Li Keqiang

Li Keqiang to focus on smart and green urbanisation

Investors advised to temper their expectations for a spate of massive construction projects

PUBLISHED : Friday, 13 September, 2013, 12:00am
UPDATED : Friday, 13 September, 2013, 3:00am

Investors banking on a big-bang building programme as part of Premier Li Keqiang's centrepiece urbanisation programme may be in for a major disappointment.

In the past two days, top policymakers, including Li, have used major public speeches to temper expectations that a massive new wave of construction-led initiatives will be the cornerstone of the policy plan.

The emphasis has, instead, been on urban connectivity, productivity and efficiency, suggesting Beijing's focus is on soothing social tensions that 30 years of breakneck industrial development and urbanisation have brought, rather than stoking them with more construction.

Chinese leaders must show "a clear shift" from the old urbanisation model featuring massive fixed-asset investment in the past decade, said Laurence Brahm, an international lawyer and an economic consultant.

The investment-driven approach had led to "enormous distortions in the economy and great inefficiencies as well as threatening the water security of the country", said Brahm. Policymakers have "definitely" realised the urgency to change and "the challenge would be to execute it", he said.

In a speech at the World Economic Forum, Li emphasised that any future growth must be "made on the premise of higher quality and efficiency", though he did not elaborate on the much-anticipated urbanisation blueprint still being drafted.

On the sidelines of the forum, National Development and Reform Commission (NDRC) chairman Zhang Xiaoqiang also stressed the need for "scientific" urbanisation.

"It needs to reflect green, intensive, smart, and low-carbon concepts. Urbanisation should not be just simply about enclosing land or constructing buildings," he said.

While the leadership appears to have consensus on the broad direction of the next phase of urbanisation, some suggest it will not be achieved overnight because of opposition from groups with vested interests such as local authorities.

Beijing's broad plan is to urbanise over the coming decade about 400 million citizens designated as rural residents under the mainland's strict hukou scheme.

The cost of this urbanisation initiative is estimated by government think tanks at some 40 trillion yuan (HK$50.3 trillion), a figure investors have latched on to as being a sum that could be mainly spent on construction projects.

But with about 200 million people already living and working in cities - forming the army of migrant workers building modern China and running its factories - much of the change for their urbanisation might merely be in the extension of benefits currently enjoyed by official city dwellers.

Hukou reform is one of the most fundamental that Beijing will have tackled since Deng Xiaoping's economic restructuring programme was launched three decades ago, and its impact on health, education and other social spending will have major ramifications.

Reforms in land ownership is another challenge. Local governments have so far relied on buying land cheap from farmers and selling it to property developers for fiscal revenue. Many academics argue that such a system has led to blind expansion of properties and that farming land ought to be priced by the market.

Li Tie, director-general of the China Centre for Urban Development at the NDRC, urged more patience on the urbanisation drive at a meeting hosted by Phoenix TV on the sidelines of the forum.

"It's unrealistic for a single plenum to solve all the problems accumulated in the past 30 years," he was cited as saying on Phoenix's website.

Lu Feng, deputy dean of the National School of Development at the Peking University, said the top leaders have said little in public about how Beijing plans to reform the land system, underscoring the sensitivity of the issue.

"Nevertheless, the November plenum will be a turning point," he said. "There will be progress - though how far it will go, I dare not say."