The Global Urbanist

News and analysis of cities around the world

From pancakes to clusters: why Shanghai needs fiscal decentralisation to achieve its sustainability plans

Sebastian Schulz describes how the decentralisation of planning responsibility without fiscal powers to Shanghai's districts is not creating the polycentric city hoped for, but rather is encouraging them to undermine the sustainability of the master plan by overdeveloping their territories in all directions.

Sebastian Schulz

Sebastian Schulz

Cities: Shanghai

Topics: Integrated planning, Regional governance, City finances, Sustainability

The monocentric growth of many Chinese cities during the past 30 years has been described as "pancake-making": a dense unrelieved urban mass spreading out steadily in all directions, a local version of urban sprawl. In response to this phenomenon Shanghai, the core of an agglomeration of 23 million people, has introduced far-reaching development programmes to transform its megacity-pancake into an urban system of dispersed sub-centres to retain green belts and create comprehensible and sustainable structures similar to the ideas of Ebenezer Howard's Garden City.

Decentralising Shanghai's planning

Shanghai's urban cluster strategy is not a new invention as predecessors can be found in the city's early master plans of the 1950s, which followed socialist urban layout guidelines with wide and long axes and a number of designated satellite industrial cities.

With the beginning of the reform era, the focus on economic development put on hold any attempt to shape urban growth, leaving master plans not implemented and resulting in this pancake-like expansion.

The obvious result is a vicious circle: if districts want to implement sustainable development programmes, the only way for them to raise the necessary finance is by selling or leasing land, encouraging overdevelopment and undermining the objective of sustainability.

A land use right reform in 1990 accelerated this process, creating a real estate market that allowed individuals to lease and trade land from the state. With the declaration of Shanghai's special economic zonePudongin 1992 and the concomitant increase of global economic activities, centralistic planning management could not keep track with the fast pace of development.

Only later did authorities and urban planners once again set out a new long-term master plan transforming the city into an urban cluster system to decrease population pressure, avoid sprawl, and therefore maintain arable land and a network of green corridors.

This strategy not only contains new planning targets, but also a significant shift towards decentralised urban planning, management and decision-making processes.

Shanghai is one of four "municipalities" or province-level cities (along with Beijing, Tianjin and Chongqing) directly controlled by the central government instead of by a province-level government. It is composed of 16 districts-the urban equivalents of rural prefectures and similar to boroughs in many large English-speaking cities. During the 1990s Shanghai's municipal government-equal shifted detailed urban management and land sale supervision to the district level, granting them more responsibility over their own development and growth strategies.

Despite the shift, municipal and national authorities still have the last say over the general direction of a district's development, which must be synchronised with the city's overall development strategies. As for the city itself, national and municipal visions of the normal five year plans were merged into a new long-term master plan for 1999 to 2020.

This plan was the first to take into account decentralised urban management and sustainable principles. The centrepiece of the plan was the provision of a large-scale green belt and a new urban system of small settlements and medium-sized cities or towns around a modern centre with "global characteristics".

While the urban system and its proposed locations for new towns were defined by the master plan, implementation was largely put into district government hands. Almost all of Shanghai's eight large outer districts were to develop at least one new town project, with detailed planning and management taking place mostly within district boundaries from plan draft to land sale and construction. This brought more responsibilities and power to district authorities than ever before. But aside all the positive (and necessary) aspects of decentralising decision-making processes, the policy produced an aggressive competitiveness between districts, causing them to neglect the sustainable development strategies conceived for the overall benefit of the city.

Expectations and reality

Apart from the lack of adequate planning regulations and the self-promoting tendencies of decision-makers at the district level, one of the main reasons for this neglect is the fiscal decentralisation issue. While planning responsibilities were being decentralised, commensurate levying powers were being nationalised.

In a first step clearly the districts' revenue collecting has to be rethought. By empowering districts politically, fiscal decentralisation inevitably has to follow.

As Barry J Naughton explains in his 2007 book The Chinese Economy: transitions and growth, a reform of the fiscal system in 1994 significantly changed the relationship between national, provincial and district governments' tax revenues to the disadvantage of the district level. Most important taxes became collected by the national tax agency, while major expenditures such as on infrastructure and public services are still carried out by municipal and district governments, without any rights to change tax rates or levy new taxes. But on the other hand, district authorities are now in charge of land lease permissions, and most of the land transaction value is captured by the districts.

The obvious result is a vicious circle: if districts want to implement sustainable development programmes, the only way for them to raise the necessary finance is by selling or leasing land, encouraging overdevelopment and undermining the objective of sustainability, especially in the sense of providing environmental protection.

In the 2009 volume Shanghai Rising edited by Xiangming Chen, geographer Fulong Wu states that the land leasing policy has become a means for the state to avoid investing in urban development via direct capital injection. This strategy is realised through the formation of land development corporations (private corporations managed and led by district authorities), which use state-owned land as collateral for bank loans.

As a result of extensive land sales by district governments, many new towns have already outgrown their intended boundaries. The idea of the urban cluster is slowly disappearing and the city with its growing new towns now seems to look like multiple small pancakes merging together. Areas formerly declared as green zones or agricultural land in the Shanghai master plan are already urbanised today. And even the remains of green land are being commercialised by golf courts, walled gardens with entry fees or privatised recreation areas inside gated residential compounds.

A call for strict guidance

The visionary urban system described by the master plan might have been discarded years ago but has been continuously altered by municipal authorities to match new developments. Songjiang New City for instance, once set for a proposed target population of 500,000 inhabitants, was being corrected to a new target of 800,000 in 2006 and even to 1.1 million in the 2010 five-year plan.

This uncertainty of development targets shows that urban master planning remains in a weak position and just follows urban growth instead of guiding it. This clearly does not support sustainability by any means and therefore threatens the city's entire future.

In order to get onto the successful path of sustainable development, strict guidance and smart resource allocation is needed. In a first step clearly the districts' revenue collecting has to be rethought. By empowering districts politically, fiscal decentralisation inevitably has to follow.

What also has to be included here, are strict adjustments of the current land lease policies. Land lease and urban planning policies need to be matched with strict national and municipal guidelines and wider public participation in the process of urban development. Only a more transparent and better supervised planning system combined with proper financial resources is able to implement sustainable visions in Chinese megacities.

holds an MSc in Urban and Regional Planing Management and works as an urban planner and GIS analyst at BUP in Dusseldorf. He is involved in several national and international planning projects with his main research focus on China's urban development.