Yesterday we saw some of Fareed Zakaria’s reasons for thinking that the Chinese economy might not be totally invincible. Today Jared Hall at China Beat has a good post here going into the connections between development, forced demolition, and the coffers of local governments. It mostly focuses on the Beijing subway, which is being expanded at breakneck speed:
In one case earlier this year, occupants of a building adjacent to the Daxing extension of Line Four protested when trains passing on the elevated line rattled their homes. A subsequent investigation revealed the tracks had been laid too close to existing buildings, and that basic sound and vibration management technology had been scrapped to cut costs.
The Daxing extension case is illustrative of two common features of the subway corporation’s interaction with Beijing residents. First, the above-ground project was implemented without any community participation in the planning process. When inquiries from those affected were directed to the company, they were simply ignored. Of course, this high-handed approach to planning extends well beyond mass transit authorities. It is endemic among transportation-related initiatives ranging from road-widening to car registration, and reflects an attitude that permeates a much wider swath of the public and quasi-public sectors in China. At the same time, it is still striking to see how blatantly the corporation disregards voices from the precise population it pledges to serve.
Second, although residents only discovered engineering deficiencies after the line had begun operation, they swiftly developed a coordinated strategy to redress their grievances. Their tactics included a combination of petitions and visits to government offices, public demonstrations, as well as lawsuits directed against the subway corporation. This particular repertoire of actions aligns exactly with those described by You-tien Hsing in her discussion of urban households resisting demolition more broadly. Even while operating within the political constraints of the capital, residents’ ability to first draw press coverage and then to extract a commitment from the subway corporation to rectify the problem should warn against dismissing localized resistance to expansion as futile.
To fund its ambitious expansion program, Beijing Subway has had to look beyond ticket sales. State-owned banks have been part of the solution. Generous loan terms have provided the capital necessary to construct much of the new infrastructure. Even so, mounting debts have only worked to underscore the need for fresh sources of revenue. This has pushed the subway corporation into related sectors like vehicle manufacturing and advertising. If such moves appear harmless enough, others have exposed real contradictions with its public interest mandate.
None have been more controversial than real estate development. The subway corporation, making use of its mandated public authority, has seized scarce urban plots and large tracts of suburban land. Those with previous land-use rights are compensated––often at below-market rates––and the land is sold later to developers at a considerable profit. The scale of this practice is difficult to measure, but its results are evidenced by sleek luxury condos and high-end shopping plazas erected on land formerly cleared for subway construction.
Beijing Subway is hardly alone in this game of property speculation. Last December, Shanghai Metro was called out for seizing over 35,000 square meters (8.6 acres) of land to construct a 603 square meter (0.1 acre) station in Jing’an District. Not long after, an office complex was erected on the site zoned as “municipal utility.” Wang Chengli, a professor researching urban transportation at Central South University in Changsha, chided metro operators across the country for “being led by the nose by developers.” He pointed to local officials as complicit in the practice, with some even going so far as to “operate ministries for profit.”
This process- seize land, compensate current owners minimally, and then flip it over to developers for huge stacks of cash- is a huge source of revenue for city governments across the country. Some, such as Custer at ChinaGeeks, have foreseen a wave of public anger in the future caused by governments trying to get out of their massive debt problems using this process. Perhaps they’ll figure something else out, but if you tie this in with the housing bubble that may or may not exist… it’s a huge problem waiting to happen. More on the potential housing bubble when I find it.