People’s Republic of China Town-Based Urbanization Strategy Study ADB TA 4335-PRC Final Report Volume 1: Main Report Prepared for Asian Development Bank National Development and Reform Commission Prepared by PADCO, Washington, DC CCTRD, Beijing August 2005 PLANNING AND DEVELOPMENT COLLABORATIVE INTERNATIONAL Setting the Standard for Our Industry® The findings, interpretations, and conclusions expressed in this publication do not necessarily represent the views of the Asian Development Bank or those of its member governments. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequences of their use. Table of Contents Volume 1 Executive Summary.........................................................................................................ES-1 Section 1: Introduction..........................................................................................................1 1.1 Background and Objectives ...................................................................................1 1.2 Study Methodology.................................................................................................4 Section 2: Urbanization Case Studies: Main Findings .......................................................7 2.1 Town Management.................................................................................................7 2.2 Economic Development.......................................................................................11 2.3 Economic Infrastructure.......................................................................................13 2.4 Environmental Infrastructure................................................................................15 2.5 Property Markets and Housing Development.......................................................18 2.6 Social Development.............................................................................................20 2.7 Municipal Finance................................................................................................24 Section 3: National Policies for Town Development ........................................................29 3.1 Towards an Integrated Strategic Approach to Town Development......................29 3.2 Employment Generation in Regions and Towns ..................................................34 3.3 Increasing Access to Markets ..............................................................................38 3.4 Improving Urban Environmental Services ............................................................42 3.5 Meeting Housing Needs through Property Market Development .........................46 3.6 Improving Access to Social Services and Benefits ..............................................52 3.7 Mobilizing Revenues for Town Development .......................................................57 3.8 Institutional Capacity and Town Governance.......................................................61 Section 4: Provincial Policies for Town Development .....................................................67 4.1 Strengthening the Ability of City, County, and Town Governments to Guide Development ........................................................................................................67 4.2 Targeting Provincial Resources for Efficiency and Equity....................................69 4.3 Planning the Development of Sub-Regions .........................................................71 4.4 Provision of Trunk Infrastructure ..........................................................................80 4.5 Monitoring and Evaluation of Local Government Development ...........................82 Section 5: Action Planning ................................................................................................89 Annexes Annex 1 Administrative Structure and Terminology Annex 2 School Fees in Development Planning Towns Annex 3 Teng’ao Land Development Process (Non-Agricultural Land) PRC: TOWN-BASED URBANIZATION STRATEGY STUDY ii FINAL REPORT Acronyms ADB Asian Development Bank BOD Biochemical Oxygen Demand BOT Build-Operate-Transfer CCTRD China Center for Town Reform and Development CMS Cooperative Medical System CPC Communist Party of China EPB Environmental Protection Bureau GDP Gross Domestic Product GIS Geographic Information System LG Local Government M&E Monitoring and Evaluation MLSP Minimum Living Standard Program NDRC National Development and Reform Commission PADCO Planning and Development Collaborative International, Inc. PDRC Provincial Development and Reform Commission PRC People’s Republic of China SME Small and Medium-Sized Enterprise SOE State-Owned Enterprise TVE Town and Village Enterprise UN United Nations WTO World Trade Organization PRC: TOWN-BASED URBANIZATION STRATEGY STUDY ES-1 FINAL REPORT: EXECUTIVE SUMMARY Executive Summary The Government of the People’s Republic of China (PRC) aims to increase economic productivity and narrow the urban-rural income gap through the development of towns. In support of those goals, the Asian Development Bank (ADB) contracted PADCO and the China Center for Town Reform and Development (CCTRD) to carry out the “Town-Based Urbanization Strategy Study” in 2004-2005. Drawing on urbanization case studies carried out in Liaoning and Shanxi Provinces, this Final Report sets out an integrated strategy for promoting the development of towns in the context of larger urban systems. For years the debate among urban policy makers in the PRC has focused on the relative merits of developing towns vs. cities. While cities offer economies of scale and greater productivity, it was argued, towns held more promise for a more evenly developed urban system. The urbanization case studies in Liaoning and Shanxi Provinces revealed that cities and towns both have important roles to play in the urbanization process. Cities are the main engines of economic growth in China today. Most manufacturing takes place in large urban areas where enterprises can be grouped together and the marginal cost of infrastructure is low. In support of industrial production and administrative activity, the service sector in cities has expanded massively in recent years, creating large numbers of jobs per unit of invest- ment. At the same time, many towns located within metropolitan areas or development corridors play important roles as manufacturing centers, tourist destinations, and agro- processing sites. In some metropolitan areas, towns serve as bedroom communities for center-city workers or transportation hubs for passengers or freight. The contributions that cities and towns are making to the parallel processes of urbanization and economic development make it clear that PRC should grow cities and towns by facilitating the development of larger urban agglomerations made up of different types of urban settlements. Within that context, national and provincial governments should focus their efforts on towns with high potential for employment generation and economic growth. Provincial governments should also enable selected towns to formulate and implement their development strategies by granting them greater authority for planning, budgeting, revenue generation, and infrastructure investment. The main elements of the proposed strategy for promoting town development are described below. Develop Towns in the Context of Larger Urban Agglomerations. Town development should be conceived and implemented as part of the development of metropolitan areas, development corridors, and other sub-regions. The PRC should foster development of physical and economic linkages among different types of urban settlements within the sub- region to improve access and take advantage of economies of scale and multiplier effects. This coordinated approach will be the most effective in enabling growth and generating employment. Public sector entities should lead a metropolitan or sub-regional planning process in which the roles and functions of urban settlements of different sizes are defined and the public investments in roads and environmental infrastructure are identified. • In metropolitan areas, identify optimal functions for different towns within the group of settlements and develop them to that end. Some towns can best serve as bed- room communities for the core city, others as manufacturing centers, and still others as transportation hubs, such as multi-modal centers. • In industrial corridors, town economies should be developed to extend the produc- tion chain of sub-regional industry or services, for example, linking steel production downstream to stainless steel production, or linking electrical power generation upstream to coal mining. Provincial or prefecture-level governments should take the lead role in studying markets, planning sub-regional development, and implementing PRC: TOWN-BASED URBANIZATION STRATEGY STUDY ES-2 FINAL REPORT: EXECUTIVE SUMMARY sub-regional infrastructure projects, such as roads, wastewater treatment plants, and sanitary landfills. • Tourism zones can be created from clusters of towns with significant tourism assets. Using a more demand-driven approach, sub-regional planners can identify excess demand in particular market segments and can target advertising and other promo- tional activities to attract more tourists. Small and medium enterprise development will be critical for growth of the tourism-related service sectors, which have great potential to generate jobs in towns. • Agro-processing areas should be defined