhou’s speech.

Prof. Zhou compared the urbanization process in China with Taiwan and the USA, including common problems witnessed. He proposed the need to address conflicts which have arisen between China’s millennia-old ‘administrative jacket’ and its economic growth.  

This is a two-sided problem. On the one hand, there is a need to make sure the administrative jacket meets needs of today’s urbanization. At the same time we must address the ‘brain drain’ from rural areas to cities. As Prof. Zhou has a wealth of experience in merging villages and merging cities, he believes as transport infrastructure improves, there is no longer need for as much local administration.

Finally, Prof. Zhou proposed a question for the mayors to consider: As an economy, its population and corporate investment grows, how can our centralised administrative structure, with its agrarian roots better fit in with today’s urbanized and industrialized era?

Urbanization’s Financial Leverage

In the process of future urbanization, finance plays an important role in the allocation of resources. Need for financing is large, long-term and complex. Products such as loans, bonds, trusts, equity financing, financial leasing are all needed. Against this backdrop, Prof. Huang Yiping presented ‘Urbanization’s financial leverage’

Prof. Huang explained two problems when trying to resolve the financing issue:

1 Need for government funding to support infrastructure and urbanisation but in reality there is a lack of formal and reasonable sustainable financing channels, there is not much money going directly from govt. revenue to support urbanization

2 Local governments’ debt has become a considerable danger to the macroeconomy.

To address these issues, he gave two methods:

1 To introduce new sustainable financing channels which are not just a sole channel of the government lending to banks.

2 To harden local governments’ budget constraints – to put it simply, whoever borrows must take responsibility.

Next, Huang discussed four channels to support emerging urbanisation investment demand.

1 A substantial increase in local governments’ control over revenue as there is a mismatch between administrative and financial powers.    

2 Developing municipal bonds and providing independently assessed financials of local governments, which is in line with global conventions.

3 Transfer payments – as the financing needs for each area is different, there should be in place a system whereby the central government can make transfers to support each area in need.

4 To greater utilize the private capital market through schemes such as private-public ventures – there are massive possibilities in this area.

Whilst these channels are being developed, Prof. Huang noted that one must keep a close eye on the process to prevent any problems occurring.