City Limits

There’s undoubtedly a Quixotic character to the ‘China should do X’ mode of outside commentary, but Yukon Huang’s short Bloomberg article advising revision of the country’s urbanization policies represents the genre at its best. Noting the agglomeration effects that yield disproportionate returns to urban scale, Huang recommends a turn away from the proliferation of new minor cities, and towards megacity growth.

China is already in a class by itself in accounting for 30 of the 50 largest cities in east Asia. It boasts half a dozen megacities with populations of more than 10 million and 25 “large” cities exceeding 4 million. In fact, though, the only way China will achieve its desired productivity gains is if its leaders allow cities to evolve more organically in response to market forces. They need to let cities like Beijing get bigger.

Urban concentration creates real problems, but these are indistinguishable from the challenges any genuine process of socio-economic advance has to confront. The solutions to these problems will be the same steps that carry the country forward into unexplored territory — beyond ‘catch up’ and into the open horizons of the future. Everything learned from concrete economic history suggests that technological and business opportunity will be ratcheted upwards by exactly those forces which promote megacity agglomeration — and better still urban concentration or intensity — to historically unprecedented levels. That is how — and where — deep social innovation takes place.

Instead of actively trying to spread out growth to small new cities, China’s planners should embrace the agglomeration economies, which militate for larger metropolises. As land and wage costs escalate, some industries will eventually gravitate to medium-size cities, but services will continue to drive expansion in the larger ones. Smart people like to mix with other smart people, and globalization has amplified their financial returns. Beijing and Shanghai have continued to grow because of buoyant higher-value services, even as their manufacturing bases have shrunk. All this explains why in China, productivity in urban areas is more than three times that in rural areas.

But aren’t China’s megacities already too big to be sustainable? As a matter of fact, some urban specialists have concluded that even China’s biggest cities may be too small. They cite “Zipf’s law,” one of the great curiosities of urban research. The law, which is surprisingly accurate for many countries, claims that the biggest city in a country should be about twice the size of the second-biggest, three times the size of the third-biggest, and so forth. On this basis, China’s largest cities appear too small.

Thinking through power laws (such as Zipf’s) dispels the idea of ‘normal’ city sizes. Optimum urban scale is decided by network effects, and is dependent upon the entire social ecology — regionally, nationally, and even globally. The ‘ideal’ size of Shanghai, for instance, cannot be derived from some model of a generic city, but has to be understood, instead, with reference to the singular role this city plays as a hub in multiple networks — especially commercial webs — within which it amasses specialized functions. As these webs expand and thicken, their critical nodes tend to grow and intensify spontaneously. It is natural, therefore, throughout the process of global modernization, for the limits of urban scale to be pushed out ever further, in accordance with the functional sophistication of the system’s crucial hubs, and the associated refinements of specialization these key cities foster.

Beijing is subject to stubborn environmental constraints, with limited water resources prominent among these. Its distance from the coast is also a growth-inhibiting factor. Shanghai, in contrast, is destined to vastness by such implacable historical forces that it is hard to imagine even the most determined policy resistance standing in the way for long. As the country’s commercial capital, any realistic power law distribution of urban scale begins with Shanghai at the summit. It would be best to bend to the inevitable, and let it become the world’s laboratory for urban intensity, tracking the advance of modernity into the Pacific Century. The rewards for this acceptance would easily overwhelm the costs.

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