.52. ; _ :

 

aims

 

 

 

 

 

PLACE IN RETURN BOX to remove this checkout from your record.
TO AVOID FINES return on or before date due.
MAY BE RECALLED with earlier due date if requested.

 

DATE DUE DATE DUE DATE DUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2/05 worm—mm

Urban Housing in China: Issues and Policies

DY
Jianzhen xie

A PLAN B PA?BR

Submitted to
Michigan state University
in partial fulfillment of the requirements

for the degree of
MASTER OF URBAN PLANNING

Urban Planning Program

Winter 1992

CONTENTS

Page

I. INTRODUCTION. .................... . ................. ........1

1. StructureOOO0..0...0.0.0...OOOOOOOOOOOO0.0000000000000000I

2. Summary ........................... .......... ............. 1

II. TYPES OF OWNERSHIP ......................................... 4

III.HOUSING POLICY ................... . ......................... 6

IV. CITY, NEIGHBORHOOD AND PUBLIC SERVICE ...................... 12

V. HOUSING COMMERCIAZATION. ........ ...........................24

VI. CONCLUSIONOOOOOO0.000......OOOOOOOOOOOOOOOOO0.0.0.00000000028

Footnotes. O...0..O...OOOOOOOOOOOOOOOOOOOOOO0.0.0.000000000000032

Bibliography...................................................35

I. Introduction

1. Structure

Although urban housing situation in China has many problems similar to
that of otherzdsveloping nations such as overcrowding, poor infrastructure
and low living standard, it has some unique characteristics both good and
bad that are worth studying. This paper analyses the housing issues and
policies which resulted in those characteristics in order to provide
insight into the essence of planning in China since the founding of the
People's Republic of in 1949. The paper is divided into six parts. Part
I, which is this part, states the purpose of the paper and gives brief
summary of the housing situation in China. Part II talks about the types
of housing in historical, present and perspectives. Part III analyses
housing policy making in terms of biased investment strategies, low rent
policy and rising urban standard. Part IV describes characteristics of
neighborhood, public service and employment structure in China and
compares them to that of the other countries. Part V is about issues and
problems of housing commercialization. Part VI draws a conclusion. To
present the data and statements in the paper realistic if not perfectly
precise, the author tries to provide as many .facts as.p.ossible from
secondary source and firsthand experience and to compare China's housing
situation with that of the west and other developing countries throughout

the paper.
2. Summary

With a quarter of the world's population occupying less than 7 percent of

the total land area of the world, the amount of space which can be made

2

available for housing the Chinese must of necessity be very limited when
one considers that much of the land area of the country is unsuitable for
human settlement because of extreme environmental conditions and that the
majority of the population reside in the eastern half of the country which
is also the best agricultural area. Yet, this is where many of the
largest Chinese cities are located, all of which have experienced rapid
population growth since the founding of the People's Republic of China in
1949.l

The urban population is highly concentrated in large cities. 62.8% of the
urban population of China are in the cities ( with over half a million
each) and 39.1% in metropolises (with over one million each). There are
43 large cities in China of which 15 are metropolises. China now has the
largest number of cities and metropolises in the world.2 The density of
urban population in China is extremely high, especially in large cities.
In Shanghaits urban area the density has reached about 40,000 persons per
sq.kilometer, much higher than the highest density of the United States
found in Bronx, Brooklyn, and Manhattan boroughs of New York City,
although not as high as on Hong Kong Island. At Caoyang in Shanghai and
the Fengsheng Neighborhood in Beijing, the population densities are 36,000
and 35,319 persons per square kilometer respectively. This means that the
per capita urban space in these two urban neighborhoods is only about 28
square meters. In Shanghai's old town, a bustling commercial center with
preindustrial spatial characteristics where the building space on the
ground level is occupied by small shops and the space on the second floor
is used mainly for residential quarters, the population density has
reached the remarkably high level of about 1,500 persons per hectare.

Thus there is only 6.75 square meters of urban space per person.

The density of population at Shenyang, a heavy industrial center with

about three million urban residents, is 4.8 times greater than that of

3

Chicago and 5.8 times higher than the population density of Greater
London, which in 1967 had 7.88 million people with a density of 4,500
persons per square kilometers. Guangzhou , the busiest commercial port
city in South China, is perhaps the most congested city in the nation.
Its population density of 57,142 persons per square kilometer is eight

times greater than that of Queens, New York.

China's housing situation changegalong'with pendulumrof the change hand of
power and the change of political and economic policies in different
times. Since the founding of the People's Republic in 1949, China has
experienced severe shortages of housing space, deteriorating of housing
conditions, and overcrowding. The population of China increased to 1.04
billion in 1982 from the 542 million in 1949. 20 percent of these 1.04
billion people live in urban areas. From 1949 to 1976, as Mao Tsetung’
government placed priority on industries, especially heavy industry,
there was not enough money to rehabilitate old housing stock, there was
few new housing development to meet the ever increasing population. With
the open-door policies of the present government led by Deng Xiaoping,
however, China has investedflmore funds in housing since 1979 and is trying

to improve the general situation. 3

Nevertheless, housing remains a pressing need of China's urban population.
Twenty-five years ago the Chinese aimed for a standard of six square
meters of living space per capita in urban areas. But the pace of new
construction has not kept up with the growth of the urban population.
Thus, living space in 193 large and medium size cities in China with a
population of 70 million persons is only 3.6 square meters per capita--
actually a decline from the area available more than twenty years ago. At
the same time, the quality of China's inherited housing stock,
particularly in older cities, has been allowed to deteriorate.

Maintenance has been neglected because the minimal rental fees charged by

4

the state have generally been inadequate to finance more than the most
superficial repairs. Prior to 1952, the average floor space in urban
China was about 4.5 square meters (40.5 square feet) per person ( the
basic measure of housing, per capita floor space, generally excludes
corridor, stairways, kitchens and toilets). As the leadership decreased
its emphasis on housing investment, the amount of space per person
gradually decreased as well, to an average of 3.6 square meters (32.4
square feet) in thermajor cities--slightly less than the space occupied.by
a king-sized bed. The situationrof urban housing has improved in recent
years. The government now treats housing reform as one of the most
important element in the raising standard of living and made housing
construction a major priority yet overcrowding and acute housing shortages

remain. ‘

For one to understand what China did and will do with the housing shortage
problem, one needs to know some basic elements about how the system of
housing works in China. The following parts will discuss those basic

elements in details.

II. Types of Ownership

Housing ownership in China falls into three types: private, work unit and
municipal. The first type is private ownership. The government has
always allowed some private home ownership since the founding of the
People's Republic. But this type of housing has experienced different
treatment in different political times. From 1949 to 1979, this period
can be called deprivatition in housing. During the Cultural Revolution
(1966-1976), private housing was confiscated and distributed to other
people as public housing. Since 1979, owner occupied housing is
encouraged. Today, not only the old private housing has been returned to

the owners, but new owners have appeared. some of the owners lease space

5

to others and become landlords. Also, because of housing shortage, the
government now allows the local level to try almost every means to provide
housing. To encourage people to get loans to buy houses from the once

public housing or build their own homes is a new practice.

Second type of housing is work unit or danwei housing which controls about
60 percent of city housing stock. The danwei means more than the meaning
of the words--working unit. Psychologically it is similar to the meaning
of a community in the U. S. in the sense of belonging. But danwei is
different in a lot of different ways. It plays a central role in the
lives of those employed there, as much a social system as an economic one.
Danwei differ in size, resources, and administrative levels. To varying
degrees, they run nurseries, clinics, canteens, and recreational
facilities. They often approve or mediate marriages and divorces, and
organize birth control programs. They may employ family members of
employees in subsidiary small workshops or vegetable farms. They also
provide guidelines for the distribution of available housing stocks and

decide who occupies the housing under their control.

This type of housing includes large estates or compounds adjoining a
factory, bureau, or school and detached housing units scattered through
the city. Most people in urban China belong to some form of work unit;
examples include bureaus, universities, schools, factories, large
department stores, mass media, institutes, and others. Thus, one's
ability to find adequate housing may depend on the danwei's size and its
available resources. Allocation of danwei housing bases on work
experience or seniority, number, ages,and sexes of children, the presence
of elderly parents and so on. Severe limits of new housing stock and long
waiting periods for the next available unit create a situation where
families of three generations commonly share a two-or three-room apartment

or house. After 1979, however, work units realize the importance of

6

housing for their employees. They may spend more revenue to constructing
new housing,or buy apartments from outside for their employees. Since
1979, this type of housing has become the major thrust of new housing
development. Numerous new'housing estates have been built either directly
by the state which then allocates them to work units for employee housing
or by the work units themselves, especially large industries with state

subsidies. 5

The last type is municipal housing which is administrated by district
housing management offices. This type of housing accounts for 20 to 30
percent of urban housing. It includes buildings taken over from former
private owners and newer housing built by the city. City owned housing
serves mainly the needs of those people whose work places do not yet
possess their own housing, and those people who are not affiliated with

any formal work places. The residents pay rents to the city.

One should be noted that the above categorization is more for the purpose

of administration of housing than for the purpose of market.

III. Housing Policy

Housing policy in any societies is strongly influenced by the political
ideas of the government. But China is an extreme case where housing has
been controlled by the central government. And the government's biased
investment strategy, low rent policy can be blamed as least partially for
the housing shortage problem. For many years China has paid insufficient
attention to housing because Chinese planners regard urban housing as
"non-productive" investment. Accordingly, urban housing construction
receives lowrpriority relative to "productive" investment such as building
factories and large industrial programs. 'Better housing is often seen as

a luxury or consumption good that detracts from the greater goal of

7

national productivity and growth. In practice, China, as other socialist
states has skimped on housing, providing only minimal floor space per

person, spartan plumbing, and long waiting lists for new housing.

From 1966 to 1976 in particular, during the ten years of so called
"cultural revolution ", little need was paid to the people’s well-being
and investment in housing was neglected. In the 1950’s, housing accounted
for 9.1% of total spending for capital construction, whereas between the
60's and early 70's it accounted for only 4.7%. Industrial development
continued.to receive heavy priority between 1949 and 1976. However, after
the political confusion of the "cultural revolution", the Chinese
government decided to pay far more attention to improving living
conditions. During 1977-1979, spending on housing increased about three-
fold compared with the average annual investment between 1966-1976. The
outlay for housing construction was 14.8% of total spending for capital
construction in 1979. From 1980-1982, the proportion for housing

investment has increased from 20% to 25.4%.6

It should.be mentioned, though, 83% of the state’s housing investment goes
to state-owned danwei housing. But, capital funds for housing building
are offered not only by the state but also by factories, schools and other
organizations which are encouraged to build houses with their own funds.
Furthermore, encouragement and help is given to workers and other city
dwellers to build their own homes. This method is called "building houses

for private use with state assistance".

China, like other developing countries, is trying rapidly to
industrialize her economy, the pursuit of which inevitably increases the
overall demand for urban housing. The State Housing Bureau Chief in 1983
estimated that in order to solve the urban housing shortage problem in

China, 34.5 million apartment units would have to be built each year for

8

10 years from 1982 onwards. This would require enormous investment on the
part of the government. According to the China’s Statistical Yearbook of
1981, the proportion of total capital construction funds allocated to the

urban housing sector has shown a significant_inpreaseLias shown in Figure;

% OF CONSTRUCTION FUNDS
ALLOCATED IN URBAN HOUSING

 

\-

 

N
4:.

/

 

l0

 

 

C)

 

 

,/
/
/
/

1976 1937 19'75 _ 15579 1630 1981
year

 

AAA—5mm
A0703

 

M

 

—L
O

7. of Capital Construction Funds

 

(I)

 

 

 

Source: Yok-shiu f. Lee."The Urban Housing Problem in China." China

Quarterly, Sept. 1988. p.400

But even with these increases in investment funding, only 16.0 million
apartments units were built in 1980, satisfying only about 46 percent of
the estimated demand for that year. It would appear that more than just
an increase in housing investment is needed to alleviate the urban housing
problem. It is caused not only by a bias in the investment policy, but
also by the low-rent policy and rising housing standards. Low rent
policy is a difficult issue which will be discussed later while the issue

of rising housing standards is discussed here.

9

Simply better standards translate into higher construction costs, given a
tough or slow-growth housing investment budget, the increase in housing
units has constrained or even diminished at times. Since the early 1970's
standards of design and building materials , as well as the quality of
construction and finishing , have gradually been improved. For Another
important standard for urban housing that was repeatedly upgraded from the
early 1970's to the early 1980's was the construction floor area per

residential unit as shown in table 1.

table 1.
.National Standards for Construction Floor Area Per Residential Unit in

Urban Area (in square meters)

 

urban area(in sq.m)

Year national standards for construction

floor area per residential unit in

 

 

 

 

 

 

1972 34

1973-76 34-37

1977 38

1978-80 42-45 type I
50 type II

1981-82 42-45 type I

 

45-50 type II

 

60-70 type III

 

80-90 type IV

 

 

 

Quarterly. p. 395.

 

W .T
Yok-shiu. F. Lee. " Urban Housing Problems in China" in The China

10
According to Lin Zhiqun, chief of the State Housing Bureau, construction
costs of urban housing increased steadily through the mid 1970's and
climbed even more rapidly in the early 1980's. Between 1972 and 1982 the
construction costs per sqg meter for urban housing rose by 135.82 per cent

as shown in figure 2.

Construction Cost Per Sq. Meter.
for Urban Housing (in yuan)

 

160

 

14o

 

 

 

 

 

 

6°'\./

40 I W I f I I I I I I I I
52-57586263-6566-70 72 73 76 78 79 80 81 82
Year _ I

 

 

IYok-shiu F. lee. " Urban Housing Prolems in China". The China
mayhem-p.397.

This factor coupled with an expanding construction floor space per housing

unit, resulted in a. substantial increase in ‘the' cost of each new

11

residential unit. This has clearly contributed to the slow growth in the

supply of new urban housing.7

On 24 May 1986 the State Council issued a set of "Guidelines of Technical
Policy Concerning Urban and Rural Housing development ". The First
guideline in this document stipulated that " strict control" would be
placed on housing standards of dwellings:

For urban housing developed with state or collective investments in the (
1980's ) average floor area for each dwelling unit should be strictly
controlled within 50 sq. meters and respectively control criteria should
be worked out for the facilities and finishing as well as for

investment.fl

The present government led by Deng Xiaoping acknowledged
peoples'complaints, admitting 'that people's living' quality' had. been
neglected. During the winter of 1978-1979, China’s leaders undertook a
profound reappraisal of the Chinese economy--its success, failure, and
future prospects. By the end of 1985, they had discarded the widely
heralded Ten Year Economic Plan (1976-1985), which was only formally
unveiled in February, 1978. In its place they adopted a drastically
revised set of developmental policies, designed to cope with problems not
usually associated with China: unemployment, declining housing standards,
and hunger. The new ”readjustment" approach, which curtails the rate of
investment and raises the priority of agriculture, light industry and

housing, has proved initially. 9

Furthermore, after much uncertainty with respect to both the future of
China's reform program and its ability to control runaway growth, the 13th
Party Congress in 1987 proclaimed China to be in the "primary stage of
socialism", allowing flexible interpretations of reforms. So while

individuals have seen impressive increases in their incomes with reform,

12

further increases in living standards are likely to be more moderate.10

IV. City, Neighborhood and Public Service

Chinese cities are productive entities; urban neighborhoods are
heterogenous in class status and self-contained functionally and amenities

are usually better than that of other developing countries.

The nature of Chinese cities has tended to change from consuming to
producing. In old China ( before 1949) the levels of production were very
low. Many cities and towns were essentially consuming, dilapidated, and
parasitic in nature. Modern industry was non-existing in many cities and
towns; the small and medium-sized cities were almost invariably consumer
societies with little industry and fewer than 20% of the residents in
Since 1949,

employment. the original commercial consuming cities‘and

towns, under the gradual process of reform, have become industrial-

commercial cities and towns. The industrial production of all cities in

the country has been multipled many times.11

The following table shows the high employment rate and high employment in

industry sector in Chinese cities.12

Table 2. COMPARISON OF SOCIO-ECONOMIC STANDARDS OF THE 15 LARGEST CHINESE

CITIES AND MAJOR CITIES IN THE ASIAN PACIFIC REGION, 1981

 

 

 

ave.1 Tokyo singa Hong Taibe Bangk Metro
5 pore Kong 1 ok -Mani
Chine metro la

se polis

citie

s

 

 

 

 

 

 

 

Seoul

 

 

13

 

Population

 

 

 

 

 

 

 

 

population per
10,000 persons

 

 

 

 

 

 

 

 

2,980 11,64 2,440 5,150 2,270 5,150 5,930 8,680,
,000 0,000 ,000 ,000 ,000 ,000 ,000 000
Total 1,814 2,155 618 1,064 272 1,565 636 605
f areas(km2)
' Total area per 6.1 1.9 2.5 2.1 1.2 3.0 1.1 0.7
10,000 persons
Employment:emp 5,261 4,882 4,565 4,664 3,474 3,701 3,647 n/a
‘ loyed
; population per
5 10,000 persons
, Manufacturing 53 23 30 41 23 19 28 n/a
. industry:% of 2,777 1,146 1,388 1,922 784 696 1,027 532
total employed
population per
10,000 persons
e, retailing_ 6 29 22 19 32 22 14- n/a
and 336 1,394 995 895 1,127 801 507 513
restaurant:
total % of
employed

 

 

14

 

Vehicles: n/a 2,337 1,616 636 2,599 1,085 716 266
Number of
registered
motor vehicles
except buses
per 10,000

persons

 

Number of 4 13 28 11 23 26 10 17
buses per

10,000 persons

 

' Education: 142 396 152 113 n/a 180 883 272
Number of
students in
higher
education
institutes per

10,000 persons

 

Health: Number 57 109 40 42 39 47 61 13
of hospital
beds per
10,000 persons

 

 

Number of 45 18 9 8 14 9 n/a 10

doctors per

10,000 persons

 

 

 

 

 

 

 

 

 

w
Source: Victor F. S. It. 1985. Chinese CItIe__s: The Growth 9f the

Mgtropglis Since 1949.p. 47

For example, in Beijing, 1980, industrial investment occupied 70% of the

total construction investment, and within the industrial sector, 90% was

 

15

in heavy industry. Of the industrial output value in 1980, heavy industry
contributed 64.5%. 80 "heavy" a structure is uncommon among the world's
capitals. In consequence, urban population increased rapidly, followed by
excessive traffic, a.polluted.environment , shortage of water, pressure on
energy supplies, and other economic and social problems. w New housing

simply has failed to keep with the influx of new residents into cities.

But it is interesting to know that Chinese urban housing still does not
compare all that unfavorably with housing in many other developing cities
where large squatter tracts mar the urban landscape. In our mid-1970's
sample, the number of rooms per dwelling in China was only slightly below
the average of that of other developing cities. But in Chinese cities
there were fewer dwellings with just one room. And with birth control
taking effect and fewer persons per household, the number of persons per
room and the percentage of dwellings with three or more people crowded

into a single room were no worse than in other developing societies.

Moreover, some of the housing amenities in Chinese cities were
considerably better than those in other developing cites. Chinese
urbanites werezmuch.more likely to have piped water and electric lighting.
Though they didn’t always have a kitchen for their exclusive use, by
sharing with other families in the same building they did better than
residents in most developing cities.“ The following data is not update,

but it still gives people some sense of happens.

 

 

 

Table 3. Urban Housing Conditions in Selected Countries
_
URBAN HOUSING CONDITIONS IN SELECTED
COUNTRIES
CHINA (MEAN) OTHER DEVELOPING COUNTRIES

(MEAN) (RANGE)

 

 

 

 

 

16

 

Size and Density

 

1. Average rooms

per dwelling

2e0-3e3

 

2. Dwellings with

only one room

18%

31%

9-52%

 

3. Persons per

room

2.8-1.4

 

4. a.Dwellings
with 3 or more

persons per room

24%

27%

50-16%

 

b. Dwellings with
less than 1

person per room

18%

31%

9-52%

 

5. Persons per

household

5.3

4.0-6.5

 

Amenities

 

6. Piped water

inside house

62%

43%

4-88%

 

7. piped water
inside house or

within 100 meters

79%

67%

23-94%

 

8. Electric

lighting

99%

64%

4-96%

 

 

9. Kitchen

 

72/93:

 

79%

 

61-100%

 

 

17

 

 

 

10. Toilets 18/29% 88% 67-99%
11. Fixed bath or 23% 40% 4-85%
shower

Ownership

 

 

   
  

12 . Owner- 42% 56% 47-74%

occupied

 

 

 

 

 

 

 

Martin KIng an: Wilfiam L. Parish. 1983. m
gontempgrary China. p. 77.

   

Source: W yte,

Some characteristics of Chinese housing need to be discussed.
Neighborhood heterogeneity is one of them. The bureaucratic
administration of housing has a number of significant impacts on the
social organization of large cities. IFirst, stable neighborhoods.persist.
With such a cramped housing supply and allocation through slow-moving
bureaucratic channels, the rate of residential mobility within Chinese
cities has remained low. Second, local areas within Chinese cities do not
take on the class and ethnic-segregated characteristics common in cities
in other societies. Rents are so low and so minimally differentiated by
income that they play only' a. minor role in sorting people across
neighborhoods by income. Personal preferences, as indicated , have a
very small role, while bureaucratic criteria emphasize things like the
type of work unit, seniority, and family size, rather than income,
ethnicity, or similar criteria. The.resulting pattern is not one of
completely homogeneous neighborhoods and.housing, but the differences that
are visible tend to be more related to work units than to class or
ethnicity. Chinese cities have in effect working class neighborhoods
where large industrial enterprises ( with their attached employee housing
) are located; they have distinctive and generally nicer than average

housing in areas where universities, larger administrative and party

18

offices, and military units are located; and they have the mixed
neighborhoods which house people from a variety of work units. Some of
the latter are quite old and decrepit. Many cities have special" Overseas
Chinese New Villages", which are urban neighborhoods set aside for the
detached.private1y owned.homes financed by overseas remittances. So some
classlike distinctions among neighborhoods exist. Still, onibalance, most
urban areas are fairly mixed. For example, a factory party secretary,
factory engineer, and factory canteen cook may all live side by side in
the same building. Thus, we would still judge the housing conditions in
China to be more equal, and the neighborhoods more heterogeneous in social
status, than they would have been in a society where market forces and
personal preferences predominated. This distinction also fear about
falling property values, flight to the suburbs, and slum creation and
residential succession, which are the common patterns in American society.
The contrast is not a total one, but generally Chinese urban neighborhoods

are both unusually stable and unusually heterogeneous.”

Self-Contained Housing and Neighborhood Servicefi is another character in
Chinese cities. In housing planning, Chinese planners follow closely the
concept of self-contained neighborhoods. Many new housing estates are
located in closeTygproximity to large industrial areas or other centers of
employment to minimize the problem of journey to work. Many Chinese
planners feel that ideally the journey to work should not take more than
thirty minutes by bus or bicycle. The construction of self-contained
communities is viewed as a fundamental way to solve the problem of urban
traffic congestion. In order to achieve this goal, services are provided
in the planned residential communities. In Beijing, for example, efforts
are made by planners to provide all the daily necessities to the residents
of new housing areas so that no one has to go more than 200 meters (660
feet) to obtain daily goods. Such efforts, however, do not confine the

residents’ shopping to their own neighborhoods. Shopping is also done by

19

residents on their way home from work at stores located along the

thoroughfares.

Many housing estates are quite large within which a variety of services
are provided. At the Caoyang Workers' Estate in urban Shanghai where
most of the workers are employed by textile factories nearby, educational
services are provided by eight middle schools, nine elementary schools,
and seven kindergartens, eight nurseries, and a bookstore. Among the
commercial establishments are aidepartment store, grain stores, small food
markets, barber shops, candy stores, and photostudios. Other services
include a bank, a cinema, a post office, two clinics and twelve health
stations, parks, a cultural center for reading and exhibition, and a
swimming pool. The number of shopping trips made by the residents to
larger commercial centers in other parts of the city is undoubtly reduced,

lowering the burden on the heavily used public transit system.

The function of the workers's housing area at Caoyang is not exclusively
residential with only basic services. The estate also runs a total of 23
small assembly factories and processing workshops producing such light-
weight consumers products as toys, fountain pens, clothing, cans,and
watches. Together the workshops employ over 3,000 workers, most of whom
living in the community. Some young people who are handicapped or
otherwise physically unfit for work which requires physical strength are
also employed. Similar workshops are found in the Fengsheng Neighborhood
in Beijing, where six small factories produce insulating'materials, rubber
products, clothing, and cardboard boxes. Between 80 to 90 percent of the
workers and staff are women, most of whom live within a walking distance

of less than fifteen minutes to the factories.

Observant Western visitors to China have noted that commercial

establishments in the cities are few and hence wondered how the daily

2O

goods needed .by the urban population are supplied. The demand for
consumer goods in China is low, a fact which may explain in part the low
level of commercial services visible on the street. A more basic reason
for the low visibility is that there are large numbers of small
neighborhood stores and service centers located in back streets and side
alleys that cater to the needs of the urban residents. These stores are
not managed by the city or the state, but by neighborhood residents under
the supervision of the neighborhood committee. Three kinds of service
establishments are organized by the residents on behalf of state
commercial agencies: general stores where daily goods and foods are sold,
including grains and cooking oil which are rationed; neighborhood

restaurants; and recycle stations collecting reusable materials.

Known collectively as sandaudan (literally, three types of ) consignment
stores, these widely distributed service establishments are found in.many
cities, including Beijing, Tianjing, Wuhan, Qingdao These small
service centers at the urban neighborhood level function as consignees of
the state and bring much of the needed goods and services to the
residents. Simple in physical structure, such services are built by the
residents themselves with limited financial support from the district and
city governments. A center usually built in a few days with less than 30

yuan, and it is usually staffed with only a few persons.

The fees of consignment paid to the state are low, fixed at 4 percent on
the gross sale of goods, less than 6 percent on the sale of vegetables and
7 percent on the value of the used materials purchased to be recycled.
The state allows a 0.2 percent monetary loss of goods damaged and a 3
percent loss for vegetables, all of which is calculated at the end of the
month. Restaurants and other eating places operated at the neighborhood
level are allowed a return of between 60-70 percent of net earning,

perhaps because of their need for qualified workers who must be paid

Ct
i

21

higher wages.

The prices of goods and services at these small firms are the same as
those in state stores, but no neighborhood store is allowed to cater to
the needs of any agencies which often purchase goods in quantity. All
operating costs are borne by the local stores, to which the state
enterprises occasionally provide management guidance. Most of the
neighborhood store workers are women in their forties and fifties, whose
wages are determined on the same basis as those working in other
neighborhood establishments. In some cases, wages are calculated on the
basis of work.points with fixed upper and lower limits. Normally about 70
to 80 percent of the net income of a store is distributed as wages, and
the remainder goes to the neighborhood committee and public funds. These
funds can be used to cover business losses, for store improvement, or for

the welfare programs of the residents.

The collection and purchase of reusable materials in Chinese cities are
done more systematically than almost any other society. Old newspapers,
bottles, cans, metal scraps, furniture, clothing and other used items are
collected at neighborhood consignment stations or by their mobile units.
Over a period of ten years, a station with 20 employees located on Xinghua
Street, Changyi District in Jilin City, Jilin Province, collected 646,000
yuan worth of materials from neighborhood factories and households for

recycling.

It should be reemphasized that the neighborhood store offer merely low-
order daily goods and services. These services, like the small
neighborhood industrial workshops mentioned earlier, are an integral part
of the Chinese urban scene. They are a major feature of the self-
contained neighborhood, a concept which China's urban planners espouse in

the planning of their cities. The presence of industrial and commercial

22

establishments in almost all residential areas in Chinese cities contrast
sharply with the lack of such activities in most of the residential
neighborhoods in American cities. It should be pointed out that because
of their small scale, these industrial and commercial establishments have

little negative effect on China's urban environment.16

Height of New Housing is a visible characteristic. Faced with an
expanding urban population and a serious housing shortage, Chinese city
planners have long recognized the necessity to maximize the use of urban
space for housing construction by increasing the height of buildings. At
present the amount of urban space used for new residential housing
construction generally accounts for about 50 percent of the total

construction space.

In the last two decades new housing has witnessed a steady increase in
height. Prior to 1958 most of the new residential buildings did not
exceed three stories. In the 1960's the height of the majority of new
housing was increased to three or four stories, and in the 1970’s to five
to six stories. It is unlikely, however, that the height will increase
further in the immediate future, except for tourist hotels which are to be
built with foreign capital. The State Capital Construction Commission has
recommended that the optimum height of new housing in large cities should
not exceed five or six stories whereas in medium-sized cities it should be
limited to four or five stories. It may be noted that in Beijing a
typical newly constructed five-story'building contains fifteen.apartments,

three in each floor.

The recommendations of the State Capital Construction Commission were made
essentially on the basis of cost. Three major factors of cost were

considered by the state. First, the construction of five or six-story

23

buildings were found to be most economical. The main reason for this lies
in the savings in foundation and roofing cost. Buildings exceeding six
stories usually require changes in structural design which would
necessitate a large increase in construction cost. According to the data
collected in Beijing and Shanghai, the per sq. meter cost of constructing
twelve-story residential buildings of medium quality is about twice as
high as that for five or six-story buildings, the cost for reinforced
concrete per sq.meter being 2.5 times higher. Similarly in Beijing and
Guangzhou the construction cost of "tall" buildings, presumably referring
to those higher than six stories, is 80 percent higher than that of five

or six-story ones.

The second factor is related to the savings in installing elevators and in
water supply. These two costs account for about 10 percent of the total
construction cost for five and six-story buildings, as against 15 to 20
percent for taller buildings. In addition, urban residents readily accept

dwelling units in buildings of less than six stories without elevators.

At the present time water pressure in most Chinese cities can deliver
domestic water to neumore than six stories without additional pumping, and
in some cities to three or four stories only. To increase the height of
buildings on a large scale would of course require a change in the city's
water supply system. 'Thirdly, the construction of large and 'tall '
buildings simply is not feasible in many densely populated urban areas
where the streets are narrow. Such a construction would lead to a still
higher population density and toimore congestion. Some streets would have
to be widened to accommodate the expected increase in traffic, and act

which would cause many existing dwellings to be demolished.

It has been estimated by the State Capital Construction.Commission that if

60 to 70 percent of the one-story housing units now in existence could be

“‘4’

24

replaced by five or six-story buildings, then the same amount of land
would add 40 percent more housing space to the housing stock. In view of
the cost and other factors, it can be expected that most of the new

housing will be limited to five or six stories in height."

V. Politics in the Process of Housing Commercialization

It is obvious that main problems of housing are the shortage of urban
housing and the fact that rents in public housing are kept so low that
they do not provide enough funds for even routine maintenance. ( Rents are
said to constitute only 1 to 3 percent of urban wages, on the average, and
to cover only about 29 percent of the costs of housing upkeep.) But how
to change the situation is still an issue. If reformed, rents for
existing housing are to be gradually increased and adjusted to account for
the amount of floor space; residents will be encouraged to purchase their
apartments; and rents or purchase prices for new apartments will reflect
the building and maintenance costs. While these proposals are designed to
deal with the serious housing shortage, they will also lead to substantial

increases in monthly expenses for urban residents.18

During the year of 1984, it was announced that the experiment in selling
urban housing to individuals, began in four cities two years earlier, was
now being extended to eighty cities. Generally the housing is built by
the state or enterprises, but is then sold to urban families, thereby
capturing more private funds for use in construction and giving individual
owners a personal stake in building upkeep. The shift also entails the
emergence of a sort of mortgage market, since part of the funds are
borrowed from banks or work units and repaid over time. But the amount of
housing involved in these private sales is still extremely small. For
instance, the housing sold privately in Shanghai is enough to house only

about forty thousand of the city's more than seven million people.

25
However, the housing squeeze has been eased somewhat in China’s largest
cities, with available housing space reported to have increased anywhere
from 5 to 25 percent since 1978. But this improvement occurred largely
through the traditional mechanism of a state and enterprise housing
construction drive, rather than through the new private housing

experiments.

Practical consequences of commercialization are still appealing; If urban
housing is sold to individuals, a much larger part of the initial state
investment can be recovered. And when the proceeds from the sale are
reinvested in the housing sector, the initial investment money is
multipled, in effect adding to the total amount of housing investment and
increasing the rate of housing construction without deepening the state's
financial burden. The gradual increase of rents can also relieve much of
the state's burden of subsidizing huge maintenance and repair costs. The
net result of .the commercialization scheme is that the urban housing

sector could become financially more healthy and self-sustaining.

The reformist planners' scheme is not wholly acceptable to the Chinese
Government. It basically demands: 1. an increase of rents 2. the sale of
housing to individuals. But to date the government has only re-instituted
a restricted experimental market for urban housing; it has not raised
rents. The reasons for the government's reluctance in implementing the

commercialization scheme are political rather than economic.

The sale of urban housing received official blessing in June 1980 when the
State Council announced that urban residential units should gradually be
commercialized. From mid 1983 to the end of 1983, 1,746 residential units
were sold to individuals in these four cities. what is interesting to
note that the residential units allocated for individual purchase were

sold at prices lower than their investment cost. Each individual pays

26

one-third of the total construction cost of a residential unit , the
government and the buyers' work-unit providing an equal share of the
outstanding balance. For, example, if the construction cost for a
residential unit with 15 sq. meter floor space is 10,800 yuan a worker
buying this unit would have to pay 3,600 yuan, with the government and
his/her work unit each subsidizing 3,600 yuan. That is, only one-third of
the initial investment can be recovered through the subsidized sale
program. Therefore, in the four cities, 13.3 million yuan, 3.89 million
yuan were recovered for reinvestment in housing. In October, 1984 this
scheme was officially extended to more than 80 cities. In 1985, 5 per
cent of Shanghai's new housing stock and 20 percent of Beijing's were set
aside for subsidized sale to individuals. By August 1986 the subsidized
sale method had been extended to more than 160 cities and 300 counties

throughout the country.

The most obvious advantage of the scheme is that one-third of the initial
investment can be recovered and reinvested to build more new houses.
Advocates of the commercialization scheme also point out that the state
will save money in the future because it will no longer be responsible for

maintenance and repair costs private housing.

While the ChineserGovernment has proceeded carefully on a limited basis in
permitting the sale of housing, it has not yet attempted to adjust or
restructure the rent subsidies. Even in 1985, several years into the
government’s campaign to resolve the urban housing problem, a study of
Shenyang’s housing showed that a huge discrepancy still remained in that
city between average maintenance costs(3.00 yuan per sq. meters) and

rental payments(0.95 yuan per sq. meter).

The government's failure fully to implement the commercialization scheme

can easily be explained: whereas the sale of a limited number of new

27

housing benefits some well-off households and provides an alternative to
the hardest-hit households without really hurting anyone, a rent increase
or a restructuring of the rent subsidies would require a total
rearrangement of the economic system, and the beneficiaries of the old
system‘would.be adversely affected” Rents are politically charged subject
in China. Stable rents, like stable food and commodity prices, are
considered paramount in preserving the overall economic well-being of
China’s population. Needless to say, the deep-seated fear of inflation
has also kept rents low. Therefore, despite a long and extensive
discussion on the subject to date no decision has been reached. The
housing inequality problem that stems partly from the rent subsidies thus

remains largely untouched.19

Analysts have attributed the country's near stillborn housing reform
scheme to the difficulties which have proven to be far greater than what
have been expected by the housing reform program designers. They believe
the obstacle blocking China's housing reform has been mainly caused.by the
following four problems:

1. People in China have become used to the 40-year-old low rent system ,
so local governments, enterprises and individuals have found it very hard
to accept the sharp hike in their rents as envisaged by the reform program
designers.

2. China is a country with a vast territory. Large, medium-sized and
small cities around the country all have their unique conditions.
Therefore, it is almost impossible to implement the same housing reform
program in all these cities.

3. Government officials usually living in better and more spacious houses
are not very interested in housing reform.

4. In the past, Zhao Ziyang made more instructions regarding housing
reform.than other leaders. Today, most local government officials are not

sure whether Zhao's instructions are still valid since he no longer holds

28

his office.

More importantly, housing, which has all the property of a commodity, has
long been related to power, social status, vested interest and has even

been used as an illegal means for personal benefits in China.20

Today China is talking about housing reform again. In a government
statement dated January 2, 1992, it speaks of the goals of housing reform
for the 1990's. The statement under the name of "China push Urban
Housing Reform-- Ministry of State Housing Reform Committee Developed
Specific Opinions about the Reform" says:" 1. The goal in the period of
the Eighth Five-Year Plan (1991-1995) is: to change the low rent, no-
return allocation, reach the three elements of simple reproduction ( cost
of maintenance, cost of management, cost of deterioration). Gradually

increase the family spending on housing.

2. Ten year goal. By the year 2000, the standard of rent should reach the
five elements ( costs of maintenance, cost of management, cost of

deterioration,investment interest and real estate tax).

3. Long term goal. The standard of rent will include eight elements(
besides the above five elements, the cost of land use, insurance and
profit). Develop the market of real estate, improve housing financial
system, complete the change of system of housing as a commodity, realize

the commercialization and socialization of housing."21

VI. Conclusion

Can expanded government capital investment in the urban housing sector

eliminate the housing shortage problem? Can the government 's approval of

29

the sale of housing help solve the shortage problem?'{he answer is "no."
The shortage problem is the consequence of a biased state investment
policy , low rent policy and rising housing standards. To solve this
problem, therefore, readjustments in the rental policy, the investment
policy, as well as national hOusing standards are required. But as the
Chinese government have made some readjustment in investment policy and
housing standard, readjustment of rent policy may require the

rearrangement of the total economic system.

The increased rate of housing investment, however, still does not match
the estimated demand for housing. Moreover, this increased investment
comes primarily from the capital construction funds that were originally
earmarked for the upgrading and maintenance of industrial facilities.
Because the modernization program stresses improved efficiency and
productivity in the industrial sector, the urban housing sector could be
placed under increasing pressure to relinquish its share of the capital
construction funds back to the industrial sector. This means that the
state's commitment to the urban housing sector is not a stable, long term
policy. Increased government investment in housing can only be a short-
term remedy that provides temporary relief to the problem. There is
evidence to support such an argument: the proportion of total capital
construction funds allocated to urban housing declined from 25.5 percent

in 1981 to 20.1 percent in 1982 and down to 17.5 percent in 1983.22

Readjusting housing standards can also have a significant effect on the
supply of housing. According to one estimate, if the state were to build
100 million square metered of urban housing, a reduction of each unit'
construction floor area by eight meters, would add an additional 300,000
units to the nation's housing stock. The view of some Chinese planners is
that the national standard on construction floor area per unit should be

set at between 45 to 50 sq. meters. Such a reduction would permit a

30

living floor space per capita. of between 5.6 and 6.3 sqp meters,
considered comfortable by current Chinese standards, and for this reason
politically easier for the government to adopt."’3 But restriction of
housing standards will alleviate only a small portion of the housing

shortage problem.

Only by increasing rents can the urban housing sector become self-
sustaining. But the decision to implement any increase involved would be
a political one and thus difficult for Chinese leaders to take. As the
Communist world has changed recently, stability is the most important to
the Chinese government, the leaders are trying to make the population
happy. By increasing rents, the government would upset many people. Also
right now the government does not have money to increase incomes to
compensate rent increase, because one should know, even with the existence
of private enterprises along with the economic reform, state-owned
enterprises still provide most of the employment which depend on the
government to pay the salaries. Also, those benefit from low rent policy
are usually those who occupy large housing space and most reluctant to see
any changes. That is why there is still a lot of talking but not much
practice about rent reform. But the Chinese Government does not seem to
have other choice than to increase rents gradualky to at least cover

costs, although how to implement it is still a question.

It seems the government subjectively would like to see rent increase as a
transition to private ownership of housing as the leaders allow other
private businesses to flourish. The main reason private housing
development is not popular is that, the political system still controls
construction materials; freedom for private housing or any kind of private
development is very limited. Thus, Chinese regime may be able to continue
the current fashion of legitimization in its attempt to bring about

economic progress or allow some private housing without lifting political

31
oppression for the time being. But the Chinese politicians and
policymakers must realize that in the long run political freedom is a

prerequisite to successful economic and housing reform.

32

FOOTNOTES:
1. Laurence J. C. Ma. "Urban Housing Supply in the People's Republic of

China", in Laurence J. C. Ma and Edward W. Hanten, edited. 1981. Urben
__geyeletmegt_tn_gegetg_ghtee. Boulder, Colorado. Westview Press. p.222

2. Shunzan Ye. " Urbanization and Current Regional Development Planning in

China", in R. Diamond Derek, Karlheinz Hottes and Chuan-chun Wu,

edited. 1984. Regionel Plegning ig Qiffetent Political Systems-- the

1 1::: = ' - ' - ::-' o: - - e ngt'ona M=e i 9 on '=- '!3
Devetepmentl Theoty and Erectice, held in Beijing, P. R.C., March 29-
April 5, 1983. Bochum. p.15.

3. Laurence J. C. Ma. ibid. p. 223.

4. Nicholas R. Lardy. " China's Economic Readjustment: Recovery or
Paralysis?", in Robert B. Oxnam and Richard Bush, edited. h na

Etiefing. 1980. p.41.

5. ibid. p.40.

6. Shunzan Ye. ibid. p.6.

7. Yok-Shiu F. Lee. " The Urban Housing Problems in China", in The Chiga
___Qgettetly, September, 1988. p. 396.

8. Shunzan Ye. ibid. p.7.

9. Nicholas R. Lardy. ibid. p. 39.

10. Anthony J. Kane. thne_§ttetingt_;2§§. Westview Press. Boulder and

London. p.34

33

11. Shunzan Ye. ibid. p.5

12. F.S. Victor It. 1985. thnese gitie : The Growth of the Mettopelis
Siege 1949. Oxford University Press. Oxford, New York, Hong Kong.
p.47.

13. Chuanjun Wu. ibid.p.25.

14. Martin King Whyte and William L. Parish. 1983. Urban Life in
Cohtempotaty Chine. The University of Chicago Press. Chicago and
London. p.76.

ISOibidO p.90

16. Laurence Ma. ibid. p.222

17. ibid. p.223

18. Anthony Kane. ibid. P.34

19. Steven Goldstein. China Briefing, 1984. Westview Press. Boulder.
p.51

20. Man Luo. "China Resume to Housing Reform", in China Market , no. 6,

1990 .P.7.

21. Chinese government statement, in People's Daily, Overseas Edition,

January 2, 1992. p.1

23. Chuan-jun Wu.

ibid.

P.

23

34

35

BIBLIOGRAPHY

BOOKS:

Derek, R. Diamond, karlheinz Hottes and. Wu-chuan-chun. edit. 1984.

hegional Plannihg in Different Political Systems-- the Chineee Settihg
- =‘°.1°: 0 t ' 1 ‘,1a “-29 x‘t 9 O! 1‘0 ona Dave 00 -n 1‘-

§£§_2££EE122 Held in Beijing, P.R. C., March 29- April 5, 1983. Bochum.

Goldstein, Steven M.edit. China Briefing. 1984.

Kane, Anthony J. edit. ghihe_flttefiihgy_lg§§. Published in Cooperation

with the China Council of the Asia society. Westview Press/Boulder and

London.
It, F. S. Victor. 1985. C ' C t’es: Gr h o h 's
ethee_1212y Oxford University Press. Oxford, New York, Hong Kong.

Ma, Laurence J. C.and Edward W. Hanten. edited. 1981. Urban_nexelenment
;h_hegeth_ghthe. Boulder, Colorado. Westview Press.

Oxnam, Robert B,and Bush Richard, edit. Chiha Briefing, 1980.

Whyte, Martin King and Parish, William L.. 1983. Utheh Life ih

gohtemeetery thne. the University of Chicago Press. Chicago and London.

ARTICLES:

Friedman, Beatrice 8.. "Public Housing in China: Policies and Practices"

, in gohrhal of heusihg, May/June, 1983.

Lee, Yok-shiu F. " The Urban Housing Problems in China", in The Chiha

36

QBQILEILY: September 1988. pp.388-400.

Lim, G-c and M-H Lee. " Political Ideology and Housing Policy in Modern

China”, in 1990, volume

 

8. pp.477-487.

Kim, Joochui." China's Current Housing Issues and Policies ", American

Elanning_A§aesiatien_Ieurnal- Spring. 1987. p- 220-

Lardy Nicholas R. "China’s Economic Readjustment: Recovery or Paralysis?
” Oxnam Robert B. and Richard Bush. Chiha Briefing, 1980. p. 39.
Luo Ma: " China to Resume Housing Reform”. thhe Magke , No 6, 1990

Ma, Laurence J. c. and Edward W. Hanten. " Urban Housing Supply in the

People's Republic of China. Ma, Laurence J.C. and Edward W. Hanten, edit.
1981. Utheh Development in hodeth thhe, Boulder, Colorado. Westview.

Wu, Chuan-Jun. " Urban Planning Problems in Beijing",in Derek r. Diamond,

Karlheinz Hottes and Wu chuan—chun, edit. 1984. Regional Ptanhing in

I',.‘ 2 PO it'cal =t‘uS-- e C i =:‘ Ttt 9 'r- ‘:-_19= 0. t!‘

r 0 a1 eetin on on 1 evelo nt lannin T
gteettee Held in Beijing, P.R. C. 29 March- 5 April 1983. Bochum.
1/2/1992

Beepte's Qaily. Overseas Edition. p.1

Kin Hua.News Agency Report. "China.Enhance Urban Housing Reform-- Ministry
of State housing reform committee developed specific opinions about the

reform".

Ye, Shunzan," Urbanization and Current Regional Development Planning in

37

China", Institute of geography, Chinese Academy of Sciences.

Oxnam, Robert B,and Bush Richard. edit. China Briefing,1980. pp.5-15.

 

 

 

 

 

 

 

 

IIIIIIIIIIIIIIIIIIIIIIIIIIII

1293 02656 8869

 

e
. .
.. .
u.
. . . .
. .
. e~ .
s . .
.e . .
e
e
.
a .
. s . .
s 1
e
a .
s
. . .
,.
. u
. o .
s
_ . .
_ .
. 1 .
. n.
e
‘. ' ' .
. .
. u
. .
. e
o u
no u .
. .
. . e .
. . .
- -
~
s .
. s ‘.
4 s
.. .
s
.s . - .
~ - ‘
. . .