“Placemaking”: the business case in China

Atkins | 22 Jan 2014 | Comments

Urbanisation may be a way to create “sustainable socio-economic development” in China but there is more to it than just shifting people into cities. For the plan to succeed, cities will need to engender a sense of place.

“Placemaking” strategies tend to focus on people, but there is another side to the story, especially in China where demographics and economics are proving to be a delicate balancing act.

Urbanisation is being promoted by the central government as a driver for growth, having already committed 40 trillion yuan (US$6.4 trillion) to the programme in its twelfth Five-Year Plan (2011-15).

The response has been predictable – in March 2013, China’s urbanisation rate was reported to be at 53% (this is up from 39% in the past decade) and is expected to reach 65% in the next ten years.

The question facing China is: how will they finance all this development? Major national infrastructure development is centrally funded through state budgets and delivered through large state-owned companies.

“Many of the state-owned enterprises are floating on national and international stock markets and raising private capital through IPOs to supplement the traditional budgetary allocations from central government,” says John Barber, director of urban planning and consultancy with Atkins in Beijing. But local development is a different matter.

At present, a cocktail of state and local government funding, private sector investment and joint venture funding from public–private partnership municipal infrastructure companies is used to cover infrastructure development at a local government level, with private sector developers playing the key role in delivering the real estate.

“Many local governments have used innovative approaches to fundraising to overcome regulatory restrictions, such as setting up local government financial vehicles (LGFV). The growth of LGFVs has raised concerns about the financial sustainability of local governments and questions about the appropriateness of the distribution of national tax revenue between central and local governments.”

“Emerging policy from the Third Plenary Session of the 18th CPC Central Committee in November 2013 is targeting a more equitable share of the national tax revenue being provided to local governments,” he continues. “Streamlining the central-local government revenue division is anticipated to ease the pressure on local governmental financial systems.”

Barber says that the private sector’s role in developing local infrastructure will only increase in the coming years. Private real estate agencies, along with state-owned enterprises moving into property development, will be key players in delivering major urban extensions and new communities.

New money

The goal for local governments is to create people-friendly environments that are commercially viable and financially self-sustaining. It’s not simply a matter of following aesthetic principles that retain a place’s character; they must understand and accommodate the commercial imperatives underpinning China’s recent economic miracle, while also keeping the public happy.

Efforts are being made to ensure that all developments have a sound commercial foundation and any foreign planners must present a credible business plan outlining how a new scheme will yield a return. For Atkins, this means any plans must keep both commercial and sustainable ends in mind.

“Placemaking is fundamental to achieving these goals,” says Clive Horsman, director for landscape with Atkins in Shanghai, “but in China, placemaking is going through a bit of revolution.”

In addition to urbanisation, the agenda is being influenced by the government’s flagship policy called “Beautiful China”. This encourages local governments to think not only in terms of population density and economics, but also of sustainability and “liveability” factors.

“We believe that placemaking is driven by value and that creating the right landscape brings that value,” says Horsman. “We design spaces in the public realm to be functional as well and beautiful, whereas many developments in China have been done so quickly that they wound up sitting in isolation.”

“This is where we bring in our particular skills and knowledge. We try to emphasise the benefits of spaces that work commercially, but also look good and function well,” adds Rupert Gold, associate director of landscape with Atkins in Shanghai. To do so, Atkins has brought together its different areas of expertise – transport, low carbon, urban design, urban planning, strategic planning, landscape, architecture, environment, water – to create a well-rounded offering.

“This integrated approach to development has started making an impact on the market and has raised client expectations of both international and local consultants,” he adds. “This makes the market more sophisticated as it pushes new concepts and services related to urban development.”

The middle class factor

What characterises China’s urban development is not just scale – which is huge, with over 200 cities in the country – but speed. The Chinese market is growing so rapidly that innovation struggles to keep pace with the demands of developers, authorities and other stakeholders.

“Whole new cities are being created in China,” says Gold. “How do you create a genuine sense of place within that almost instant urban creation?”

Gold and his team have worked extensively on the new tier of Chinese cities to balance aesthetic and commercial considerations, while accommodating the needs of developers. This means planning for the right amount of real estate to get a return on their investment.

It also means that even greater care needs to be taken to persuade municipal authorities of the need to place a check on unfettered building of apartment buildings. That can often be as much a commercial challenge as an engineering one, as the country’s emerging middle class begins to exert its influence.

According to Bloomberg, in September 2013, new home prices rose by 20% in the southern business hubs of Shenzhen and Guangzhou, 17% in Shanghai and 16% in Beijing from a year earlier. They’re not alone: house prices climbed in 69 of the 70 cities tracked by the government.

“People are coming to the cities in droves, they’ve been saving and they want to buy a piece of a modern city,” explains Gold. “That is what is driving placemaking in China: this investment in the future of China.

“This means, if you develop a new residential development, even in a third or fourth tier city, you need to make it attractive as a place to live and work, not just as an investment opportunity,” he says. Instead of people looking for short-term profit, you need to attract communities planning for the future.

Changing tides

This isn’t just a new-build story; many major cities in China were built when its market first opened up and they’re looking a bit tired and worn these days. As a consequence, regeneration is becoming more important, particularly for the beautification of the cities, and placemaking is an important ingredient in that mix.

“The idea that you can take a tired city and regenerate it, redo the streets, reinvent the plazas, create new spaces for life – this is the kind of dialogue that Europe has been having for the past 20 years,” says Horsman. “But China is just entering that space.

“City authorities are trying to find the best possible ways to make old things new. People are living in dilapidated cities while new buildings are going up in other locations and generating interest and investment,” he adds. “At Atkins, we’re doing what we can to point them in the direction of some great precedents that demonstrate how they can also regenerate their older cities, to attract both people and investment.”

Considering that China’s urban population in 2012 was already almost 712 million, the commercial opportunities that could be derived from its growth in the next two decades is immense.

The key is to make sure that all sides of the equation balance out, from the commercial opportunities to beautiful public spaces and the transport links that tie them all together.

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