Hangzhou: Urban Development and China’s Transitional Economy

China has made tremendous economic strides over the last few decades, recently overtaking Japan to become the world’s second largest economy. These changes have come about in part because of Chinese government policies to encourage economic growth.

In their February 2012 Habitat International article “Restructuring for Growth in Urban China: Transitional Institutions, Urban Development, and Spatial Transformation,” Ye Hua and Dennis Weia discuss these policies in the context of a single city, Hangzhou, located on the Yangtze River Delta. They argue that Hangzhou’s development follows a pattern typical for Chinese cities and, thus, can be used as a case study to understand China’s urbanization within the broader context of the country’s economic restructuring.

Beginning in the 1980s, China launched a number of economic reforms that moved the country away from earlier socialist policies toward globalization. While the central government dictated many of the reforms to Chinese cities, a trend of decentralization also empowered local governments to utilize their own resources for economic development. Furthermore, the central government began to encourage marketization; institutions that were once egalitarian slowly began to move toward competitive growth. However, Hua and Weia emphasize that this process was slow and tentative, and that China is still in a period of economic transition.

A variety of strategies and tools have contributed to Hangzhou’s  economic development. The federal government designated four Economic and Technological Development Zones within the city, with comparatively relaxed economic regulations to encourage development. The city provided additional investment incentives, completing infrastructure development projects to make Hangzhou better prepared for new business. City officials have promoted Hangzhou as a tourist destination, deeming it the “Geneva of the Orient,” with limited success. The city government has also encouraged high-tech industries to settle in the city by investing in research, education, and high-tech industrial development.

Other development tools are fairly ubiquitous throughout China. Opportunities to achieve higher government positions incentivize city officials to promote urban development. Another common policy is “administrative rescaling,” the practice of annexing nearby suburbs and towns. Land is at a premium for most Chinese cities, so this practice is often critical to a city’s continued growth. Hangzhou has annexed surrounding areas several times. In 2001, Hangzhou absorbed two nearby cities, a move that more than doubled its population from nearly 1.8 million in 2000 to over 4 million in 2005.

In general, Hangzhou’s development plan has been successful; the city’s GDP jumped from 96 billion yuan in 1995 (approximately 11.5 billion USD) to nearly 510 billion yuan in 2009 (approximately 75 billion USD). However, Hua and Weia raise questions about the sustainability of this growth. Hangzhou has a shortage of public and living space, and rapid population growth is putting pressure on the job market and the environment.

The authors believe that Hangzhou’s development path can shed light on government initiatives for urban development not only in China, but on the role of government in other transitional economies around the world.