mistrustful logotype: AHI: United States ? A theory of China's cities and housing: Part 2A ...

[Continued from yesterday's Part 1B and the preceding Part 1A.]

By:David A. Smith

Yesterday?s post, Part 1B of a six-post three-part thesis, showed that while China?s leadership presumes that nothing outside of China matters, the last twenty years have witnessed such a comprehensive revolution in global economics and finance that today the fastest way to national bankruptcy is national isolation.

This ?

? leads to this

While in the long run, information interflow will be the world?s salvation because it will make the world rich, in the interim information is already disrupting the second macro-premise of Chinese political society:

Three premises and their twenty-first century breakdown

1.? ?Nothing outside China matters? ? but China cannot succeed except in a globally connected world ? and the consequence is that China is burying money in fixed assets that people do not want.?

2.? ?An imperial economy is a successful society? ? but modern economies and cities are so vast and complex they have to be self-managed ? and the consequence is that China?s cities are obsolete before they are built.

3.? ?Between observation and doctrine, report doctrine? ? but markets, including information markets, will not be fooled for long ? and the consequence is that all Chinese statistics are questionable and the economy is mismanaged.

2: ?An imperial economy is a successful society?

Belief in the superiority of a planned, imperial economy has committed China to a state-driven approach to investment expenditures, leading to substantial place-based misallocations of land, zoning, and capital that is visibly reflected in turgid cities where housing that is unaffordable is plentiful, and housing that is affordable is clandestine.

As I am no student of Chinese history(though forty years ago I took Reischauer?s magisterial introductory course on Chinese and Japanese history, and still have their tome on my shelves), I take as accurate Owen Johnson?s characterizations:

I hold the Mandate from Heaven

Chinese society has been based on a system of hierarchical relationships within the family unit since the time of our earliest evidence regarding their culture. Age was superior to youth, men to women, and rulers to subjects. ?Within the family, children are always inferior to parents, wives to husbands, sisters to brothers, younger brothers to elder brothers, and so on.

We know who is superior to whom here

This has the advantage of structural clarity.? It has many disadvantages, especially in a modern economy:

The father figure controlled all family assets and held ultimate authority over his offspring; he could sell them into slavery if he desired or kill them for improper conduct. Moreover, these relationships were essentially fixed in perpetuity; that is, one was (in theory) always inferior to one?s ancestors and superior to one?s descendants.

In a fashion similar to an imperial father, Chinese politics were from early times imperial and static:

The first known Chinese rulers are the semi-legendary shaman-kings of Xia, Shang, and Zhou. Xia dates from about 2200 BC and was succeeded by Shang, which lasted from about 1750 BC to 1040 BC. Zhou, the first Chinese kingdom from which we have written records, dates from about 1100 BC to 256 BC, overlapping the Warring States period and ending within living memory of the establishment of the Qin Dynasty in 221 BC.

The economy of all three ancient kingdoms was based on settled agriculture, not trade, which was minimal.

Emperor Zhou

If all power flowed out from an emperor, then influence was measured by proximity to the emperor.

The Imperial court [was bifurcated] into an Outer Court staffed and run by Confucian officials and responsible for most aspects of civil administration, and an Inner Court run by the emperor himself and staffed by his closest relatives and associates, and his personal servants (often eunuchs). The Inner Court was concerned mainly with diplomatic affairs, direct communication with regional governors, and of course warfare ? all executive activities with the potential for violence that were maintained under the Emperor?s direct control.

A court inside a city, then a city inside a court, and a court inside the court

Especially in later dynasties, the Emperor had his own communications networks and dedicated organs run from the Inner Court, which the officials of the Outer Court had no direct access to.

This distinction between an Inner Court and an Outer Court has been maintained in China to the present day, where the leadership has two central committees ? one for civil affairs to which the various Ministries respond and a Central Military Committee with a more exclusive membership that is the seat of real executive power. As in Imperial days, these two bodies have their own organs under them and are served by separate communications networks which do not interconnect.

The imperial government has been revived under the Chinese Communist Party, which installed Mao as the first emperor, and after some tumult succeed him with Deng Xiaoping, who though economically progressive was politically reactionary:

Deng Ziaoping in his younger days

Deng ordered the tanks into Beijing in 1989, of course, and there left a legacy that will haunt the Chinese Communist Party to its dying day.

A deal had been struck. Deng had promised the Chinese people material wealth they hadn?t known for centuries on the condition that they never again asked for political change. The Party said: ?Trust us and everything will be all right.?

All of this reinforces the belief that the imperial central court can govern the country, via a planned economy, and direct activity no matter how many mountain ranges lie between Beijing and the provinces.? When Beijing dictated domestic production, then all must produce domestically, and all did:

State-owned enterprises began bidding enthusiastically in land auctions, and local governments let their pet projects run wild.

As we have seen in many previous AHI posts, this led to gleefully running up the debts, a corruption-friendly money machine, suburb stuffing, and new-construction ghost towns.?

From AHI, December, 2010

Beijing is often accused of manipulating the value of its currency, the renminbi, to subsidize its manufacturing. The government also funnels domestic savings into the national banking system and grants subsidies to politically favored businesses, and it seems obsessed with building [rural ? Ed.] infrastructure.

All of this tips the economy in very particular directions.

These directions become overdeveloped ? and naturally enough (given China?s political culture), the solution to local overspending must necessarily be another edict from the central government:

Orders flow in one direction only

Ever since, the two problems have preoccupied China?s central government. In April 2010 it put curbs on speculative homebuying and spent much of last year tidying up local finances.

However, the Chinese refrained from taking the more effective steps, like taxing vacant land based on its development value, or restricting the flow of capital from state-owned banks to state-owned developers to bid up state-owned development land. ?And fear of a hard-landing economic slowdown seems to have motivated the central government to let the localities keep printing zoning.

Up and up we go, and where the demand stops, long ago

Local governments meanwhile have been given leave from their debtors? prison. Reports suggest that China?s banking regulator has told banks to increase lending to ?better qualified? financing vehicles. These vehicles have also increased their bond sales, issuing over 420 billion yuan-worth of paper already this year.

These twin turnarounds might be good news?a sign that property prices have stabilised and local governments have restored their creditworthiness. But they could also be signs of desperation, evidence that the central government has lost its nerve in the face of falling growth.

Meanwhile, with all this building ? and up and ever up ? the cities being produced by this centrally directed model that presumes all square meters are equally good square meters, a view bequeathed to China by the hegemony of its Communist leadership.

When Mao Zedong unified China in 1949, much of the country was in ruins, and his Communist Party rebuilt it under a unifying theme. Besides promulgating a single language and national laws, they subscribed to the Soviet idea of what a city should be like: wide boulevards, oppressively squat, functional buildings, dormitory-style housing.

Soviet-era housing, in Russia

In reality, Soviet housing was hideous in design, shoddy in construction, and rotten in maintenance, and as far as I can tell Mao-era Chinese housing was no better.

Cities weren?t conceived of as places to live, but as building blocks needed to build a strong and prosperous nation; in other words, they were constructed for the benefit of the party and the country, not the people.

[The] endless fractal Beijings [are] dreary expanses traversed by unwalkable highways, punctuated by military bases, government offices, and other closed-off spaces, with undrinkable tap water and poisonous air that?s sometimes visible, in yellow or gray. And so are its lesser copies across the country?s 3.7 million square miles, from Urumqi in the far west to Shenyang way up north. For all their economic success, China?s cities, with their lack of civil society, apocalyptic air pollution, snarling traffic, and suffocating state bureaucracy, are still terrible places to live.

The future looks brighter ? it has to, doesn?t it?

Terrible places to live though they may be, China?s cities are the country?s engines of economic growth:

Tangjialang, China ? Liu Jun sleeps in a room so small, he shares a bed with two other men. It?s all the scrawny computer engineering graduate can afford in a city so expensive that the average white-collar professional can?t afford to buy a home.

A dim fluorescent bulb hangs from the ceiling of the 180-square-foot (17-square-meter) room on the fringes of Beijing. The floor is littered with cigarette butts, dirty laundry and half-eaten paper bowls of spicy instant noodles.

?This is what I get for living with two guys,? the 24-year-old Liu says, hunched near a pile of used computer parts.

Residential corridor in Tangjialang

[Picture taken from this Flickr site by Zhou Wang ? Ed.]?

Still, the people keep coming, for themselves and their children, despite China?s grotesque efforts to keep them out.

A father protesting the demolition of his son?s school

Uniform centrally-prescribed quotas means the buildings go up, even if they are badly engineered and even if the infrastructure will not support the developments.

A more common problem is a shortage of water. Beijing is perched precariously on the edge of the Gobi desert, and for centuries planners have been preoccupied with how to bring water into it, not divert it elsewhere. Guo Shoujing, a 13th-century scientist and hydrologist, is still revered for designing a network of lakes, weirs and artificial waterways. These not only watered the palaces of Kublai Khan and his descendants but also allowed barges from the southern parts of the empire to bring ?tribute? to their imperial masters and grain to the people of the capital.

Drainage was left to open sewers, sluices and canals, none of which was particularly effective when rains came.

As predictable as the rain

With consequences as predictable as well

As in other nations, urbanization in China is overwhelming the government?s capacity to deal with it, and that leads to infrastructure breakdowns ? which are in no one?s political interest to fix, because they cost money and add no municipal revenues.

The current drainage system dates from the 1950s and is based on a Soviet design, which relies on pipes rather than sewers to direct excess water.

Of course the system cannot handle a heavy rain.? It is already long since obsolete.? Demand has increased enormously from Beijing?s growth.? And there?s a tragedy-of-the-commons shrinkage of the piping network:

As 20th-century planners filled in many of Beijing?s canals, moats and waterways, residents were forced to rely on this creaky relic of Sino-Soviet co-operation to keep their streets from flooding when it rained.

Now, if only the rain were as responsive to Beijing?s commands ?.