罗兰德在中国城镇化报告宣讲会上的讲话

It may come as a surprise to many, but Chinese cities are not dense. Guangzhou, for example, could accommodate 4.2 million more people, had it the density of Seoul in Korea. Actually, many modern Chinese cities have dense city cores. But beyond the third ring road in Beijing, the urban sprawl begins. And that is where density efficiencies can be achieved, and where they should be achieved.

Smart density planning is a guiding consideration for internal city design. Think of the superblocks in Beijing, sometimes 500 meters wide. Their very existence reduces the number of traffic arteries, because they only allow for a limited amount of junctions and crossroads, thus causing widespread congestions. A finer grained network makes it much easier to manage traffic.

The density of cities is also about more space for rural and agricultural land. There is a widespread assumption that China needs around 120 million hectares for food production. If China’s cities were to continue their urban sprawl, they would need to convert rural to urban a land area the size of the Netherlands over the next 14 years. That is clearly not sustainable. It would threaten the 120 million hectares red line.

Inequality is the second challenge. That is where the issue of land reform comes in. Part of the reason for urban sprawl is that cities tend to finance their expenditures by converting rural land into urban use. In this process, cities compensate farmers at the price of agricultural land, convert it into urban land, sell it to developers at urban land prices, and take the difference to finance their expenditures. Farmers are rightly aggrieved, and their demand for better compensation has led to social tensions and manifestations. No wonder the bulk of social unrest in China occurs at the urban periphery, where these two land systems—the rural land system and the urban land system—collide.

In terms of policies in China, we propose to focus on farmers’ property rights, moving away from the dichotomy of urban land and rural land, and eventually, to a unified land system. There should be legal limits to land expropriation and eminent domain actions by local government. Fair and equitable compensation for expropriation would go a long way to redress grievances of farmers. From 1990 to 2010, local governments expropriated land at an estimated two trillion renminbi below the market value. Assuming that those 2 trillion would have generated returns similar to overall growth, farmers would have more than 5 trillion renminbi in household wealth by now.

Inequality is an issue that is hotly discussed worldwide these days, as evidenced by the global success of Thoma Piketty’s book on Capital in the 21st century. It is also an issue in China: some urban residents are registered with the city hukou, a household registration system, and have access to public services, but migrants are left out. Things have somewhat improved over the years, and many cities are striving to provide social services for those migrant workers, but access overall is still restricted. We argue in our report that the hukou system needs to be abolished over time and access to services should be based on residency, not origin.

Sustainable urbanization needs to redress environmental deficiencies, air pollution and the degradation of land and water. We find that, by and large, China has good laws and regulations, comparable to those of many OECD countries. At issue is implementation, the weak capacity of environmental agencies, the single-minded myopic future on economic growth, which only now is given way to a new emphasis on the quality of growth, of life. Administrative boundaries of cities and provinces are no longer adequate enough to deal with the environmental degradation that goes beyond those boundaries. Beijing will not be able to handle air pollution on its own, since pollution there is mainly caused by the neighbouring Hebei province, for example.

How is all this going to be financed? China’s fiscal system needs comprehensive reforms. With better and stronger land rights for farmers, cities will lose revenues from land conversion. Cities need new sources of revenue. Now is the time to empower cities to find new sources of revenue, through property taxes or local surcharges on income taxes. Environmental levies, such as higher motor vehicle licence fees, pollution charges and cost recovery on utilities, will raise revenues while addressing environmental problems at the same time.

To finance long-term investments in infrastructure, there needs to be reforms of the financial system at the city level. Local government financing vehicles need to be brought in to reduce debt levels. Cities in good financial standing should also be allowed to issue their own bonds.

More efficient cities will yield major savings. At the current rate and without reforms, China’s cities will spend about $5 trillion on infrastructure over the next 15 years. In a reform scenario, China’s more efficient and denser cities may save some $1.4 trillion in infrastructure investments, more than enough to finance the expansion of health, education and low-income housing to cope with the influx of people. Shifting from the physical expansion of cities and infrastructure to delivering services to China’s citizens would truly be the people-oriented urbanization that is the ambition and aspiration of the third Plenary outcome from last November. And this is what we are proposing as well.

Thank you.