Letter From China - Beijing’s Vision for the Future - NYTimes.com

The NYT published a nice article about Beijing’s urban planning centre:

The centerpiece of the Exhibition Hall is a scale model of 1,302 square meters, or 14,000 square feet, that shows in fantastic detail the entire city inside the present-day Fourth Ring Road.

Every city in China with a bit of ambition has such a hall, in which the urban future is represented. Very often, these planning centres, and their scale models for that matter, are used to seduce foreign investors. As Liu Yuyang, one of our interviewees, posed it:

They use the power of visual simulation to attract potential investors. It’s not a boring Excel sheet or Business Plan, but an image of a new CBD that plays with people’s imagination.

Read the full story: Letter From China - Beijing’s Vision for the Future - NYTimes.com.

First reports expert meeting ‘Designing the Hybrid City’ published

Last month, we made the reports for the expert meeting ‘Desiging the Hybrid City’, organized by The Mobile City. The first reports of this expert meeting ‘Designing the Hybrid City’ are available now.

Chinese netizens report: 51.23% of sold housing in Shanghai is vacant - Shanghaiist

Chinese netizens report: 51.23% of sold housing in Shanghai is vacant - Shanghaiist.

‘Most homes’ to be demolished in 20 years

China Daily focusses on the problem of the short lifespan of Chinese constructions. The newspaper interviews a researcher from the Ministry of Housing and Urban-Rural Development, who states bluntly that “more than half of China’s existing residential structures will be demolished and rebuilt in the coming 20 years”.

Given China’s fast economic development and pace of urbanization, houses built between 1979 and 1999 cannot meet the demands of modern living, either because of limited space or a lack of supporting facilities,” he said. “Only those homes built after 1999 are likely to be preserved in the longer term.”

China’s fast housing production during the 80’s and 90’s has led to substandard compounds, similar to Europe’s post-war residential area’s that were demolished on a big scale during recent years. But the size of the Chinese problem seems to be a lot bigger.

In April, Qiu Baoxing, vice-minister of the ministry, said during an industry forum that Chinese buildings can only stand for between 25 and 30 years. In contrast, the average life expectancy of a building in Britain is 132 years and they last around 74 years in the United States.

Read the full article ‘Most homes’ to be demolished in 20 years.

Der Spiegel forsees bursting Chinese Housing Bubble

Der Spiegel predicts a new challenge for the global economy in 2012, when Hu Jintao and Wen Jiabao step down from the government. The magazine predicts that will be the moment China’s real estate bubble is likely to burst. We’ve heard the argument many times before, but Spiegel focusses on the first ones most likely to suffer from dropping housingprices: local governments in China’s cities:

China, which long seemed immune to the global crunch, now faces the threat of a homemade real estate crisis. This could spell trouble for many local governments, which in some cases have financed almost a third of their major infrastructure projects, like airports and train stations, by selling agricultural land to real estate sharks.

The article quotes Cao Jinhai from the Chinese Academy of Social Sciences in Beijing, who scetches the worst case scenario, when local governments run out of money, because they lose their single most important source of income: land sales.

In the worst case, Cao predicts, there could be a large-scale run on the banks. “Of the 4 trillion yuan in the Chinese economic stimulus package, 3 trillion are in fact coming from local governments — and they borrowed the money from the banks.”

The Go West Project plans to focus on the overproduction of real estate in China during our trip to Yinchuan in October this year.

The influence of the state on the Chinese real estate market

Increasing influence of SOE’s on Chinese real estate market (source: New York Times)

Earlier this year, we posted an article by the Global Times reported the measures the Chinese government took on the increasing influence of State Owned Enterprises (SOE’s) on the real estate market. Today, the New York Times has a front page article on the growing influence of these SOE’s. The article is chrystal clear about the negative effects the SOE’s have on the real estate market:

By driving up property prices, the state-owned companies, which are ultimately controlled by the national government, are working at cross-purposes with the central government’s effort to keep China’s real estate boom from becoming a debt-driven speculative bubble

Figures proof a potential bubble, about which we reported earlier:

A recent study published by the National Bureau of Economic Research in Cambridge, Mass., found that land prices in Beijing had jumped by about 750 percent since 2003, and that half of that gain came in the last two years. Housing prices have also skyrocketed, doubling in many cities over the last few years.

Read the full article here.

Comparing urbanization in China and India - McKinsey Quarterly - Economic Studies - Country Reports

The McKinsey Quarterly published an article by Richard Dobbs and Shirish Sankhe in which they compare urbanization in China and India. The nice thing about consultants - also these ones - is that they love figures. Some excerpts of the article:

from 2005 to 2025, India will need to add 700 million to 900 million square meters of floor space a year; in China, the required numbers could be 1,600 million to 1,900 million square meters.

..and..

During the same period, India will need to add at least 350 to 400 kilometers of metropolitan railways and subways annually, while the corresponding number in China will be closer to 1,000 kilometers.

..moreover..

While India spends $17 per capita on capital investments in urban infrastructure annually, China spends $116.

But there is also more qualitative analysis:

While India has barely paid attention to its urban transformation, China has developed a set of internally consistent practices across every element of the urbanization operating model: funding, governance, planning, sectoral policies, and the shape, or pattern, of urbanization, both across the nation as a whole and within cities themselves.

Read the whole article here: Comparing urbanization in China and India - McKinsey Quarterly - Economic Studies - Country Reports.

Beijing starts gating, locking migrant villages - Yahoo News

Gang Xia Village, Shenzhen

AP reports about villages of migrant workers in Beijing being closed off during nighttime. The reason for this radical move? Crime:

It’s Beijing’s latest effort to reduce rising crime often blamed on the millions of rural Chinese migrating to cities for work. The capital’s Communist Party secretary wants the approach promoted citywide. But some state media and experts say the move not only looks bad but imposes another layer of control on the already stigmatized, vulnerable migrants.

Urban villages are rural communities, incorporated by cities. You can find them all over China: former farmers reacted pragmatic to the expanding city by constructing cheap housing for migrants. The Chinese government is not very fond of the villages, and wants to break them down - because they don’t fit in the image of a modern city.

Closing them off is a reflex with a historic meaning:

Gating has been an easy and effective way to control population throughout Chinese history, said Huang, the geography professor. In past centuries, some walled cities would impose curfews and close their gates overnight. In the first decades of communist rule, the desire for top-down organization and control showed in work-unit compounds, usually guarded and enclosed.

However, there is a difference:

“To put it crudely, gated communities in the city are a way for the upper middle-class and urban rich to keep out trespassers, whereas gated villages represent a way for the state to ‘keep in’ or contain the problem of ‘migrant workers’ who live in these villages,” Pow Choon-Pieu, an assistant professor of geography at the National University of Singapore who has studied the issue, said in an e-mail.

Read the whole story here: Beijing starts gating, locking migrant villages - Yahoo News.

Moving Westwards

The New York Times reports about investments in China’s Far West:

At a conference this week, Chinese officials called the investment in western China a strategic move, designed to raise the living standards of the region’s people and shift growth away from China’s prosperous coastal areas.

The areas include Northwest China’s Xinjiang Uygur autonomous region, North China’s Inner Mongolia autonomous region, Southwest China’s Tibet autonomous region, and Sichuan and Yunnan provinces.

via Spending for Stability in China’s Far West - NYTimes.com.

And not only the government is moving westwards. Also electronics manufacturer Foxconn - moves westwards, to Zhengzhou that is:

Foxconn and senior officials of Zhenzhou and Henan are working on the details of an agreement to build the plant, said a spokesman for the municipal government.

The first phase of the plant will measure 133 (!!) hectares.

The new plant is to employ 300,000 people in the long run. About 100,000 people are to be recruited in the near future, said a recruitment advertisement on the official website of Henan’s Hebi city.

Forum on Factory Protests on NYT

The website of the New York Times has an interesting discussion on the recent problems at Foxconn and Honda in Southern China, and their backgrounds. NYT asked several specialists to give their opinions on what is happening in ‘the factory of the world’. Amongst them Yasheng Huang, professor of economics at MIT and author of the eye-opening book ‘Capitalism with Chinese Charactaristics’, about the role of the state in the Chinese economy.

Some quotes from Huangs comment on China’s labor situation:

The labor income share of Chinese G.D.P. declined from 57 percent in 1983 to only 37 percent in 2005. (…) This is to say that hundreds of millions of Chinese workers have lost relative to government and corporations, which, in terms of head counts, represent a tiny fraction of China’s massive population.

Some have argued that the U.S. firms need not worry because the labor component of their production costs is small. This is simply not true. U.S. firms themselves may not have a high labor component in their cost structure but their suppliers — and their suppliers — do. American firms, which sit at the top of the food chain, depend heavily on the labor-intensive operations down below.

Another specialist writing on the NYT forum is Leslie Chang, author of the famous book ‘Factory Girls‘, about workers in a factory in Donguan, Guangdong province. Some of her comments:

The new generation came of age when migration was already an accepted path to a better life. Younger and better educated than their predecessors, they are motivated less by the poverty of the countryside than by the opportunity of the city.

Although this generation of migrants is more demanding, that does not necessarily translate into more organized protests. Chinese workers are above all pragmatic, and the prospect of joining a large-scale demonstration seems risky and futile to most.

The universe of the factory can be a complicated place. Young people living away from home for the first time are learning to deal with co-workers, roommates, and bosses. They are adjusting to a world of material and sexual freedom, fleeting relationships and crushing loneliness. They face demands from families back home who often have little understanding of their new lives. These factors create a stressful environment from which, for a handful of workers, suicide seems the only escape. To boil this desperate act down to a protest against working conditions is to deny a worker’s complexity and humanity.

Read the whole forum here.

CNN: Foxconn to scrap China ‘factory town’ model

Interesting update on the Foxconn news on CNN today: the CEO announced that they:

are going to return these social functions to the government”.

Obviously, this is a big step in the way Taiwan and Hong Kong manufacturers are doing business in China - and it will have major impact on the physical city as well. Read the whole story here.

Suicides, wages rise and moving westwards

The recent weeks, the Chinese news has been dominated by one very sad issue: the suicides at the Foxconn factories in Shenzhen in Southern Guangdong province. Foxconn is a 800,000 people company from Taiwan, producing electronics for HP, Dell and Apple. Foxconns 400,000 people factory in Shenzhen has been hit by a series of suicides during the last months. Some argue that the suicides are the consequence of the harsh regime in the factory where working 100 hours of overtime is default, where others try to put things in perspective by saying that the number of suicides in the city-sized factory is lower than the average in China.

The company’s first reaction to the suicides was not too subtle, with their CEO Terry Gou explaining that he worked 15 hours per day, and expected his workers to do the same. Later, the company reacted more 21st century-like, by opening its doors, and also practical by installing 1.5 million square meter of safety nets around the buildings  in the campus. Now, wages are also increased in the factory by 33%.

And Foxconn is not the only one, also Honda is raising its wages with 24% after a strike last week.

Yesterday, Foxconn announced another raise:

In announcing the wage increase late Sunday, the company, a unit of Taiwan’s Hon Hai Precision Industry Company, said that within three months the basic salaries of many of its 800,000 workers in China could reach nearly $300 a month, about double what many were earning a few weeks ago.

The increase is the strongest sign yet that labor costs are soaring in China’s biggest manufacturing centers and that consumers in other countries may eventually be forced to pay more for a wide range of goods that are made here.

This combined with the increase of the value of the Yuan, leads to a raise of the costs of products worldwide, analyzes the New York Times. It might make it necessary for companies to move their business. Either to Vietnam, Bangladesh, or to western China:

Pietra Rivoli, a professor of international business at Georgetown University and the author of “The Travels of a T-Shirt in the Global Economy,” says the effects of rising labor costs will vary by industry, perhaps with lower-valued goods like garments being forced to move to western China or even to Vietnam and Bangladesh.

UPDATE 06/09:

The NYT reported that another strike hit the Honda factories in China, and this proves the increased bargaining power of the Chinese workers. The article mentions the improving inland job prospects as the reason for the labor shortage in the coastal areas.

However, the writers underestimate the size of the Foxconn campuses in our opinion:

The campus has high-rise dormitories, a hospital, a fire department, an Internet cafe and even restaurants and bank branches.

Come on, there are 300,000 people living there! Of course they have restaurants…

In China’s Land Rush, Rights Are Often Trampled - NYTimes.com

In China’s Land Rush, Rights Are Often Trampled - NYTimes.com.

Lecture Go West at Tongji University, May 19

How does Kunming deal with its history?
Where in Shijiazhuang can you find farmers?
What is the relation between modern architecture and urban villages in Lanzhou?

The Go West Project tries to answer these and more questions in a lecture at  Tongji University / College of Architecture and Urban Planning, this Wednesday. The lecture will give an overview of urbanization in China, and will deeper go into three phenomena in three different cities in central and western China.

DETAILS

May 19, 10.00 AM

College of Architecture and Urban Planning of Tongji University
Auditorium Hall, Building B
1239 Siping Road
Shanghai
Read the rest of this entry »

Ordos: bubble or unique condition?

Although not in the list of ‘Go West’ cities, Ordos is one of the most interesting places in China. The city, in the heart of Inner Mongolia, became rich due to the coal mining industry and, according to Merrill Lynch economist Ting Lu:

‘Its gross domestic product has grown a “staggering” 25% a year over the last eight years’, which is more than twice as fast as the national average. (..) Its per-capita GDP of $21,600 is more than twice than of Beijing’.

The Ordos Government ‘has tried to keep the coal wealth closer to home’, by developing a new city next to the existing one. As many new cities in China, the new part of Ordos, called Kangbashi, is still empty. Read the rest of this entry »