Australia-China Chamber of Commerce and Industry
of New South Wales






8 March 2002



China’s Early Development

Contrasts with European Development

Impact on Urban Development

Treaty Ports – A Case Study of Shanghai

Centralisation After 1949

Case Study of Wuhan

Difficulties With Central Planning

Current Strategy for Urban Development

Megacities – A Case Study of Chongqing

Wider Implications of Urban Development

Sources of Information

Related Documents

Key Cities in China

Position Paper on Sister State and Sister City Relations Between Australia and China

Position Paper on Incentives for Direct Foreign Investment With Special Reference to
 Australia-China Relations



The principal objective of the Chamber’s position papers is to express opinions about specific issues relating to China’s economic and social development, and thereby to encourage further discussion and commentary.  This one is devoted to China’s urbanisation process and provides a more detailed rationale of the Chamber’s “Key Cities” Strategy, compared to earlier statements.

Specifically, the main points are as follows:

v      The development of cities in China differed substantially from that of European cities.  An understanding of this difference is necessary in order to avoid incorrect inferences based upon Western experiences.

v      China’s recent urban development strategy differs from previous strategies.  Once again, an understanding of both past and present circumstances is needed in order to evaluate this strategy.

The position paper proceeds chronologically, beginning with the Xia Dynasty.  Three case studies are used to illustrate urban development in successive time periods of the modern era: Shanghai, Wuhan and Chongqing.

For the purpose of this overview, it is desirable to skip ahead in order to let the reader know what is in store.

In 1997, Chongqing was restructured as a municipality that is equal to a province.  The new governmental authority contains a population of 30 million people and encloses a region with a distance approximately equivalent to that from Sydney to Griffith in an east-west direction, and from Batemans Bay to Taree in a north-south direction.

This was achieved by amalgamating cities, towns and rural areas into a municipal arrangement, but it was not a process of centralisation since those same cities, towns and rural areas were similarly centralised under the jurisdiction of Sichuan Province.  The separation of these units from the province, and effectively given to Chongqing Municipality, is more a division or decentralisation in creating two equally ranked administrative units rather than only one.

The division was made with the view to assisting the development of the new region.  It is our opinion that the strategy is likely to succeed and may serve as a model for similar regional restructurings.  We also believe that this urbanisation format will be effective in creating better linkages between urban areas and rural areas in China. 

It may also contribute to a more systematic development of small and medium sized enterprises (SMEs) in China.  However, this can be treated as a separate issue and is one that will be discussed in a later position paper.


China’s Early Development

Urbanisation in China began in the Xia period (2100 to 1700 BC).  Since writing was not invented until the subsequent Shang period (1700 to 1027 BC) information is based upon an oral history of an organised society in the earlier period.  Recent archaeological discoveries tend to verify this oral history.

Traditional settlements throughout China consisted of dwellings that were built along or near fresh water supplies, typically a river or stream, from which the agricultural workers, as well as the hunters and gathers, journeyed outward to perform their tasks.  In China, at that time, these were concentrated along the middle portion of the Yellow River.

The Shang kings were known to establish capital cities (court cities) that displayed early grandeur.  The king appointed regional rulers who formed an aristocratic class of military elite and established secondary cities.  There is some evidence of conquest and colonisation in outlying areas, particularly near the end of the Shang period, and these military forces were most probably under the direct control of the king.

A fundamental change occurred during the subsequent period, which is known as the Zhou Dynasty (1027 to 221 BC).  The first Zhou king is reported to have been a tribal chieftain who overthrew the last of the Shangs.

The Zhou rulers extended the Shang territory to include much of the land between China’s two great rivers (the Yellow and the Yangtze).  It represents approximately one-eight of present-day China, or slightly more than 1 million square kilometres, which is roughly equal to the combined area of France, Germany and Great Britain. 

Partly as a result of the relatively large territory, and perhaps also to offset the despotic reputation of the Shangs, the Zhou kings established an administrative structure which differed from the European version (discussed in more detail below).  It consisted of an amalgamation of city-states that became progressively centralised, though not always as a continuous process, and were dominated by increasingly impersonal political and economic institutions.

Although the system had feudal elements, it is more accurately viewed as an extension of the earlier tribal organisation, within which familial ties were more important than legal bonds between the “peer of the realm” and his subjects.  The system gave explicit recognition to local authorities and attempted to provide a structure within which these authorities could serve community interests, as well as demonstrating loyalty to higher-level authorities.

Land was typically distributed by the king’s representatives (or vassals) by forming a series of rectangular grids, each of which contained 9 squares in 3 rows and 3 columns.  The outer 8 squares of land were each allocated to a peasant family, who combined with other families working the grid to cultivate the central square as a tax or tribute to the ruling class.  Thus, work groups rather than individuals were taxed.  Each local ruler passed along a portion of this revenue to a regional ruler and a portion of this was, in turn, passed to the king.

This type of centralised control was incomplete, however.  Regional warlords retained considerable authority and rivalry among them led to disunity and civil unrest toward the end of the Zhou period (the Warring States period). 

Regional cities nevertheless prospered during this and the subsequent period, which is referred to as the Qin Dynasty (221 to 207 BC), with China’s first emperor.  This was due largely to massive public works projects, including walls surrounding the cities, as well as continuing work on the Great Wall of China. 

Urban development also benefited from a significant change in the economic system during the Xin period (9 to 24 AD).  Slavery was abolished; land was nationalised and redistributed to the cultivators; imperial monopolies were formed to control the distribution of salt, iron and coinage; and prices of many other items were fixed by the state.  These conditions were well suited to the expansion of a commercial class who could operate outside of the direct control of the aristocracy in the trade of the non-regulated items. 

The large landowners who were dispossessed by the Xin emperor rebelled against the system during the latter part of his reign.  Many of his reforms were repealed, but the basis for commercial activities in urban areas continued and expanded substantially during the Song period (960 to 1279 AD).

In the interim period, between the Han period (206 BC to 220 AD) and the Tang period (618 to 907 AD), China experienced considerable instability with a decline in central administration.  Towns and villages undoubtedly grew larger, but did so without pattern or plan.

This changed when the Tang Dynasty strengthened the system of government that was supported by a large group of Confucian scholars who were selected through competitive public service examinations.  The changes to the system were intended to offset imperial dependence upon aristocratic families and warlords, which had produced destabilising influences from the latter part of the Zhou period.

These public servants are often referred to as mandarins.  They were part scholar, part magistrate and part public servant.  They wore official robes with a cap of a particular colour, depending on their rank.  They were not allowed to marry or to own property within their assigned region, which they normally served for no more than three years.  They spoke a particular dialect, which in English is called Mandarin.

The ability of the mandarins to achieve unity through imperial influence is more or less demonstrated by the unchanged nature of the public service system from the Tang period until the modern era.  In relation to urban development, they enabled villages to be amalgamated into towns and towns into cities in a systematic way, depending upon the needs of the respective communities.

These amalgamations included rural land that was originally part of the villages, resulting in cities in modern China having both a rural population and an urban population.  It is likely that a ranking of China’s urban areas was approximately in line with the nine rankings of mandarins, so that a successful amalgamation might have aided the advancement of those who were instrumental in achieving it.

The contribution of the mandarins to social order in China is undoubtedly one of the reasons for the durability of the system.  These public servants were key figures in their respective communities.  They became part of the familial ties that were an integral part of Chinese culture since the Zhou Dynasty.  The mandarins resolved local disputes and, through their devotion to higher order precepts, they provided a model for the conduct of human activities.

However, there was a cost associated with the maintenance of social order through this system.  Mandarins were, by nature, tradition-oriented.  They revered past achievements and sought to replicate them rather than improve them. 

Their organisation was similar to that of a monastic order, but without the religious trappings.  Mandarins were dedicated to their Emperor, but in a larger sense the dedication was to the entire line of emperors and to their own ancestors.  There was no need to convert the local people to a different creed or philosophy; the mandarins had only to remind them that they were part of a continuum of people who occupied the same land for many centuries.

This helps to explain the traditional view the “middle kingdom” as the centre of the universe, with the universe defined by the evolution of the Chinese people, including all of their traditions and familial ties.  It also helps to explain why the various spoken languages and dialects had the same written language.  Written communications were the principal responsibility of the mandarins, and their enforced mobility prevented those communications from degenerating into regional or local variations.

As a result, the past was perpetuated and there was little or no incentive for innovation.  This greatly hindered productivity increases that normally flow from technological improvements.  Population pressures during the last of China’s dynasties – the Qing (1644 to 1911 AD) – resulted in declining productivity per person and put China’s fragile physical environment under considerable strain.


Contrasts with European Development

City-states were an important part of the early Western civilisations around the Mediterranean Sea.  To give a few examples:

Memphis was the ancient capital of Egypt, within the Nile delta south of Cairo.  It is believed to have been founded in the early part of the 4th millennium BC and was important during the Old Kingdom period (3100 to 2242 BC).

Babylon was located east of the Euphrates River, about 90 kilometres south of present-day Baghdad.  It was a city-state by 1894 BC.

Athens was fortified in 1400 BC and became a city-state in the mid 9th century BC.

Sparta consisted of a city containing only rulers and soldiers who descended from the Dorian invaders about 1100 BC.  It was walled as a city-state at the end of the 4th century BC.

Carthage in Tunisia was founded in the 9th century BC by Phoenicians. 

Byzantium was established at what is now Istanbul by Greek colonists in 660 BC.

These dates span both the Xia and the Zhou period in China (see the previous section).  By the end of the period, however, the European city-states differed substantially in terms of economic, social and political structures.

The Mediterranean Sea obviously gave rise to water transport and facilitated trade and other commercial interests within the region.  In China, in contrast, apart from salt and a few other items that were not available in most provinces, each region sought economic self-sufficiency.  In ancient times, only the court cities showed significant commercial interests and these were of course completely dominated by the imperial courts.

The social structure was top-down and hierarchical in both the East and the West during the early period, but, until the expansion of the Roman Empire, Western civilisations were effective in incorporating only the city-state and its immediate hinterland.  Remote villages were not subdued and therefore remained unconnected to the established civilisation. 

Although the political system varied in the city-states from elements of democracy in Ancient Greece and Rome to a fully militaristic state in Sparta, citizenship was rigidly controlled.  The majority of inhabitants in the cities were either slaves or women, neither of whom had political rights.  The system in China did not provide for votes or plebiscites, but a non-binding consensus was nevertheless formed within the village and town structure.

Perhaps of greater importance were the significant differences in migration.  The almost continuous capture and transport of slaves around the Mediterranean created a forced migration that did not occur in China.  As noted previously, the movement of people in China was restricted mainly to mandarins and soldiers.  This acted as a substitute for the movement of large numbers of people and preserved local characteristics under a centralised “umbrella”.

In ancient Europe, the “umbrella” changed with the conquest of a city-state.  The established institutions in the conquered region were destroyed and there was little or no incentive, until the end of the feudal period, for the victors to make them impersonal.


Impact on Urban Development


Ancient cities in Europe comprised the state, including all of its apparatus.  The overall plan or layout of cities gave priority to the delivery of goods and other forms of tribute to the rulers, and were generally designed to overwhelm state visitors, as well as those who were prisoners of the state.  The cities deterred invasion and rebellion by projecting grandeur and a show of force.

This changed with the fall of the Roman Empire, and Medieval cities in Europe were, for the most part, designed to protect the inhabitants and to impede invaders from reaching the centre of the city where the more valuable structures were located.  This established a rectangular grid pattern of urban development, with a concentric hierarchy. 

The Medieval urban plan was not well suited to the rise in commerce following the breakdown of feudalism.  As a result, commercial centres in European cities and towns were generally established in the middle or outer portions of this concentric pattern, with wider streets and a greater capacity to differentiate each commercial establishment.

The industrial revolution created even greater strain on urban development and the increased amount of community awareness generally resulted in some form of zoning for land usage.  This met with varying degrees of success, depending upon the level of authoritarianism exhibited by the municipal leaders in reconciling the conflicting land-use claims. 

In China, there was little or no such conflict.  Amalgamations of villages and towns were determined by community needs when the natural rate of population growth justified them.  All such amalgamations were principally administrative; they did not require a new urban plan.  The formerly separate towns eventually grew together to form a continuous “built-up” area. 

This produced a greater uniformity, as compared to European cities, but nevertheless created additional problems with industrialisation.  For a study of those problems, a brief commentary on the institutional developments during the 19th and 20th centuries is needed.


Treaty Ports – A Case Study of Shanghai


China’s population doubled in the 18th century, but, as mentioned previously, output expanded as a slower rate, thus bringing about a decline in productivity per person.  This severely weakened the Qing Dynasty and in the 19th century led to intrusions by foreigners.

Guangzhou was the first port that was opened to foreign trade, and efforts to expand direct trade to North China led to increased conflict.  These trade wars were resolved in favour of the European powers and Japan, leaving China with a string of treaties that were perceived to be unequal from the Chinese point of view. 

Tianjin and Shanghai were added as “treaty ports”, in which foreign governments were able to lease land and allow commercial enterprises from those countries to engage in trading activities.  Shanghai makes a useful case study.

The city was a frontier town during the 13th century.  A wall was built around it in the 16th century for the purpose of repelling Japanese pirates.  The population size at that time is not known, but it was classified as a county-level town, more specifically a county seat, rather than as a city.

The early settlement was near the area that become known as “The Bund”, which is two kilometres south of a sharp bend in the Huangpu River and on the western side of the river.  Pudong lies on the eastern side.

The population of Shanghai in 1840 was about 50,000, and it was classified as a city at that time.  It began to be an open port in 1845 and this forever changed the nature of its development.

The British were the first to open a settlement on the leased land, which continued to be under Chinese sovereignty but was nevertheless under the administrative control of the British.  France and the USA soon followed, thus creating a leased area that was many times larger than the old city.

Before 1853, residency in the international settlements was restricted to Westerners, but in that year insurgency within the Old City resulted in a flood of Chinese into the settlements.  The legality of this migration was uncertain, under the leasing arrangements (referred to as the “Land Regulation”), but was nevertheless accepted by both the Chinese and the foreign governments.

The sharp rise in population within the International Settlement and the French Concession created health and sanitation problems.  The Shanghai Municipal Government was slow to respond, which is not surprising during the period of rapid change and with a significant decline in central authority.  As a result, the foreign governments unilaterally established a municipal council.

A Foreign Ratepayers’ Meeting was convened to include all who held leases, or sub-leases, in the settlements.  It resembled an annual shareholders meeting, at which the forthcoming budget was approved, taxation matters were agreed upon and the board of the Municipal Council was voted upon.  The Council administered all municipal services, including water and sanitation.

This represented the first clearly defined countermovement to centralisation in China since the Tang Dynasty.  It also reflected the first instance in which economic and commercial development dominated urban planning.

It was nevertheless hugely successful in relation to urban growth.  The area included in the settlements at the beginning of the 20th century expanded to nearly 49,000 mu (about 32.5 square kilometres), which was 57 times larger than the original settlements, and the population reached 1 million.

However, the decentralisation of administration led to fragmentation, with an International Settlement (mainly British and American), the French Concession and the Chinese Section.  Water, electricity, transport and communications were supplied separately in each fragment, and with different standards.  Inter-connectivity was poor or non-existent.

Efforts were made to alleviate the inefficiencies of these arrangements, but an overall municipal plan did not emerge until the 1930s, under the Kuomintang Government of the Republic of China.  Implementation of the plan remained incomplete when the Japanese occupied the city in 1937. 

In the interim period, Shanghai’s industrialisation increased at an exceptionally rapid pace, but also carried all of the undesirable features of undisciplined development.

With the formation of the People’s Republic of China (PRC) in 1949, the Chinese Communist Party (CCP) sought to eradicate the slums, rehabilitate the thousands of opium addicts and bring an end to the exploitation of labour, especially child labour.  This can be interpreted as a return to centralisation, but it occurred in a different way, compared to Imperial China. 


Centralisation After 1949


Mao Zedong’s policies after 1949 were varied and sometimes difficult to categorise.  Four main features nevertheless stand out in the efforts of the government to regain central control.

First, a socialist system was quickly established, through which all Chinese were guaranteed lifetime employment with housing, education, health care, retirement and other social benefits supplied by the state. This is often referred to as the “iron rice bowl” concept.  It was achieved by nationalising all land and all manufacturing enterprises. 

State-owned enterprises (SOEs) contained the basic work units in urban areas, and agricultural communes provided the work units in rural areas.  The services and benefits mentioned above were supplied by the danwei, which were work groups within the SOEs or within the communes.

Initially rural-to-urban migration was allowed, but the cities quickly became inundated with migrants and the municipal authorities generally lacked the infrastructure to accommodate them in a satisfactory manner.  Supplying this additional infrastructure would cut across the central planning objective of substantial government investment in industrial enterprises. 

This gave rise to the hukou, or family registration system that was established in 1952.  All residents were issued identity papers that designated their respective work groups.  Typically a newly married woman would join the danwei to which her husband belonged, and since these enterprises supplied health and educational facilities for the children, the children also belonged to a specific danwei. 

The transfer from one work group to another, and therefore from rural areas to urban areas, was allowed only in special circumstances.  Migration was generally permitted for purposes of education or to obtain employment as a result of a special skill.  Approval was generally needed by the administrative officer of the both the previous and the new work group.  This “double” approval rarely occurred.

The obvious impact of the hukou system was to create inefficiency by limiting mobility of workers.  It also slowed the rate of urbanisation.

Second, the Government of the PRC dominated economic decision-making.  The State Planning Commission set output targets on an annual basis for each industry, and allocated a specified portion of the output to the respective provinces.  Inputs needed to achieve these outputs were calculated and the deliveries of the inputs to the SOEs were scheduled.  Prices were set on the basis of the input requirements. 

Third, an administrative process for three levels of government was established.  This included the central government, provincial governments and municipal/county governments.  The central government is of course located in Beijing with various ministries and departments.

The second level consists, currently, of 31 provincial-level administrative units: 22 provinces, 5 autonomous regions, and 4 special municipalities that are equal to provinces.  Each of these units has a provincial-level people’s congress, which is the legislative body, and each such body has a selection committee that appoints the principal administrative officers.  These administrative officers are governors and vice governors for the provinces and autonomous regions, and mayors and vice mayors for the 4 special municipalities.  The appointments are made from a list of approved candidates supplied by the central government. 

The third level consists of autonomous prefectures, counties, autonomous counties, cities, and municipal districts.  This is sometimes described as the county-level administration even though it includes a number of large cities. 

These mayors have some autonomy in decision-making within their respective jurisdictions, but report to the provincial authorities rather than to the central government.  The selection committees of municipal/county people’s congresses make appointments to these administrative positions from a list of approved candidates supplied by the provincial-level government.

Fourth, the Government of the PRC looked upon international trade as a failure of central planning.  It was not embraced for the purpose of achieving gains through international specialisation and division of labour.  National self-sufficiency was an extension of the regional self-sufficiency that existed in China for centuries, and the policy also served to remove the influence of foreign-owned enterprises.


Case Study of Wuhan


The features of Mao Zedong’s centralisation policy mentioned above put Wuhan (in Hubei Province) in an excellent position for accelerated growth.  A straight line connecting Guangzhou with Beijing and another line connecting Shanghai with Chongqing would intersect close to Wuhan.  As a consequence, the city was of fundamental importance in shifting China’s manufacturing away from the coastal cities and into China’s heartland. 

Additionally, Hubei Province is rich in mineral resources with 111 minerals found there, accounting for 74 per cent of all the 150 minerals already found in China.  Perhaps of greater importance, the deposits include many metals such as iron and copper, as well as minerals that contribute to metallurgical processing.

Wuhan lies along the Yangtze river, which formed a major inland transport system since ancient times, at the point where the Han River joins the larger one.  It is therefore not surprising that the central government selected it as a site for iron and steel making.

In 1950 the cities of Wuchang, Hankou, and Hanyang were combined into one administrative unit, and given the abbreviated name Wuhan.  The former cities are now districts within Wuhan.

Hankou, the commercial centre and largest of the three, occupies the northern quadrant, lying mainly on the western bank of the Yangtze with a smaller land area along the Han River.  Hanyang is a manufacturing and residential section lying south of the Han River and the western bank of the Yangtze.  Finally Wuchang, the administrative and educational centre, as well as the location of the provincial capital buildings, is situated on the eastern bank of the Yangtze.

This type of amalgamation enabled a large manufacturing complex to be established through a combination of urban development and urban renewal.  In this case, the three (former) cities were separated by water, so there was no tendency to grow together, but expansion could nevertheless proceed in a planned and coordinated manner.

The area was first settled more than 3,000 years ago during the Han Dynasty.  Hanyang became a fairly busy port, and in the first and third centuries AD walls were built to protect both Hanyang and Wuchang.  Hankou became one of China’s four busiest trading towns about 300 years ago and became a “treaty port” in 1841.

The city was part of an uprising during the 1911 revolution and most if it was burned, except for many of the foreign-concession buildings.  These have distinct European features.  Digital photographs are available at:  Note especially the photograph of the old customs house.  This contrasts with traditional Chinese architecture as shown in the photograph of the Yellow Crane Tower.

In the early part of this century, Wuhan became the centre of revolutionary activity.  The movement led by Sun Yat-Sen, that resulted in the overthrow of the Qing Dynasty on 1911, began there.  The town's workers were in the forefront of the national strike in 1933, and the Central Peasant Movement Institute, where Mao Zedong taught Communist theory, was established there in 1936.

Thus, the basic ingredients for centrally controlled development of the new city were in place – central location, available natural resources and historical significance for the Chinese Communist Party. 

The municipal government administration was effectively reconstituted when the original cities were amalgamated.  New administrators were recruited and given the power to organise the bureaucracy in such a way as to achieve the planning objectives. 

The mixture of urban development and urban renewal resulted in wider thoroughfares, as compared to many other cities in China.  Despite an urban population of about 4 million (with an additional 3,300,000 living in rural areas that are under the jurisdiction of the municipal government) and an urban population density of more than 2,500 people per square kilometre, the city functions surprisingly well.

Urban development in Wuhan was nevertheless uneven.  This was due partly to the inherent difficulties with the central planning system (discussed in the next section).  Additionally, when economic reform began in 1979, Wuhan was slower to adapt to a more market-oriented system, compared to the coastal cities.  This can be explained partly by the more entrenched bureaucratic apparatus that was established with Mao Zedong’s blessing in 1950.

Recent changes have nevertheless occurred in Wuhan, particularly with the current plan to develop the western provinces in China.  As a result, Wuhan is rapidly catching up with the coastal cities.  The data in Annex A indicate that recent growth rates and figures for GDP per capita put the city among the top 10 in China.


Difficulties With Central Planning


During the latter part of the 1960s and the 1970s, China encountered two major problems with central planning.  First, there was a consistent mismatch between demand and supply.  Output targets set by the planning authorities did not meet the needs of consumers, thus leading to excessively large stocks of unwanted items and shortages of popular items. 

Second, production targets were met with inefficient use of resources (natural resources as well as human resources).  Modern technology was needed to lift output per worker, and an opening of trade with the rest of the world was considered to be the best way to achieve this. 

Additionally, the “iron rice bowl” concept, discussed previously, resulted in severe financial burdens for both state-owned enterprises and communes.  This extensive social welfare system, organised through work groups, experienced costs that escaladed much more rapidly than industrial productivity. 

China’s central government therefore embarked on a program of opening to the outside world through international trade and allowing foreign enterprises in China.  This was accompanied by a return to family responsibility in farm management (the ending of the commune system) and decentralisation in the management and control of SOEs.

Decentralisation also occurred in relation to urban development.  Municipal governments could undertake whatever changes they thought necessary to achieve these objectives, as long as the development was fully funded by them and complied with national laws.

Not surprisingly, cities in the coastal provinces could embrace this new strategy more easily than cities in the interior provinces.  Not only were they in a better position to attract foreign capital, they also had a superior revenue base to obtain the necessary funding.  Regional inequities therefore arose and this created social tensions.  It was a significant departure from the “social equalisation” of the early Mao Zedong period.


Current Strategy for Urban Development


China has 668 cities, and that number continues to grow as county-level towns become reclassified as cities. 

China’s current Five-Year Plan (2001-2005) projects a 1-percentage point increase per annum in the urbanisation rate (the proportion of the population living in urban areas).  This means that more rural villages will become reclassified as towns and more towns will be reclassified as cities. 

Perhaps of greater significance, with China’s current population growth rate, and with the projected urbanisation rate, within the next 5 years China will have 87.3 million more people living in urban areas.

If 20 per cent of this increase occurs from newly classified urban areas, then about 70 million people will be added to existing urban areas.  If another 20 per cent of this increase is attributed to the reclassification of towns into cities, then an additional 56 million people will be added to existing cities.

We cannot be certain that these percentages will occur, but it is nevertheless clear that the growth rate of China’s cities will be much more rapid during the next 5 years than it was in the recent past.

Similarly, we cannot be certain which of the existing cities will grow more rapidly, but the scale of the growth is sufficiently large to justify a close monitoring of urbanisation patterns in China.

The Chamber’s “key cities” approach is part of that monitoring process.  It is expected to provide practical insights into business opportunities in China. 

These opportunities are likely to be substantial.  The urban development cost in China is estimated to be RMB 60,000 per capita (see reference below for Wang Yiming).  With the projections given above, this translates into an expenditure of RMB 4.2 trillion for existing urban areas during the next 5 years.

China’s urbanisation strategy, as stated in the current Five-Year Plan, places emphasis on the following:

Accelerating the development of small towns.  This will focus on a small number of existing towns with good infrastructure and generally good potential to enable them to grow into medium-sized cities. 

Developing international metropolises.  Efforts will be made during the next 20 years to enable cities such as Beijing and Shanghai to become internationally competitive and to be classified as “global cities”.

Upgrading cities as regional centres.  This is sometimes referred to as the “constellation plan” for urban development, through which regional cities are developed in conjunction with the outlying areas (smaller cities and towns) in such a way that they function collectively.

Constructing and developing new cities.  This is particularly relevant to China’s vast central and western regions where the urban density is relatively low.  It will allow greater attention to be placed on new urban development, rather than on urban renewal.  It is also consistent with the desire of the central government to reduce the regional disparities in income and wealth.

Designing and guiding areas with a high density of towns.  The Pearl River Delta and the Yangtze River Delta are the main focal points for high-density living, a high level of industrialisation, a large number of relatively high-density towns and close economic links between the towns.  The major task is a combination of urban expansion and urban renewal that will allow these urban areas to absorb a larger population in an effective and efficient manner.

Some of the difficulties with this strategy are as follows:

v      China currently has a total of 18,800 established towns, for which the average population is 8,000.  Although it is desirable, for at least some of these towns, to plan infrastructure development that would be consistent with a population of 20,000 by the year 2020 (slightly more than 5 per cent growth per annum), the task of choosing the ones with the greatest potential is certain to be difficult.

v      Further development for the currently high-density urban areas is largely an administrative task.  Most of the cities and towns in the Yangtze River Delta and Pearl River Delta are already adjacent to each other.  Some form of local government amalgamation is likely to be necessary in order to achieve economies of scale in urban services and infrastructure for these areas.

v      The regional-centre approach, in comparison, conveys the Chinese tradition for local area identity that existed for more than 2,000 years.  It is likely to facilitate the selection of towns with the greatest potential for rapid growth and it would distribute the development of the western provinces on a more even basis.

Chongqing provides a good case study for these aspects of China’s transition from a rural based economy to an urban-based manufacturing economy.


Megacities --A Case Study of Chongqing


Chongqing consists of an area that was formerly administered by Sichuan Province, but in March 1997 it was classified as a municipality that comes directly under the central government, so it is administratively separate from Sichuan.  It is about 1,500 kilometres from Shanghai.

During the Zhou Dynasty, Chongqing (then called Jiangzhou, and somewhat later Bajun, Chuzhou, Yuzhou and Gongzhou) was the capital of a separate kingdom ruled by the Ba – an ethnic group that occupied the region since the Stone Age.  It was incorporated into China during the Qin Dynasty, but remained as a separate administrative region.  The present name was applied during the Song Dynasty and means “double happiness”. 

Chongqing’s modern history begins in 1891, when it was made an open port and it formally became a city in 1929.  During World War II, the Kuomintang Government moved the capital to Chongqing and made it a municipality directly under the central government.  This was reversed by Mao Zedong’s government in 1954 when it again came under the jurisdiction of the Sichuan provincial government.

The first amalgamation occurred in 1983, when eight counties around the city were merged with Chongqing, and in 1992 it was made an “open city”, thus giving the municipal authorities limited autonomy in relation to foreign trade and investment.  

A second amalgamation occurred in 1996, when the Central Government approved the incorporation of Wanxian, Fuling and Qianjiang regions into the municipality.  This lifted the population of the municipal government to 30 million, making it the largest local administrative unit in China (refer to Annex A). 

It covers an area of 82,040 square kilometres and administers 43 districts, cities and counties, 5 of which are autonomous counties.  Within the city administration, there are 1,502 town and township offices. 

The rural population within Chongqing is about 24.5 million, or 80 per cent of the total.  The overall population density is 375 people per square kilometre.  Minority (ethnic) groups represent about 6 per cent of the total population and live mainly in the southeast portion of the municipality.

Chongqing differs substantially from the other three municipalities that are equal to provinces – Beijing, Shanghai and Tianjin -- and they also differ from each other, as well as from the three other cities in China with more than 10 million people. 

Chongqing is much larger in area, equivalent to about 290 kilometres by 290 kilometres.  In comparison, Beijing has 16,808 square kilometres (129 x 129), Tianjin has 11,300 square kilometres (106 x 106) and Shanghai has 6,340.5 square kilometres (80 x 80).

Chongqing’s land area is not square, however, having a maximum span of 470 kilometres from east to west and 450 kilometres from north to south.  It occupies almost all of the southeast portion of what was previously Sichuan Province and borders Hubei Province and Hunan Province in the east, as well a Guizhou Province in the south.

As can be seen from the map, the city of Chongqing comprises only a small portion of this area.  It is not a “megacity” in the normal sense.  The population of Chongqing City is about 2.5 million people, but the combined urban population surrounding the city is about 3 million and is expected to grow substantially within the current decade.  Chongqing will soon be a megacity and all five elements in the current urban development strategy of China will be reflected in its growth process.

Like the nation as a whole, Chongqing Municipality must accommodate the majority of its citizens who now reside in rural areas.  The 20 per cent who live in urban areas undoubtedly provide a comparatively large share of municipal revenue, and balancing the development needs of the rural residents with increased services required for those urban dwellers will be a continuing problem.

Much of the development strategy of Chongqing will focus on the co-development of rural agriculture and urban industrialisation.  Rural-urban linkages must be firmly established with a solid network of small towns that are capable of growing into medium-sized cities.  Urban centres in regional areas will be needed to effectively maintain this network within the overall structure of the municipality.

Most of the infrastructure development during the past few years has focused on Chongqing City.  This can be attributed to several factors:

First, development of Chongqing City lagged behind that of China’s coastal cities.  The World Bank reported that between 1987 and 1992 Chongqing’s per capita income was between 30 and 40 per cent lower than that of other major cities. 

Second, the location of Chongqing city at the confluence of the Yangtze and the Jialing Rivers makes it a natural commercial hub for the region now contained in the municipality.  Its early industrial base was relatively broad, including coal, iron, petroleum refining, metallurgical, chemical and petrochemical operations.  The more recent development of light industry such as electronics, food processing and cosmetics broadened the base even further, giving it a substantially greater growth potential than most of the other urban areas within the municipality.

Third, as a result of more rapid economic growth since 1992, Chongqing City experienced substantial rural-to-urban migration, with about 20 per cent of population classified as a “floating population”.  Improvements in urban services, such as water supply and wastewater treatment, were urgently needed.

As a result of these factors, the capacity of Chongqing City to attract direct foreign investment was limited.  The infrastructure development was intended partly to enhance the appearance and liveability of the city and to exploit its natural surroundings with waterways on three side and mountains on the fourth side.

Additional problems arise from the construction of the Three-Gorges Project, which will lead to the forced migration and relocation of a large number of inhabitants in the catchment area of the project.  The area to be submerged by the dam within the next several years will affect 18 towns and counties with about 715,000 people.  By 2009, when the Three-Gorges Project is expected to be completed, the total population to be relocated will reach 1.07 million people.

The planned relocations are projected as follows:

v      In 1997, when the Yangtze River was initially diverted to allow construction of the dam, 13 county towns, 73 factories and 22,400 inhabitants in the “first line” of the water level at 90 metres were relocated.

v      From 1998 to 2003, 31 county towns, 393 factories and 527,000 inhabitants in the “second line” of the water level at 135 metres will be relocated.

v      From 2004 to 2006, 15 country towns, 211 factories, 11 hydro power stations and 220,000 inhabitants will be relocated.

v      From 2007 to 2009, 51 country towns, 703 factories, 25 hydraulic power stations, 497 docks, 842 km of highways and 280,000 inhabitants will be relocated .

These relocations of people are, in principal, to be matched with the concurrent relocation of towns and factories, as well as the creation of new towns and factories.  The larger urban areas, such as Chongqing City, Wanxian and Fuling, are expected to provide temporary accommodation if the relocations lag behind the rising water levels.

Environmental problems are also substantial.  According to a World Bank evaluation, Chongqing City is the largest source of organic water pollution in the Yangtze River Basin upstream of the Three Gorges Dam.  So far the Yangtze River has been able to absorb urban, agricultural, and industrial pollution loads while maintaining acceptable water quality, due mainly to the river’s strong flow and high velocity.

However, the completion of the Three Gorges Dam will reduce the velocity of the Yangtze River, increase its water depth, and alter the flow regime.  “From a river basin perspective, Chongqing needs to be concerned with maintaining a water quality which will avoid eutrophication of the future reservoir.  From a local perspective, Chongqing must ensure that its supply of safe water is not endangered by deteriorating surface water quality, in particular near water intakes” (see reference for the World Bank document at the end of these notes).

In addition, the municipality must adjust its urban environmental infrastructure to the heightened water level.  For example, two of Wanxian’s water supply plants will be submerged, parts of the sewer system and wastewater treatment plants will be flooded, and open dumpsites located near the river will be washed out.

Urban development problems in Chongqing are therefore more substantial, and more imperative, than those associated with most other cities in China.  However, they do not differ in substance.  All cities in China will face similar problems, but fortunately on a smaller scale and without the time-span pressure from rising water.


Wider Implications of Urban Development


Urban development is linked to the more general economic and social development of China.  These linkages are both direct and indirect.  The former emerge from general recognition that a transfer of resources from one region to another will not necessarily result in net gain to the combined region.  This implies that urban development must contribute positively to rural development.  Even if rural development remains unchanged, the process will produce inequities that may give rise to counter-productive influences.

Indirect linkages are more subtle, and more varied.  They exist within the context of China’s struggle to achieve a stable compromise between central control and local autonomy.  For this, a restatement of past experiences is useful.

China achieved a relatively stable urban-rural environment from the Tang Dynasty to the formation of the First Republic in 1911.  We noted, however, that the system was inflexible and could not adjust to new technology. 

The period after 1911 was one of regional chaos and anarchy, sometimes referred to as the warlord era.  Mao Zedong re-established central influence and control in 1949 by replacing the mandarins with Party cadres.  This also proved to be inflexible, but for different reasons.  The cadres were unable to alter or to adjust the centrally planned production targets in response to local market conditions.

The reform process that began in 1979 introduced flexibility, but it is easier to change the rules than to change behaviour patterns that were established with the superseded rules.  Rule changing is part of the process that is often referred to as economic and social liberalisation, or deregulation.  Its basic characteristic is greater freedom of choice and an increase in individual responsibility in making decisions. 

Behavioural problems arise when the liberalisation process has “loop holes”, or gaps, that can be exploited by a segment of the population.  This is generally destabilising since it encourages widespread evasion of the new rules.

Perhaps more importantly, the liberalisation process loses its flexibility if it is maintained in a straight line, that is, if is not allowed to adjust to changing circumstances.  Even if behaviour patterns are set to be coincident with the process at any given time, it is likely that they will move off on a tangent when the liberalisation process changes. 

Therefore, the sequence and timing of liberalisation become important in avoiding, or in minimising, the imbalances associated with the lack of coincidence between rules and behaviour.  Failure to correct the “tangencies” may result in a backward bending of the liberalisation process.

Much of China’s economic reform during the 1980s and early part of the 1990s has been described as “two steps forward and one step backward”.  It is sometimes viewed as a failure of the reform, but is more easily seen as part of China’s step-by-step liberalisation and of the adjustments associated with it.  It is nevertheless consistent with a backward bending process, and urban development in China has not escaped this problem.

The five elements in the current urban development strategy are jointly comprehensive.  The basic problem will be in achieving a sequence and timing that allows implementation of the strategy to be similarly comprehensive.

The current setting for such a sequence and timing is incomplete in the sense that the various decision-making units are not linked as effectively as they were in the early period by the mandarins, and in the later period by the Party cadres who were responsible for the respective work units. 

It is likely that the linkages will require the participation of non-government organisations (NGOs) that are recognised by the respective government authorities and are fully accepted by the decision-making units.  These are already starting to form in China, but the nature of their network or structure has not yet emerged. 

The network must necessarily differ from that of the mandarins, since that cannot be replicated in the modern era.  It must also differ from that of the Party cadres of the Maoist era, since the lowest level of that structure was necessarily dispensed with during the liberalisation process.  It may, however, require some of the elements of each of these.

It is not certain whether urban-based NGOs can successfully link up with rural-based NGOs while retaining the principal interests of their respective constituents.  There is also a need for a delicate balance between government recognition (to give the NGO network authority) and government dominance (which could create mistrust).

We believe that the Chongqing arrangement represents an opportunity for a desirable network or structure to emerge.  The urgency of relocating inhabitants from the low-lying areas along the Yangtze, combined with the strong desire to reduce the development disparities between the coastal provinces and the western region, could serve to underscore the mutual benefit that NGO linkages could produce. 

Chongqing City must be linked to its satellite cities to allow efficient transport and distribution for trade with other regions in China, and with other nations.  The satellite cities must be linked with county-level towns surrounding them and the surrounding towns must be linked to their respective hinterlands in order to benefit the 80 per cent of the population living in those hinterlands.

This would seem to provide a natural structure for organisational linkages, but visualising it is likely to be much easier than achieving it.  This will most probably be a major development issue for China during most of the current decade. 

For this reason, the Chamber adopted a Key Cities approach with a view to observing and perhaps participating in these developments.  Similarly, the importance placed on NGOs explains why the home page of this Internet site gives emphasis to the “establishment of strong and lasting economic linkages between non-government organisations in Australia and China”.


Sources of information


General History

A number of treatises are available, but two are particularly good since they are concise and are available online:

US Library of Congress, China Country Study, is a comprehensive document containing numerous chapters on history, social development, the economy, politics, literature and many others.  The site address gives a table of contents with links to separate pages for each heading and sub-headings.  It is useful mainly for background information, as it has not been updated for recent developments. The URL for the country index page is:

Frankenstein, Paul, Brief History of China is a popular reference to China's history and is now updated with graphics and links to other sources.  The URL is:

Shanghai’s Development History

A useful reference is a student project described in another portion of this Internet site (see “Student Essays and Projects” on the home page)”:

Huang Nanzhen, “Urban History of Shanghai”,

Wuhan’s Development History

Background information from:

China Travel:

China Pages:

Chongqing’s Development History

Both background and detailed information from:

Chinese Culture:

China Travel Service:

World Bank:

Current Development Strategy for China

Koop, Marissa, “Urbanisation and Urban Development in China”, also described in “Student Essays and Projects”.  The text is available at:

World Bank’s Discussion Papers (undated) at

Yang, Weimin, “China’s Urbanisation Strategy: Priorities and Policies”,

Songsu Choi, “Agenda for China’s Urbanisation Policy: Economic Mobility and Integration”.


Zhou Period:  The sketch of the area occupied by the Zhou Dynasty is from Paul Frankenstein (see reference) above.  The illustration shown was altered, for purpose of its presentation here, by means of graphics software.

Shanghai: The map of foreign concessions is from Huang Nanzhen (see reference above).

Wuhan map:  The area, boundaries and layout are from Maps of China: with editing changes for presentation.

Chongqing map:  Also from with similar editing changes.

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