A State Beyond the State

State Beyond Ting Chen

Shenzhen and the Transformation of Urban China

State

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A STATE BEYOND THE STATE

A the

State Beyond Ting Chen

Shenzhen and the Transformation of Urban China

State

nai010 publishers

Diverse Urban Quarters on Mono-Functional Grounds Abstract Glossary

List of Enterprises

Introduction

A

ZONE PIONEERS

1979 to Mid-1990s: The Birth of SOE-Lands and the Preparation for China’s ‘Open Door’ Policy Comprehensive Zones with a Single Zone Builder: Urban Experiments in Progress Professional Zones with Multiple Zone Builders: ‘Building Nests to Attract Phoenixes’

1.1

1.2

2.1 2.2

3.1 3.2

From the Mid-1990s: Protecting SOE-Lands from Government Intrusion Redevelopment: Land Sale, Reuse and Densification Legitimization of Land Ownership: The Great-Red-Line Agreement From the Early 2000s: SOEs as Omnipotent Developers in Chinese Cities Central SOEs as Developers: Countrywide Expansion Provincial SOEs, Municipal SOEs and District SOEs as Developers: Citywide or Further Expansion

IX XIII XV XXI 1 27 29 34 46

53 53 56

63 65 81

Redrawing the Boundaries, Restructuring the City

88

B

CITY DEVELOPERS

91

Territorial Expansion into the Sea Thirty Years of Land Reclamation SOEs as Leading Developers Along the Coastline

97 98 107

2.4

Urban Redevelopment in the ‘City Without History’ Thirty Years of Urban Renewal Urban Renewal in Villages: Nationalization of Rural Land Urban Renewal in Industrial Zones: ‘Industrial Upgrading’ Renovation as a Temporary Strategy

115 116 120 128 138

Upgrading in Plan, Segregation in Reality

144

1.1 1.2

2.1 2.2 2.3

VI

C

URBAN PARTICIPANTS

Shangbu Industrial Zone 1980s: Constructing the High-Priority Industrial Zone 1.2 The 1990s: Exploring a Post-Manufacturing Economy 1.3 Late 1990s to Mid-2000s: Developing

China’s No.1 Electronics Market 1.4 Mid-2000s to Early 2010s: Striving for an ‘Upgrading’ 1.1 The

147 151 151 162 168 182

Southpetro Comprehensive Development Base 2.1 The 1980s: The Unplanned Zone Development 2.2 1990–1998: An Uncontrollable Real Estate Fever 2.3 1999–2003: The Downfall and Dismantling of the SOE Landlord 2.4 The 2000s: The ‘Free Rein’ Transformation

of Southpetro’s Eastern Area 2.5 Early 2010s: Growing Government Attention

191 191 203 209

223 232 234 237

Shahe State Farm 3.1 1959–Late 1970s: A Pseudo-Military Danwei 3.2 The 1980s: Splitting the Farm, Developing Industries 3.3 The 1990s–2003: Competing for Land 3.4 2003–2009: Maintaining Social Stability

for a ‘Harmonious Society’ 3.5 The 2000s–Early 2010s: Becoming a Vibrant Habitat 3.6 Early 2010s: A Renewal Plan on the Way

Self-Evolving SOE-Lands as Indispensable

Complementary Neighbourhoods of the City

Outlook:

Rethinking the City’s Transformation

Bibliography Figure Credits List of Figures List of Tables Acknowledgements Imprint

212 217

249 253 259

264

271 278 290 292 293 294 296

VII

Introduction All animals are equal, but some animals are more equal than others.

— George Orwell’s Animal Farm In China, while every enterprise is theoretically and legally similar, in reality some enterprises, particularly state-owned enterprises (SOEs), are privileged. For example, unlike post-socialist Eastern European cities where land has generally been privatized, the cities of the People’s Republic of China (PRC) are only semi-marketized, and there are large tracts of land that are owned by entities with a state-linked background, especially SOEs. From the pre-reform era (1949–1979) to China’s ‘open door’ policy until present time, many SOEs have established themselves as the most stable and aggressive landlords in the Chinese urban landscape. Theoretically, these SOEs, which are wholly or partially owned and controlled by government agencies, are perceived as the corporate face or alter ego of the state. However, in reality, their operations, especially of those of high political status, may be quite independent from the agenda of their supervising agencies. As a result, these seemingly governmentcontrolled SOEs in fact enjoy a significant level of independence and operational freedom. They are the key protagonists of China’s distinctive SOE urbanism, which prevailed and prospered in the urban development in Chinese cities since the introduction of market principles in the 1980s.

This research presents SOEs as a different kind of state power that is positioned beyond or above the state. Although SOEs’ urban power seems unconstrained, the transformation processes of SOEland (land that is fully, partially or nominally held by one or more SOEs) and their socio-economic impacts differ significantly from one to another, due to their different geographic locations, land and property ownership structures, etc. Based on a detailed analysis of the highly different cases of SOE-land in the central area of Shenzhen (China’s first Special Economic Zone), this research focuses on the following questions:

1

1 2

3

How and why did SOEs perform differently, and in what specific ways, in the urban transformation of the city?

How and why did centrally located SOE-lands develop over time into neighbourhoods with highly differing urban characteristics? What influences did these areas have on the surrounding neighbourhoods of the city?

With the overwhelming phenomenon of large-scale, exclusive and mono-functional urban development in Chinese cities, how are SOEs guided to promote sustainable urbanism for socio-economically inclusive and diverse neighbourhoods?

Overview: Evolution of the SOE Urbanism in Mainland China When talking about the SOE urbanism today, it is impossible to ignore their communist past as all-encompassing socio-economic units, or danwei,1 from the 1950s to 1970s, and since the SOEs’ corporatization and reform process beginning in the 1980s. In the first three decades of its rule, the Communist Party of China (CPC) applied a series of policies to stabilize its control over the country’s densely populated urban areas. The most influential control strategies are the land accumulation and rearrangement of the differing communist danwei, as well as the lifelong governing system over the urban residents within danwei walls.2 These measures influenced the everyday life of the Chinese urban population so deeply that many of their socio-spatial legacies are still present today.

At the end of 1978, following the death of Premier Mao Zedong3 and the end of Cultural Revolution,4 the new leaders of PRC officially launched the ‘open door’5 campaign, which introduced

1 单位 in Chinese. In China,

social organizations in which people are employed, be it is a factory, shop, school, hospital, research institute, cultural troupe, or party organ, go by the generic term ‘danwei’.

There can be many kinds of danwei, as He Xinghan explains: ‘There are big units and there are small ones, there are enterprises and businesses, there are publiclyowned units as well as collectively-owned utilities, there are even Party, government and military units. Even

2

Buddhist temples can be divided into rank order in this way, with prefectural-level and county-level units and so on.’ On this topic, some useful literature include David Bray’s Social Space and Governance in Urban China: The Danwei System from Origins to Reform (Stanford: Stanford University Press, 2005) and Lu Duanfang’s Remaking Chinese Urban Form: Modernity, Scarcity and Space, 1949–2005 (London: Routledge, 2006).

2 This book only uses the

specific term ‘danwei‘ to refer to a place of employment, from 1950s to early 1980s when the Chinese economy was still heavily communist.

3 The founding father of the People’s Republic of China (PRC), who governed as Chairman of the CPC from its establishment in 1949 until his death in 1976.

4 The Great Proletarian Cultural Revolution was a socialpolitical movement that took place in the PRC from 1966 through 1976. Set into motion

Introduction

by Mao, its stated goal was to enforce communism in the country by removing capitalist, traditional and cultural elements from Chinese society, and to impose Maoist orthodoxy within the Communist Party. This political turmoil has caused the death of 30 million people (according to the current Chinese government).

5 改革开放 in Chinese, also known as the Chinese Economic Reform, or literally translated as ‘Reform and Opening-Up’.

Fig. 0.1

Timeline: SOE Urbanism in China and Shenzhen

WORLD

World War I

World War II

CHINA

Republic of China Founded

2nd SinoJapanese War

SZ-HK RELATIONSHIP

Cold War

Post–War Economic Oil Crisis Expansion in the Western Bloc

People‘s Republic of China Founded

Shenzhen: An open rural area at the border of Nationalist China

Mao‘s Cultural Revolution

An enclosed rural area under Communist China

Revolutionary Wave in the Eastern Bloc Countries ‘Open Door‘ Policy

Industrialization & Great Inflation

The first Special Economic Zone of Communist China

1950S - 1970S

Republic of China UK Privileged SEZ Less privileged SEZ Non-privileged PRC Land

Hong Kong: A port city for the British Empire since 1842

A capitalist frontier facing to PRC

An ‘Asian Dragon‘ with a prosperous manufacturing industry

SHENZHEN IN SPRAWL

Bao‘an County: Vast rural land with villages and small market towns

Early Early 20th Century Century POLICY ON SOES

1949

1920s-40s Start of Industrialization in China The emergence of state-owned as well as private manufacturers using western technologies

SOE-LAND IN SHENZHEN

GOVERNMENT IN SHENZHEN

1980 1950s-70s Nationalization of Entire Urban Economy Turning many private enterprises into stateowned danwei (work units), and also establishing new ones 1950s-70s State Farms As a socialist frontier directly facing the capitalist world, there were only two state-owned danwei in the region. Both of them are state farms to accommodate overseas Chinese refugees, or to serve as a military reserve force at the border.

Pre-PRC Era Counties and Villages Following the tradition of rural China, although there were county governments in charge of a large piece of land, villages were the real

1950s-70s State Farms and Collectives Villages were either converted into state farms or collectives. Without a real supervising local government, these two were the real governance entities.

governing entities.

ECONOMY OF SHENZHEN

6

Start of the SEZ with few urban settlements

Pre-Reform Era Agriculture For hundreds of years, people living in Bao‘an County were mainly focused on agricultural economy.

Introduction

1985

1980s Corporatization of the Danweis Turning many manufacturer danwei into state-owned enterprises (SOEs)

1979–Early 1990s Autonomous Development Zones Large pieces of land were allocated to SOE developers to make comprehensive zones and professional zones, where the SOE landlords had autonomy in planning and land administration.

1980s SOEs and SEZ Government The early Shenzhen SEZ mainly consisted of administrative districts with weak governance agencies.

This enabled the SOE zones and villages to develop in a laissez-faire condition.

1980s Industrialization Both inside and outside the Special Economic Zone, with investors from Hong Kong, Japan, Southeast Asia, etc.

Dissolution of the Soviet Union Tiananmen Square Incident

TaxSharing Reform

Developing the manufacturing sector; establishing a municipal government

A global city focusing on the financial and sevices sectors

Asian Financial Crisis

Global Anti-Terrorism Campaign

Transfer of Hong Kong to PRC

China Joins WTO & Becomes World‘s Factory

Rocketing Property Market

4 Trillion CNY Economic Stimulus

Developing the manufacturing sector; exploring the commercial sector

Under strong political intervention from China‘s central government

1990s: Construction in SEZ and suburban sprawl

1995

Mid-1990s Deindustrialization This happened inside the SEZ. Accompanying that, there was accelerated urbanization at the periphery of the city.

2010

2015

2000s Growth of Remaining SOEs Due to special privileges, many remaining SOEs (from the SOE Reform) expanded in an unexpected speed

Late 1990s Great-Red-Line Agreement The newly established local government tried to retain the authority over planning and land administration from the SOE landlords, through the Great-Red-Line Agreement.

Early 1990s Municipal Government Since a complete municipal government was established in Shenzhen, it started to intervene in the previously autonomous villages and SOE development zones.

2000s: Accelerated real estate campaign

2005

2000

Since Mid-1990s SOE Reform Restructuring/privatizing/ stripping of SOE assets, following the principle ‘manage the large and let go the small’

Deceleration in Economic Growth

Incrementally losing its special status; competing hard with other megacities in China

Special Administrative Region under the ‘One Country, Two Systems‘ policy

1980s: Development zone and village construction

1990

Global Economic Recession

Since Mid-2000s Urban Renewal Campaign SOE landlords and developers were encouraged by the local government, with many incentive policies, to rebuild their own plots or other aged neighbourhoods of the city.

Since Mid-2000s Government-Led Urban Transformation The city government became increasingly eager to upgrade the urban image and the urban economy.

Thus, many incentive policies were announced to encourge rebuilding inside the urban core and new development in the suburban area.

2000s Rising Property Value This happened inside the SEZ due to the Housing Reform and the growth of the commercial and service sectors.

Since Late 2000s to Early 2010s Real Estate Fever This happened throughout the city following a national trend. It reflected the national economy‘s heavy dependence in the real estate sector.

7

ZONE PIONEERS Moving from Pioneer Zone Builders to Urban Developers

A STATE BEYOND THE STATE

A

27

1 In this book, this term refers specifically to autonomous, experimental zones developed by SOEs in the 1980s and early 1990s, inside the Shenzhen Special Economic Zone. Today, this term is applied more widely in China, referring to new urban areas marked for industrial development.

2 In this book, the term ‘zone builder’ refers to SOEs that took part in the construction of the development zones in Shenzhen from the 1980s to the early 1990s.

3 The proposal was approved in August 1979, and the Shenzhen SEZ was formally established in August 1980, along with the enforcement of the ’Guangdong Special Economic Zone Ordinance‘.

4 Ezra F. Vogel, Deng Xiaoping and the Transformation of China, (Cambridge: Belknap Press of Harvard University Press, 2011).

5 通往邪恶的资本主义世界 in Chinese. In the communist era, this phrase ‘evil capitalist world’ was widely applied in the official propaganda to describe capitalist countries and regions.

28

ZONE PIONEERS

a Master Plan 1986–1995 1 Beach

2 Zone for Smaller Factories

3 Zone for Larger Factories

2

1

3 Industry Warehouses Transportation Housing Public Facilities Public Green Streets & Squares Infrastructure 500 m

36

ZONE PIONEERS

b Housing Development Type 1 North Merchant Residence

Type 2 Rose Garden Residence

c Central Park

Fig. 1.3

Shekou Comprehensive Zone by China Merchants A port & industrial development-oriented zone built by a central SOE, with an open spatial structure

37

T. 1.3

2002 GRAgreement of Shekou: Planned Functional Distribution Commercial

Office

High-Rise Housing

Other Housing

Total

19,700

125,600

82,000

318,200

545,500 sq m

3.61%

23.02%

15.03%

58.33%

100%

90,200

350,100

780,500

544,300

1,765,100 sq m

5.11%

19.83%

44.22%

30.84%

100%

Price in the GRAgreement (CNY/sq m)

2,050

1,500

1,200

1,450

2006 basic land-leasing price (CNY/sq m)

2,572

2,085

1,980

2013 basic land-leasing price (CNY/sq m)

3,732

3,021

3,081

2013 market land-use price (CNY/sq m)

>7,100

>7,100

>29,000

Existing GFA in 2002 (sq m)

Permitted GFA Increase from 2002 to 2012 (sq m)

Source: Shenzhen Centre for Assessment and Development of Real Estate, Policy Guidance on the Land Prices of Shenzhen City, 370–377; official website of the Urban Planning, Land & Resource Commission of Shenzhen Municipality. Online. Available HTTP: http: (accessed 15 May 2014); Shenzhen Tongchengzhi Land Evaluation

Office, ‘深圳市南山区蛇口海上世界片区 2011003-0087号商业文化办公项目用地土地使用 权价格评估 [Reports on Land Evaluation of the 2011-003-0087 Plot for Commercial, Cultural and Office Project in the Sea World Area of Shekou, Nanshan District, Shenzhen]’, 21 August 2013. Online. Available HTTP: http://www.cninfo.com.cn/

finalpage/2013-10-16/63160270.PDF (accessed 28 May 2014); Shuhui Huang, ‘注资地价过高遭质疑 [Scepticism About High Land-Use Price]’, October 18, 2013.

Online.Available HTTP: http://finance. qq.com/a/20131018/000852.htm (accessed 28 May 2014).

announced ‘basic land-leasing price’ in public auctions. (Such a price, usually much lower than the actual market price, is already the most preferential one available for any wellconnected developers who can ‘pre-programme’ the tender or auction). For the high-rise apartments plots for instance, the basic land-leasing price rose from 1,980 CNY/sq m in 2006 to 3,081 CNY/sq m in 2013. By 2013, the price on the real property market was already more than 29,000 CNY/sq m, while the plots covered by the GRAgreement was only 1,200 CNY/sq m [T. 1.3].

According to the GRAgreement, if projects are launched after the 10-year period (after 2012) with the same land-use price, the land-lease term will be calculated from 2012. In order to extend the land-lease term to a more conventional term (for example, 70 years for the residential property from the project launch date, rather than from 2012), the land-use fee for the additional years would be calculated according to the market price. In order to maximize profits, China Merchants sped up its real estate developments. The exceptionally low development costs contributed to the company’s exponential boom in its real estate sector in the following decade. As a result, the speedily constructed urban fabric of the newly built area in Shekou, comprising high-rise offices and luxury gated housing estates, turned out to be very different from the SOE-land’s old socio-economic fabric [Fig. 1.9]. Furthermore, China Merchants’ only

60

ZONE PIONEERS

Fig. 1.10

JinGu #6: Office building registered as industrial building

real estate subsidiary China Merchants Property, which used to be the second-level subsidiary supporting the public-oriented housing development of the Shekou Industrial Zone, was hastily enlarged and turned into a first-level subsidiary of the central SOE65 — reflecting the public company’s reorientation from building for a wider public to building mainly for the upper-middle class.

Chegongmiao66 The developer of the Chegongmiao Industrial Zone at Futian district was municipal SOE Terra (now an affiliate of the city’s biggest municipal SOE Shum Yip),67 which was commissioned in 1988 to build the 1.15 sq km Chegongmiao Industrial Zone. In order to raise money for the construction of the zone and to support the operation of the company, it sold a large number of its properties to incoming companies. As a result, the property-holding structure within Chegongmiao was already fragmented at the outset. When Terra signed the GRAgreement with the municipal government in 2004, the SOE merely held 0.303 sq km of land. Besides the land occupied by industrial plants and some informal structures, Terra only had 0.056 sq km of buildable land.

From the Mid-1990s: Protecting SOE-Lands from Government Intrusion

65 Interview with B-b, a former manager in the SOE China Merchants, on 6 June 2013.

The name of the interviewee is withheld by mutual consent.

66 A large part of this section is based on information taken from the Shenzhen Centre for Assessment and Development of Real Estate, Policy Guidance on the Land Prices of Shenzhen City, 416–420.

67 It was initially known as the Shenzhen City Industrial Zone Development Company, but was renamed to Terra when the company was restructured in 1990s.

61

Supported by numerous interviews and primary data, this book points out the threats posed by typical large-scale projects of single SOEs (State-owned enterprises), and further shows alternative development potentials that match the long-term socioeconomic demand, by learning from self-evolving SOE areas shaped by the combined forces of various public and private stakeholders.

Since China’s 1980s economic reform, the ubiquitous semi-marketized SOEs have established themselves as immovable landholders in the urban landscape. To improve our understanding of the Chinese SOE urbanism, Ting Chen made a first-hand account and evaluation of various SOEs’ urban performances and the differing socioeconomic influences of SOE land transformations. The urban core of the Special Economic Zone Shenzhen, largely constructed by SOEs, was chosen as the case study.

A

A book that offers much needed balance among ethnography, architectural theory, cartography, economic history and the singularities of urban change.

— Professor AbdouMaliq Simone

This book is unique and a must for anyone operating in urbanism in China.

— Professor Ir. Kees Christiaanse

ISBN 978-94-6208-349-3

9 789462 083493

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the