Socioeconomic Transformations in Shanghai

Socioeconomic transformations in Shanghai (1990–2000):
Policy impacts in global–national–local contexts
Zhigang Lia and Fulong Wu , b,
a
Centre for Urban & Regional Studies, Department of Geography, Zhongshan University, Guangzhou, 510275,
China
b
School of City and Regional Planning, Cardiff University, Cardiff CF10 3WA, Wales, UK
Available online 15 June 2006.
The thesis of social polarization in the global city has been debated for a decade, though there are few studies
of cities playing major global roles in developing countries in general and cities in transitional economies in
particular. This paper investigates the socioeconomic transformation of Shanghai, an emerging global city in
China. From 1990 to 2000, a significant loss of occupation occurred within manufacturing, especially in State
Owned Enterprises (SOEs), while it increased mainly in the producer service sectors, and the tertiary outgrew
the secondary to become the largest sector. Nevertheless, neither polarization nor professionalization, as seen
in cities in the West, is identified, although the trend of increased socioeconomic disparity is found. Social
stratification is not only impacted by economic globalization but also driven by state policies. Income disparity is
increasing and human capital is seen to be increasingly important. The state is inextricably involved with the
market in determining final outcomes. As a result, two groups are expanding in the social structure: globally-
oriented skilled labor at the one extreme and rural migrants at the other. The unique socioeconomic outcome of
Shanghai underscores the complicated interactions between globalization and local politics. It highlights
differences between globalizing cities with different functions as well as political and economic legacies.
Keywords: Globalization; Shanghai; China
Proceedings of the 15th Annual Conference of the Association for Chinese Economics Studies Australia
(ACESA)
Economic Globalization and Foreign Direct Investment in Shanghai
XIE Kang1
Shanghai Academy of Social Sciences
&
WANG Shouzhen
PhD candidate, Xi’an Jiaotong University
ABSTRACT
Economic globalization is a process of developing closer economic linkages and interconnections among
most of the states and regions of the world and explains the widening scale and degree of cooperation in
the world economy.
The major economic characteristics of globalization are trade liberalization, financial securitization and
production integration, the latter being the most fundamental. By means of Foreign Direct Investment
(FDI), multinational corporations (MNCs) have merged the national economies into the world market,
thus becoming the main body, the carrier and the organizer of integrated international production.
1 Correspondence to:
XIE Kang
Professor and Senior Research Fellow
Institute of World Economy
Shanghai Academy of Social Sciences
622/7 Huaihai Rd (M)
Shanghai 200020 P. R. China
Tel: 86 21 5306 0606 Ext 2471
Fax: 86 21 5306 3814
Email: xiesh-c@online.sh.cn
WANG Shouzhen
PhD candidate, Xi’an Jiaotong University
General Manager, Shenzhen Konsai Industrial Co., Ltd.
Zhong Shen International Mansion, Level 19
2068 Hongling Rd (M), Luohu District
Shenzhen 518008 P. R. China
Tel: 86 755 2586 9399
Fax: 86 755 2586 9933
Email: szwang@konsai.com Xie, K., & Wang, S., ‘Economic Globalization and Foreign Direct Investment in Shanghai’. - 1 -
(ACESA)
With the strategy of global production integration, more and more multinational corporations have
entered the Chinese market - particularly after China’s entry to the WTO. This economic watershed is
resulting in fierce competition among and between both domestic and international enterprises. However,
this increased competition in the local market is also helping local enterprises to improve their
competitiveness in international markets.
This paper makes a general survey of multinational corporations’ penetration into Shanghai since China
started its reform drive and open-door policy. The trends reveal that Shanghai will develop into a global
manufacturing base. Foreign enterprises in China will significantly enhance their economic efficiency
given that the localization of MNC operations in China is going on steadily and surely. Xie, K., & Wang, S.,
‘Economic Globalization and Foreign Direct Investment in Shanghai’. - 2 -
(ACESA)
Economic Globalization and Foreign Direct Investment in Shanghai
I. Introduction
Economic globalization has become an inexorable and irreversible trend since the end of last century. It is
an iterative process that results in increasingly closer economic linkages and interconnections among
most of the states and regions of the world, and towards the widening scale and cooperation in the world
economy.
The major economic characteristics of globalization are: trade liberalization, production integration and
financial securitization, among which production integration is fundamental (ZHANG, 1999). By means
of FDI, MNCs have merged national economies into the world market, thus becoming the main carriers
and organizers of international production integration.
With the strategy of integrating global production, MNCs have played an increasingly important role in
China’s economy. After China’s accession to WTO, even more MNCs will enter the Chinese market.
(Wang, 1996) This economic watershed is resulting in fierce competition among and between both
domestic and international enterprises.
As Shanghai is a popular city to begin FDI in China, this paper first makes a general survey of MNCs’
penetration into Shanghai since China adopted its reform and opening-up policy more than 20 years ago.
Second, the trend is revealed that under the strategy of MNC localization, Shanghai will develop into a
global manufacturing base. Third, the paper analyzes the reasons why the export competitiveness of
foreign enterprises in Shanghai is increasing. Finally, the conclusion is reached that within the framework
of the MNCs’ global network, the economic efficiency of foreign enterprises in China will be
significantly enhanced.
II. The Status and Characteristics of Foreign Enterprises in Shanghai
Since the reform and opening-up of China over 20 years ago, the coastal city of Shanghai has been a
leading city for FDI absorption and a strategic location for overseas investors when they enter China or
expand investment in China.
According to a survey, 400 MNCs of the Global 500 have entered China, 256 of which chose Shanghai.
Of those in Shanghai, 145 MNCs are located in Pudong and a further 25 well-established MNCs have
their Chinese or regional office set up in Pudong. More than 92 % of the MNCs are planning to set up
regional offices in China in the near future and 30 % of them consider Shanghai as their first choice,
while Beijing (15%) and Shenzhen (11%) rank second and the third (SFIC, 2002).
According to the statistics of the Industrial and Commercial Bureau of Shanghai Municipality (2000),
there are 365,000 industrial and commercial enterprises in Shanghai, among which 17,100 are
Xie, K., & Wang, S., ‘Economic Globalization and Foreign Direct Investment in Shanghai’. - 3 -
(ACESA)
foreign enterprises, 184,000 are state-owned, and 164,000 private. Of the 17,100 foreign enterprises, the
number of newly-established ones and their registered capital in the first half of this year increased by
44.7% and 106.1% respectively over the same period of last year. The number of enterprises with
investment amount s over USD10 million reached 73, a 97.3% increase over the last year, and those with
investment amounts over USD 30 million was 9. Most of the foreign enterprises have invested in such hi-
tech areas as electronics, integrated circuitry and computers.
Foreign enterprises in Shanghai have participated in the urban construction of Shanghai and made a great
contribution to its export-oriented economy. They have not only expanded the volume of export in
Shanghai, but also accelerated the optimization process of export commodity composition. In 1990, the
export volume of foreign enterprises was only USD 299 million, sharing 5.62% of the city’s total export
volume. In 2000, the figure reached USD14.26 billion, accounting for 56.27% of the City’s total (Xue,
2003). The foreign enterprises have become the largest exporters in Shanghai, as compared with the state-
owned and private enterprises. More importantly, of the hi-tech exports, 90% are produced by foreign
enterprises, which have become the main driver of Shanghai’s international competitiveness. The fact that
the IT industry has become Shanghai’s No.1 industry is inseparable from foreign investment.
With China’s accession to the WTO, the trade volume of foreign enterprises in Shanghai will increase
faster. According to the statistics of Shanghai Customs, the import and export value of foreign enterprises
through the port of Shanghai was USD 57.97 billion in 2000, a 49.2% increase over the last year and
accounting for 53% of the total import and export value of the port of Shanghai. The import value was
USD 30.16 billion (a 54.7% increase) and the export value was USD27.81 billion (a 43.6% increase), 5%
higher than the national average (Shanghai Customs, 2001).
The characteristics of the import and export business conducted by foreign enterprises through the port of
Shanghai in 2000 are as follows:
1. The growth rate of original trade was the largest and the percentage share increased further.
2. The growth of processing trade accelerated, accounting for over 60% of the total import and export
value.
3. The trade conducted by cooperative enterprises, joint ventures and foreign-owned enterprises all grew
rapidly.
4. The exports to major foreign markets kept rising.
5. The export of textiles and apparels grew with a fast pace and the import of industrial raw materials also
increased fast.
6. The import and export of electrical and mechanical products accounted for over 60% of the total trade
volume.
(ACESA)
III. Consequences of the MNC Localization Strategy
With a view to enhancing economic efficiency and international competitiveness in the process of
globalization, MNCs should not only consider the rational use and arrangement of their assets with
ownership advantage and the managerial skill with internalized advantage, but also the geographic
arrangement of assets (Xie, 1999). Under the circumstance of the increase and internationalization of
competition, the asset efficiency resulting from location advantages has become an important aspect in
MNC FDI strategy, particularly for the products at maturity stage of the product life cycle and those hi-
tech products to penetrate into the local market or peripheral markets of the host country.
The immediate consequence MNC localization strategy is the formation of its global manufacturing
network. This is a new type of integrated production system built by the MNC to raise its global
competitiveness, as well as to help the host country to establish a production base and increase
employment, government revenue and market sales.
Chinese enterprises’ engaging into the MNC global manufacturing network means that through tactically
establishing joint ventures with well-established MNCs, Chinese enterprises can join the MNC global
manufacturing network, from which it can obtain such resources as product, technology, export markets
and management expertise. While working for the MNCs, Chinese enterprises can join the international
division of labour in the process of China’s economic transition and industrial reconstruction so as to
enhance their own international competitiveness and operational capability.
With a market share of 10%, Ericsson is the third largest mobile phone manufacturer in the world, next to
Nokia and Motorola. Besides mobile phone, Ericsson also produces telecommunications network
equipment, which account for over 80% of its business (Chai, 1999).
With a staff of 4000 in China, Ericsson has set up 24 representative offices and 10 joint ventures. In its
global expansion strategy, Ericsson has actively brought the advantages of Chinese production, market
and talents into its global production and development programs. Their localization in China is a
component of its globalization. According to Mr. Xu Shi-ming, president of Ericsson Asia-Pacific Co.,
Ltd., in the next 5 years Ericsson plans to raise its investment in China from USD 2.4 billion to USD 5.1
billion, its annual export from USD 1.49 billion to USD 4.5 billion and its R&D and human resource
development expenditure from USD 290 million to over USD 572 million. Ericsson has become one of
the major partners to support China’s telecom industry in the field of R&D, purchasing, manufacturing
and sales (Shima, 2002).
IV. Export Competitiveness of Foreign Enterprises in Shanghai
One of the important characteristics of foreign enterprises in Shanghai is hi-tech intensiveness. The
technological import by those from the U.S., Japan and Germany has kept rising (Table 1).
(ACESA)
Table 1 Technical Import in Main Years ( in 10 thousand USD)
Contracted Value
Executed Value
Country
(Region)
1985
1990
1999
Total by the end of 1999
1985
1990
1999
Total by the end of 1999
Total
26370
14848
179912
981368
23628
15063
840296
Hong Kong
4619
1311
6865
70522
2263
1688
6767
51268
Japan
8883
3861
36181
246919
8165
2868
61956
265262
Germany
4540
893
32001
211301
4632
2925
45920
167074
Italy
1611
1003
2052
38033
924
1755
2547
28121
U.S.
3424
4448
56550
202542
3742
2226
60775
179544
Switzerland
526
638
2133
19339
1383
1060
2187
15836
U.K.
669
632
3240
19643
1214
667
3476
14182
Sweden
632
46
304
11862
262
576
496
7294
Austria
204
1322
686
21639
119
603
5970
17397
France
274
159
25073
43937
82
70
3907
20532
Note: 12664 projects of technique and equipment were imported during 1983-99, among which 1634 were imported
in 1999.
Source: Shanghai Statistics Yearbook, 2000.
Take the U.S. for an example, the investment by their large companies in Shanghai are capital- and
technology-intensive, concentrating on the manufacturing industries in which the U.S. enjoys the
comparative advantage, such as computers, automobile, aircraft, chemical and pharmaceutical (Table 2)
and on service industries such as commercial banking, investment banking, insurance, legal service, film
and TV.
Table 2 U.S. MNCs in Shanghai
MNCs
Subsidiaries in Shanghai
Types of Investment
Registered Place
Business Area
Intel
Intel Technology (China) Co. Ltd.
Joint Venture
Waigaoqiao
Computer chip
Rostmont
Shanghai Rostmont
Instruments Co. Ltd.
Joint Venture
Jingqiao
Automatic controlling system
Motorola
Shanghai Motorola Ragen Products Co. Ltd.
Joint Venture
Zhangjiang
Pager
HP
China HP Golden Bridge computer Co. Ltd.
Joint Venture
Jingqiao
Computer
GM
Shanghai GM Motor Co. Ltd.
Joint Venture
Jingqiao
Automobile
Ford
Shanghai Ford Hua glass Co. Ltd.
Joint Venture
Jingqiao
Auto component
United Tech
Shanghai United Turbine Supercharger Co. Ltd.
Solely-owned
Zhangjiang
Turbine supercharger
Westinghouse
Shanghai Turbine Generator Co. Ltd.
Joint Venture
Minghang
Power generating equipment Xie, K., & Wang, S., ‘Economic Globalization and Foreign Direct Investment in Shanghai’. - 6 -
Source: Foreign Economic Cooperation Division, Shanghai Municipal Economic Committee, 2000.
(ACESA)
Combining hi-tech with the local industry of Shanghai, the foreign enterprises have helped to promote
industrial re-construction in China and the export of hi-tech products. The foreign enterprises have
become the main driver of hi-tech product exports from China. From January through July of 2000, the
export value reached USD 19.571 billion, a 31.72% rise over the same period of the last year and
accounting for 80.89% of the total export value of hi-tech products of the country. During January and
May 2001, the export value of hi-tech products of Shanghai was USD 1.792 billion, a 30% increase over
the same period of the last year (SFETC, 2001).
At the moment, the major export markets of China’s hi-tech products are Hong Kong and the U.S., with
electronic and information products being the main exports. The East coastal provinces and cities are the
main export areas, with Guangdong and Shanghai taking the lead.
Located in Waigaoqiao Bonded Area of Pudong New Area, Shanghai, Intel Technology (China) Co. Ltd.
is the first manufacturing enterprise invested by Intel in China. With total registered capital of USD 68
million, it is one of the largest foreign investment projects in the area (SHIMA Li-ying, 2002).
Intel Technology (China) Co., Ltd. is a processing enterprise with supplied materials, mainly engaging in
assembling and testing of Terattertg Transistors, supplied to global purchasers. The company has become
Intel’s production base of Terattertg Transistors. The product achieved ISO9002 quality certification in
September 1998, only 6 months after investment, and ranked first in export among those produced by
foreign enterprises in Shanghai during 1999 and 2000 (Liang, 2001). According to the GM of the
company, the company’s export value reached USD 264 million during the first nine months in 2003, a
58.1% increase over the same period of 2002.
The reasons why the company has made such achievements are as follows:
1. Establishing a complete technical training system to train quality staff;
2. Setting up a “precise reproduction” mechanism to guarantee product quality;
3. Lowering cost, raising output, and enhancing competitiveness;
4. Introducing advanced planning management and responding to the market quickly.
By transferring their leading technical advantages within the company through integrated production, the
well-known MNCs have brought their technological capability into effective use in the host country, thus
gaining larger market share and raising their own competitiveness (Michael, 2002). Foreign enterprises in
Shanghai therefore have gained more advantages than the local ones. Table 3 makes a comparison.
(ACESA)
Table 3 The Comparison of Export Competitiveness Between Foreign and Local Enterprises
Foreign Enterprises
Local Enterprises
Types
Technology- and capital-intensive
Labor-intensive
Market and Government
Market competition first, government motivation second
Government motivation first, market competition second
Manufacturing
High level
Medium and low level
Brand
Possessing own brand
Creating brand through export processing
Purchasing and marketing network
Having global purchasing and marketing network
Lacking global purchasing and marketing network
International trade
Integrated intraindustry trade
Traditional interindustry trade
Intellectual property rights
Many products with intellectual property rights
Few products with intellectual property rights
Entrepreneurs
With global strategy
Based on the Chinese market, lacking global vision
Cultural value
Western style
Eastern style
R&D
Large expenditure
Small expenditure
Source: Center for Multinational Business, SASS.
V. Economic Efficiency of Foreign Enterprises in Shanghai
With the information revolution driven by computing and communication engineering, and with the
economic globalization based on international integration of production, foreign enterprises have
historically been the main exporters from Shanghai. Their total export revenue amounted to USD 14.261
billion in 2000, a 37.83% increase over the previous year and accounting for 56.2% the city’s total export
sales (SFIC, 2001). Not only have the foreign enterprises exceeded state-owned and local private
enterprises in terms of export scale and value, but also in economic efficiency.
According to the Annual Survey Report of Foreign Enterprises in Shanghai year 2000, by the end of
1999, 991 large enterprises (with investment exceeding USD 10 million) had been approved for
establishment. Now 827 enterprises are in operation, of which 463 have made profit, sharing 56% and
accounting for 6.68% of total 6934 foreign enterprises. But the combined profit of those 463 enterprises
in 2000 was RMB23.3 billion, accounting for 97% of the total profit of RMB 24.08 billion of all foreign
enterprises. In addition, 278 enterprises were at loss because of short investment time, bad operation and
other reasons, and 86 enterprises were still under construction (see Table 4A and Table 4B).
(ACESA)
Table 4A Annual Survey of Foreign Enterprises in Shanghai Year 2000 (1)
Enterprises in normal operation
Number
Amount of profit in 2000 (billion RMB)
Total
827
——
Enterprises in the black
463
23.3
Enterprises in the red
278
5.6
Enterprises under construction
86
——
Source: The Annual Survey Report of Foreign Enterprises in Shanghai 2000, Shanghai Municipal Government.
Table 4B Annual Survey of Foreign Enterprises in Shanghai Year 2000 (2)
Number of Enterprises
Investment Amount (bn USD)
Accumulated Registered Capital (bn USD)
Sales (bn USD)
Profit
(bn USD)
Total Capital
(bn USD)
Enterprises in operation ①
6934
37.574
21.815
377.94
24.08
457.75
Large enterprises (investment over USD 10 bn) in the black ②
463
21.1
11.383
237.23
23.36
277.35
①/② (%)
6.7
56.3
52.2
62.8
97
60.1
Table 5 analyzes the FDI structure in Shanghai based on industry and country/region. Categorized by
industry, of the 463 profit-making enterprises, 107 enterprises are consumer goods manufacturers,
accounting for 23.1%; 126 are manufacturers of raw materials and products, accounting for 27.2%; 118
enterprises are equipment producers, accounting for 25.5%; 112 enterprises are vehicle and IT producers,
accounting for 24.2%. Categorized by country/region, these companies come from Hong Kong, Japan, the
U.S., Singapore, Germany, Virgin Islands, the U.K., and Taiwan.
(ACESA)
Table 5 Annual Survey of Foreign Enterprises in Shanghai Year 2000 (3)
Share (%)
Investment Amount (bn USD)
Share (%)
Registered Capital (bn USD)
Share (%)
Categorized by industry
Consumer Goods
107
23.1
3.918
18.6
2.105
18.5
Raw Material and Products
126
27.2
4.022
19.1
2.372
20.8
Equipments
118
25.5
4.193
19.9
2.44
21.4
Vehicles and IT Products
112
24.2
8.968
42.5
4.467
39.2
Categorized by country and region
Hong Kong
106
22.9
3.24
15.4
2.12
18.6
Japan
94
20.3
4.78
22.7
2.6
22.8
U.S.
68
14.7
4.27
20.2
2.12
18.6
Singapore
28
6.05
0.517
2.47
0.307
2.7
Germany
27
5.83
2.38
11.3
1.25
11
Virgin
25
5.4
1.19
5.64
0.275
8.57
U.K.
19
4.1
0.384
1.82
0.218
1.91
Taiwan
12
2.59
0.401
1.9
0.21
1.84
Others
84
18.1
3.94
18.7
1.58
13.9
Source: The Annual Survey Report of Foreign Enterprises in Shanghai 2000, Shanghai Municipal
Government.
The business efficiency of these enterprises was quite good in 2000. Their average sales profit margin
reached 9.85%, 50% higher than the average level of all the foreign enterprises in Shanghai. Their
average return on investment was 24.73%, nearly 100% higher than the average level of all the foreign
enterprises. The average return on assets was 150.32%, higher than the average level of 108.4% (Table 6).
Xie, K., & Wang, S., ‘Economic Globalization and Foreign Direct Investment in Shanghai’. - 10
-
(ACESA)
Table 6 The Efficiency of Profit-making Foreign Enterprises in Shanghai
Categories
Average Sales Profit (%)
Average Return on Investment (%)
Average Return on Assets (%)
Categorized by Investment (USD million )
10 — 30
327
6.62
18.1
117.1
30 — 100
102
11.1
28.5
173.7
Over 100
34
11.7
27
176.5
Categorized by year
Before 1992
203
10.3
31.4
175.6
Between 1993— 1996
201
11.2
23.1
135.1
After 1997
50
5.97
12.7
120.2
Categorized by Industry
Consumer Goods
107
9.99
25.7
138.9
Raw Material and Products
126
6.98
12.1
107.2
Equipments
118
9.95
21.8
154.7
Vehicles and IT Products
112
10.6
32.6
176.2
Categorized by country/region
Hong Kong
106
8.98
22.2
171.6
Japan
94
10.7
18.2
112.7
U.S.
68
12.2
20.7
130.4
Singapore
28
8.58
15.1
117.6
Germany
27
9.97
51.2
191.2
Virgin
25
8.87
21.3
151.1
U.K.
19
9.63
13.9
101.1
Taiwan
12
12.8
19.9
1264
Others
84
/
/
/
Note: Considering the preferential tax treatment to foreign enterprises, gross profit is used instead of net profit
The high efficiency of foreign enterprises in Shanghai is inseparable from their prudent investment
decisions, advanced technical input, strict management, and successful partnerships. Of course, the
investment environment, agent service, human resources, and logistic service provided by Shanghai are
all the external conditions essential to the enhancement of economic efficiency.
Theoretically, it is justified that under the MNC network, FDI promotes the international division of labor
and raises business efficiency. As indicated in World Investment Report 1995: Transnational
Corporations and Competitiveness, international production is an important means for transnational
corporations (TNCs) to secure and expand markets for their products as well as to internalize cross-border
transactions based on an intra-firm division of labor, with a view towards minimizing transaction costs.
Securing access to markets - be they domestic on international – affects the competitiveness of TNCs in
several ways: it allows firms to benefit from economies of scale; it Xie, K., & Wang, S., ‘Economic Globalization
and Foreign Direct Investment in Shanghai’. - 11
-
(ACESA)
allows locational specialization of activities along the value-added chain, leading to improved efficiency
and lower costs; it increases the financial base of firms, and it forces them to respond to the more
competitive environment and the nature of demand in international markets (UNCTAD, 1995). MNCs’
FDI in China give them more access to such resources as market, capital and R&D, provide them with
more export channels, product advantages and technological transfer, and help them to lower transaction
costs. Undoubtedly, the advantages brought by FDI will raise the efficiency of foreign enterprises in
China and Shanghai.
VI. Conclusion
China officially joined the WTO on December 11 2002. Under the framework of the WTO, China will
open more to the outside world and Chinese enterprises will enter the world market with fewer
restrictions. While gaining more opportunities, they will, of course, meet more challenges and
competitors, for example, in the financial service sector. So, the Chinese enterprises should, based on its
own conditions and requirements and following a unified strategy, form joint ventures and cooperative
enterprises with MNCs of different types and from different countries to bring the Chinese industries and
enterprises into the international division of labor. This is surely a win-win solution. Xie, K., & Wang, S.,
‘Economic Globalization and Foreign Direct Investment in Shanghai’. - 12
-
(ACESA)
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Xie, K., & Wang, S., ‘Economic Globalization and Foreign Direct Investment in Shanghai’. - 13
-The effects of globalization on the urban system in China
The open policy has led to a concentration of foreign investment in the Eastern
Coastal region. SEZs and open coastal cities benefit more from the open policy than
inland cities and have higher economic growth rates (Leung, 1990; Xie and Costa,
1991; Fan, 1992). The distribution of foreign investment is mainly concentrated in the
extra-large cities and in the Eastern Coastal region (table 7.6). Quite a sizeable amount
of foreign investment is also located in the medium-sized cities in the Eastern Coastal
region. However, as reflected by the coefficient of variation, there is great variation
between regions and city sizes (tables 7.7 and 7.8). FDI tends to concentrate in the
coastal regions and large cities. For most regions and city sizes, the coefficient of
variation is higher than 300 per cent. The variations in foreign investment are very
high for small, medium-sized, and large cities. But the variation is relatively small in
extra-large cities, indicating that most extra-large cities have high foreign investment
and less variation. The great concentration of foreign investment is shown in table 7.9.
In 1990, the top 20 cities as regards foreign investment accounted for 78.3 per cent of
total FDI in cities. All these cities are coastal cities in the Eastern Coastal region. Most
of them are located in Guangdong province, which is adjacent to Hong Kong, the
major source of foreign investment in China.
Table 7.7 Foreign direct investment in cities by region, 1990
Region Total FDI Per cent Mean Standard deviation Coefficient of No. of
US$'000 (US$'000) (US$'000) variation (%) cities
Eastern 2,362,930 95.7 10,363 34,982 337.6 228
Central 74,780 3.0 512 1,608 314.1 146
Western 32,350 1.3 347 1,291 372.0 93
Total 2,470,060 100.0 5,289 24,937 471.5 467
Source: China Urban Statistical Yearbook, 1991.
Table 7.8 Foreign direct investment in cities by city size, 1990
City size Total FDI Per cent Mean Standard deviation Coefficient of No. of
US$'000 (US$'000) (US$'000) variation (%) cities
Small 458,750 18.6 1,576 9,762 619.4 291
Medium 900,930 36.5 7,700 35,589 462.2 117
Large 218,120 8.8 7,790 19,073 244.8 28
Extra-large 892,260 36.1 28,782 52,735 183.2 31
Total 2,470,060 100.0 5,289 24,937 471.5 467
Table 7.9 Top 20 cities for foreign direct investment, 1990
City Province City size Foreign direct

investment (US$'000)
Shenzhen Guangdong Medium 349,200
Dalian Liaoning Extra-large 200,750
Shanghai Shanghai Extra-large 177,190
Huizbou Guangdong Small 146,230
Guangzhou Guangdong Extra-large 117,010
Beijing Beijing Extra-large 105,760
Dongguan Guangdong Medium 100,100
Tianjin Tianjin Extra-large 83,150
Shantou Guangdong Large 81,970
Foshan Guangdong Medium 79,230
Haikou Hoinan Medium 73,880
Xiamen Fujian Medium 72,730
Fuzhou Fujian Large 65,100
Zhuhai Guangdong Small 62,190
Nanjing Jiangsu Extra-large 57,350
Zhongshan Guangdong Medium 53,280
Qingdao Shandong Extra-large 30,960
Jiangmen Guangdong Medium 28,340
Shenyang Liaoning Extra-large 27,470
Putian Fujian Small 22,720
Total FDI in the top 20 cities 1,934,610
Total FDI in all cities 2,470,060
% of the top 20 cities in total FDI in cities 78.32%
There is a difference in the source of FDI between northern coastal cities and southern
coastal cities. Take Shenzhen and Shanghai, for example. The source of investment in
Shenzhen is mainly Asian countries, particularly Hong Kong, whereas Asian FDI is
less prominent in Shanghai (table 7.10). In the period 1985-1989, 93.0 per cent of the
FDI in Shenzhen came from Asia, with 85.0 per cent from Hong Kong. In Shanghai,
only 52.7 per cent of FDI was from Asia and 30.5 per cent was from non-Asian
countries. Although Hong Kong was still the largest investor, it constituted only 34.7
per cent of its FDI. Investment from Japan and the United States was more important
in Shanghai than in Shenzhen. The pattern of foreign investment is different too. Most
of the foreign investment in industries in
Table 7.10 Distribution of the source of foreign direct investment in Shenzhen

and Shanghai, 1985-1989 (%)
Source of FDI Shenzhen Guangdong Shanghai National
Hong Kong 85.0 87.2 34.7 61.5
Japan 5.6 3.2 12.6 12.7
Taiwan 1.0 0.7 0.0 0.0
Singapore 1.2 0.9 5.4 1.2
Thailand 0.3 0.2 0.0 0.4
Korea 0.0 0.0 0.0 0.0
Philippines 0.0 0.0 0.0 0.1
Total main Asian countries 93.0 92.3 52.7 75.9
USA 6.0 4.0 23.7 11.2
Canada 0.3 0.4 2.5 0.3
United Kingdom 0.1 0.1 2.4 1.3
France 0.0 0.2 0.0 0.9
Germany 0.2 0.1 1.6 1.1
Sweden 0.0 0.0 0.0 0.1
Denmark 0.0 0.0 0.0 0.3
Australia 0.2 0.8 0.4 1.1
Total main non-Asian countries 6.9 5.6 30.5 16.4
Other countries 0.1 2.1 16.8 7.7
Total 100.0 100.0 100.0 100.0
Total (US$ million) 1,332.3 3,840.2 1,328.2 13,099.7
% of national total 10.2% 29.3% 10.2%
Sources: Shenzhen Statistical Yearbooks; Guangdong Statistical Yearbooks; Shanghai

Statistical Yearbooks; Almanac of China's Foreign Economic Relations and Trade.
Shenzhen is small, whereas foreign investment in Shanghai tends to be large. This is

mainly because of the nature of foreign investment from Hong Kong. Foreign
investment from Hong Kong is mainly related to outward processing of small
industries from Hong Kong, and tends to involve many investors with small capital,
utilizing the cheap labour and land in Shenzhen.
There is also a difference between the two cities in the distribution of FDI among
different sectors. In the period 1985-1989, over 75 per cent of FDI was in industry in
Shenzhen, whereas industry constituted only 41.6 per cent in Shanghai (table 7.11).
On the other hand, there is more foreign direct investment in real estate in Shanghai
than in Shenzhen.
The country of origin of foreign investment has different impacts on the urban system.
Foreign investment from Hong Kong is mainly located in the southern provinces,
particularly the Pearl River Delta. Such investment is increasingly located in rural
townships, contributing to the rapid rural urbanization of the Pearl River Delta. In
contrast, most of the foreign investment from Japan and other countries is located in
cities and less in rural areas. However, because of the development of export
industries, many towns and cities are producing goods that are exported to different
parts of the world.
Table 7.11 Distribution of foreign direct investment by sector in Shenzhen and

Shanghai, 1985-1989 (%)
Sector Shenzhen Guangdong Shanghai National

Agriculture 0.5 2.5 0.3 2.9
Industry 75.3 76.0 41.6 55.1
Geological inv. 0.0 0.2 0.0 3.1
Construction 2.9 2.3 0.6 2.2
Transport/telecom 3.5 2.6 0.3 1.7
Commerce 3.7 2.4 0.5 5.1
Real estate 12.4 12.8 48.9 24.1
Health and sport 0.1 0.1 0.0 0.5
Education and culture 0.1 0.1 0.0 0.4
Scientific research 0.0 0.1 0.0 0.1
Finance and insurance 0.0 0.0 0.0 0.6
Government department 0.0 0.0 0.0 0.0
Other 1.5 0.9 7.8 4.2
Total 100.0 100.0 100.0 100.0
Total (US$ million) 1,332.3 3,840.2 1,328.2 13,099.7
% of national total 10.2% 29.3% 10.2%
Sources: Shenzhen Statistical Yearbooks; Guangdong Statistical Yearbooks; Shanghai

Statistical Yearbooks; Almanac of China's Foreign Economic Relations and Trade.
Contents - Previous - Next
Problems of urban development under the open policy
The open policy, particularly the introduction of foreign investment, a commercial

economy, and private enterprises, has greatly influenced urban development in China
since 1978. It has weakened the pre-1978 mechanisms of population control and state
resource allocation that were effective in shaping urban development to a form desired
by the government. The household registration system has been relaxed and there is
increasing mobility of people. The development of a free market and the proliferation
of individual enter prises outside the state system are rapidly eroding the household
system, which was effective in controlling population growth in the cities. The state is
less relied on to provide employment and services. People can earn more outside the
state system in private enterprises and enterprises involving foreign investment. The
Chinese government is no longer able effectively to control urban development. Kwok
(1988) observed that large cities were developing more rapidly than the government
policy, which aims to "control the growth of large cities, rational development of
medium-sized cities, and active development of small cities." There have been rapid
changes in the urban system owing to economic reform. As a result, the following
pressing issues have to be faced in the rapidly growing cities and towns in the Eastern
Coastal region (Yeh and Leung, 1991).
Temporary population
The most remarkable phenomenon in Chinese cities under economic reform is the
growth of the temporary population in large and medium-sized cities. There are two
types of temporary population. The first type is temporary residents (zanzhu
renkou). Unlike permanent residents (changzhu renkou), whose households are
registered in the city, temporary residents are mainly people who obtain permission to
stay in a city for a fixed period of time. They are mainly contract workers working in
factories or on construction sites. The other type is the transient or floating
population (liudong renkou). They are people who enter and leave the city within a
few days, weeks, or longer. They may be travellers, businessmen, or people looking
for jobs. The transient population is normally not reported in city statistics but
temporary residents are reported.
Temporary residents can constitute as much as 20-25 per cent of the total number of
residents of some cities. In Guangzhou, the percentage of temporary residents is very
large, being 38 per cent of the total number of residents (Zou, 1990). In Shenzhen
SEZ, temporary residents outnumber permanent residents: in 1991, there were
432,000 permanent residents, but temporary residents numbered 766,000, accounting
for 63.9 per cent of the official population in the SEZ (Editorial Board of Shenzhen
Special Economic Zone Yearbook, 1992). Some of the temporary residents can
become permanent residents after staying in a city for a period of time. The building
industry engaged the largest proportion of the temporary population, followed by
retailing, especially individual retailing enterprises on the street.
The Institute of Urban and Rural Economic Development in the Ministry of

Construction has conducted a detailed study of the characteristics and problems of the
transient population in large cities (Li and Hu, 1991). They found that there was a
rapid increase in the transient population in large cities. The duration of stay of the
transient population has increased. Most of them came to work in the cities, either
self-employed or employed in the building and retailing sectors. Most of them came
from villages and were mainly males with a low educational background. The
existence of the transient population results from the household registration system
not being effective in restricting non-registered people in a city under economic
reform. Non-registered people can bypass household registration by getting their daily
necessities from the free market. The presence of the transient population is alarming
in some of the large cities. They have increased the crime rate and overloaded
transport, infrastructure, and housing in the city. As social facilities are based mainly
on permanent residents, the existence of a temporary population also creates great
pressure on social facilities, transport, and housing.
Urban land use and development control
In the past, the internal structure of Chinese cities was strongly influenced by urban
planning and state investment. However, these are of diminishing importance when
more and more firms and factories are owned by individual enterprises and foreign
investment.
The permission for foreign investors to use land and to participate in the property
market has rapidly changed the internal structure of Chinese cities (Yeh and Wu,
forthcoming). Foreign investors were allowed to use land for a leased period in the
Special Economic Zones by paying annual land-use fees as early as 1981, soon after
SEZs were established (Yeh, 1985). The adoption of the paid transfer of land-use
rights (tudi youchang zhuanrang) in the First Session of the Seventh People's
Congress in 1987, which is similar to leasing land to developers, has further opened
up the urban property market to foreign investors. Their participation in land leasing
and urban land transactions has given rise to new forms of foreign investment in
China. Their investments have led to rapid urban renewal in the old urban districts of
the cities.
Problems of urban development under the open policy
The open policy, particularly the introduction of foreign investment, a commercial

economy, and private enterprises, has greatly influenced urban development in China
since 1978. It has weakened the pre-1978 mechanisms of population control and state
resource allocation that were effective in shaping urban development to a form desired
by the government. The household registration system has been relaxed and there is
increasing mobility of people. The development of a free market and the proliferation
of individual enter prises outside the state system are rapidly eroding the household
system, which was effective in controlling population growth in the cities. The state is
less relied on to provide employment and services. People can earn more outside the
state system in private enterprises and enterprises involving foreign investment. The
Chinese government is no longer able effectively to control urban development. Kwok
(1988) observed that large cities were developing more rapidly than the government
policy, which aims to "control the growth of large cities, rational development of
medium-sized cities, and active development of small cities." There have been rapid
changes in the urban system owing to economic reform. As a result, the following
pressing issues have to be faced in the rapidly growing cities and towns in the Eastern
Coastal region (Yeh and Leung, 1991).
Temporary population
The most remarkable phenomenon in Chinese cities under economic reform is the
growth of the temporary population in large and medium-sized cities. There are two
types of temporary population. The first type is temporary residents (zanzhu
renkou). Unlike permanent residents (changzhu renkou), whose households are
registered in the city, temporary residents are mainly people who obtain permission to
stay in a city for a fixed period of time. They are mainly contract workers working in
factories or on construction sites. The other type is the transient or floating
population (liudong renkou). They are people who enter and leave the city within a
few days, weeks, or longer. They may be travellers, businessmen, or people looking
for jobs. The transient population is normally not reported in city statistics but
temporary residents are reported.
Temporary residents can constitute as much as 20-25 per cent of the total number of
residents of some cities. In Guangzhou, the percentage of temporary residents is very
large, being 38 per cent of the total number of residents (Zou, 1990). In Shenzhen
SEZ, temporary residents outnumber permanent residents: in 1991, there were
432,000 permanent residents, but temporary residents numbered 766,000, accounting
for 63.9 per cent of the official population in the SEZ (Editorial Board of Shenzhen
Special Economic Zone Yearbook, 1992). Some of the temporary residents can
become permanent residents after staying in a city for a period of time. The building
industry engaged the largest proportion of the temporary population, followed by
retailing, especially individual retailing enterprises on the street.
The Institute of Urban and Rural Economic Development in the Ministry of

Construction has conducted a detailed study of the characteristics and problems of the
transient population in large cities (Li and Hu, 1991). They found that there was a
rapid increase in the transient population in large cities. The duration of stay of the
transient population has increased. Most of them came to work in the cities, either
self-employed or employed in the building and retailing sectors. Most of them came
from villages and were mainly males with a low educational background. The
existence of the transient population results from the household registration system
not being effective in restricting non-registered people in a city under economic
reform. Non-registered people can bypass household registration by getting their daily
necessities from the free market. The presence of the transient population is alarming
in some of the large cities. They have increased the crime rate and overloaded
transport, infrastructure, and housing in the city. As social facilities are based mainly
on permanent residents, the existence of a temporary population also creates great
pressure on social facilities, transport, and housing.
Urban land use and development control
In the past, the internal structure of Chinese cities was strongly influenced by urban
planning and state investment. However, these are of diminishing importance when
more and more firms and factories are owned by individual enterprises and foreign
investment.
The permission for foreign investors to use land and to participate in the property
market has rapidly changed the internal structure of Chinese cities (Yeh and Wu,
forthcoming). Foreign investors were allowed to use land for a leased period in the
Special Economic Zones by paying annual land-use fees as early as 1981, soon after
SEZs were established (Yeh, 1985). The adoption of the paid transfer of land-use
rights (tudi youchang zhuanrang) in the First Session of the Seventh People's
Congress in 1987, which is similar to leasing land to developers, has further opened
up the urban property market to foreign investors. Their participation in land leasing
and urban land transactions has given rise to new forms of foreign investment in
China. Their investments have led to rapid urban renewal in the old urban districts of
the cities.
Although a City Planning Act was enacted in December 1989, it was not effective in
controlling land development. It mainly required the city government to prepare a
master plan, but the provisions are too broad to control site-specific development,
leaving too much discretionary decision-making to the building administration and
local district governments. Disputes may occur between the applicant for land
development and the authority that grants planning permissions. It is difficult to reject
a building application on the basis of the existing land-use zones because they are too
broad. The actual location, type, and intensity of development may not be what the
planners intend to achieve in the master and detailed plans. For example, a site zoned
for public building may be used to build tall office buildings, irrespective of whether
or not it is a suitable site for office building and whether or not there is a need for
cultural and recreational building in the neighbourhood. In the past, most offices,
shops, and commercial activities were owned and operated by government
departments. All non-residential and non-industrial land was considered to be public
building land. This is different from the concept of public building land in the Western
free market economy. Most of the land that is considered to be "public land" in China
would be regarded as office and commercial land in other countries. Because of
increasing private and foreign investment in the cities, land zoned for public buildings
may no longer be under the control of the city government. Land zoned for public
buildings may be developed into commercial offices and hotels for higher profits by
government departments and state enterprises, which intend to make more money,
leaving inadequate amounts of land for other public building to meet the demand of
the community for sports, cultural, and recreational facilities.
The existing land-use zones are also too general. It is not possible to make sure that
certain types of land will be available in the right locations or available at all. For
example, land zoned for public building may be used to build offices and hotels,
regardless of whether or not they are in the right location. This is why office buildings
and hotels seem to be erected at random in the cities. If all public building land is
developed into offices, there will not be any land left for public buildings for sports,
culture, and recreation.
A new form of land development control is needed to cope with these developments.
Shanghai and other cities are now experimenting with the introduction of zoning
regulations to control the type and intensity of land use in the city. It is hoped that the
objectives of the master and district plans can be better achieved and that there will be
less dispute over the type and intensity of development in the planning permit
application process. The building administration and local district governments will
have less discretion over the type and development intensity of a site. It is hoped that
orderly and efficient land development can be achieved, avoiding incompatible land
use in wrong locations.
Urban transport
Another major urban problem that has surfaced under the open policy is urban
transport. The problem manifests itself in a number of ways, notably inadequate
infrastructural development, a rapid increase in motor vehicles, and conflicts over
urban land use and between public and private transport.
Take the case of Guangzhou as an example (Yeh and Leung, 1991). Between 1949 and
1986, the city's road length increased from 228 km to 474 km, or by more than 200
per cent, whereas road space expanded from 1.85 million m 2 to 5.37 million m2, or by
nearly 300 per cent. However, between 1949 and 1988, Guangzhou's bicycles and
motor vehicles increased over 80-fold to 1.9 million and 0.158 million, respectively,
and passenger travel volume by 27 times to 1.1 billion trips per day. Moreover,
whereas the growth rate in vehicles was around 10-12 per cent per annum in the
1970s, it increased to 22 per cent per annum in the 1980s. As the city expanded, and
new areas of development such as the Tienhe and Huangpu districts were established,
conflicts over land use and traffic arose between old and new city districts. To put it
simply, the (old) central city is densely populated and developed, whereas the new
districts are more spacious and are at some distance from the central city. This
generates uneven cross-traffic, sharp peak hour demands, and increasing commuting
or journey distances and time. All of these make the provision of efficient public
transport in socialist China not an easy task.
The worsening situation of passenger transport can be attributed to the failure to

resolve conflicts between public and private transport. In China, the bicycle may be
regarded as a form of private transport, given its functions and characteristics. Yet it is
a mode that has been nationally subsidized and heavily interwoven into the social
fabric. In Guangzhou, passenger trips are classified as motorized (32.02 per cent),
bicycle (29.95 per cent), and walking (38.03 per cent). Passenger trips made by bus
and trolley bus account for only 21.63 per cent, or roughly two-thirds of motorized
trips and 72 per cent of the bicycle trips daily. Thus the more efficient motorized
modes are not being fully utilized or developed, and the significant role of the bicycle
poses problems of efficiency, safety, transport planning, and traffic management.
Increasingly, the modern private transport mode in the form of motor cycles and
private cars is being introduced and further complicates the issue.
Traffic congestion is getting worse in the cities. There is an increase in commuting

because of the wider spread of land use and people no longer live next to their
workplaces. However, the transport system is not growing fast enough to cope with
the increase in passengers and motor vehicles. There is inadequate provision of roads,
together with a shortage of traffic control systems and facilities.
Environmental pollution
Environmental degradation is an increasingly serious problem in China. Although the

Environmental Protection Act was initially adopted on a trial basis as early as 1979
and finally adopted in 1989, it was not effectively implemented, particularly in small
cities and towns. Environmental pollution is better controlled in cities than in towns.
Many rural enterprises discharge water without any treatment (Chang and Kwok,
1990). Air pollution is also increasingly severe.
In the Pearl River Delta, one of the fastest-growing regions in China since 1978, the
threat to the environment comes not from the major cities in the region but from the
rapidly growing small cities and towns (Yeh et al., 1989). Despite the increase in
population in Guangzhou in the first five years of the 1980s, the water quality of the
section of the Pearl River downstream of Guangzhou showed only a very minor
deterioration trend (Huang et al., 1988) because the increase in domestic sewage was
offset by a reduction, by as much as 23 per cent, in the discharge of industrial
effluents during the same period as a result of tightening environmental control
measures in Guangzhou. Industries in Guangzhou were growing at a rate of 12 per
cent per annum in this period, but environmental control measures were able to reduce
the amount of industrial effluent per industrial production unit by 16 per cent in these
five years.
Environmental control is much more relaxed outside the major cities of the Pearl
River Delta. The main threat comes from industrial development in small and
medium-sized cities and towns and from rural industrialization (Ma and Qiang, 1988).
In the eyes of industrialists, one of the attractions of the small and medium-sized cities
and towns is their less stringent environmental control measures. Hong Kong and
Macau are the major sources of foreign investment in the Pearl River Delta. Some of
their polluting industries, such as tannery and dyeing, which are becoming
increasingly costly to operate because of tightening environmental controls, have been
moved to the Pearl River Delta. Some industrial enterprises in Guangzhou have also
moved to the countryside for similar reasons. Rapid industrial development in the
small cities and towns has produced a large amount of industrial waste, creating
problems that are often beyond the capacity of the local authorities to handle. This has
resulted in unabated pollution in many areas, rendering prime agricultural land less
productive and causing oxygen depletion and eutrophication in receiving water bodies
and subsequent contamination and reduced production of aquatic products (Shen,
1983).
Policy implications and future trends in urban development
The past decade of rapid development of the economy and the urban system is the
result of interaction between economic reforms and the open policy. Because of the
locational advantage of the Eastern Coastal region, the open policy has made it grow
faster than the Central and Western regions. Urban growth and urbanization,
especially rural urbanization, are also most rapid in the Eastern Coastal region. With
continued economic development as a result of the open policy, more towns in the
Eastern Coastal region will be upgraded to become cities in the future, reversing the
pre-1978 trend of decentralizing cities to the Central and Western regions. Unless
there is a major shift in the existing policy, there will be an upsurge of new cities in
the Eastern Coastal region because the majority of the rapidly growing towns are
located there, such as the towns in Guangdong and Jiangsu. Furthermore, some towns
located in these provinces (such as Dongguan) have already been granted city status in
order to have more autonomy and flexibility in attracting foreign investment. Apart
from the addition of new cities, the open policy also favours the development of
existing cities in the Eastern Coastal region that have better accessibility and an
economic base for foreign investment. The recent designation of Pudong in Shanghai
as a special development area is an example of this trend. If Pudong development is
successful, it may become a model for development of other existing cities.
The open policy has opened the highly centrally controlled economy to a mixture of
central and market economies. More and more people do not rely on the state for
income and housing. The pre-1978 mechanisms of population control and state
resource allocation are becoming less effective in controlling urban development. One
of the main manifestations of the weakening of central government in shaping urban
development is the marked increase in temporary population in the cities. This is a
major problem. In general, the level of urbanization in China is related to the level of
industrial development. Although there is some temporary population in the cities,
pseudo-urbanization has not yet occurred in China. However, with further
development of the free economy and if industrial development cannot catch up with
urban population growth, pseudo-urbanization may occur in China. The massive rural-
urban migration that has plagued many large cities in less developed countries may
appear in China, repeating some of the urban problems experienced by large cities in
Asia.
China is in the midst of economic reforms. It is uncertain how much more the free
market mechanism will be allowed to operate in the future. The existing form of free
market demonstrates that there is an urgent need to improve urban management. In the
past, urban development could to a large extent be controlled by the state through the
allocation of funding. Since the adoption of economic reform, the introduction of
housing and land reform, and the opening up of China to foreign investment, the state
and centrally planned economy have less role to play in influencing the development
of cities. These new developments are affecting the internal structure of the cities and
leading to the restructuring of their land use to reflect market forces rather than the
previous state control of land-use allocation based on economic planning. As a result,
foreign investment has led to the clustering of commercial housing to form new social
areas, the restructuring of land use and urban development, and the designation of
new economic and technical development zones for attracting foreign investments
(Yeh and Wu, forthcoming).
City governments have less control over the location and timing of development.
Without good urban management, the land-use pattern can be chaotic, leading to
inefficient use of the land and traffic congestion. There is an urgent need to manage
the fast-growing towns and cities in the Eastern Coastal region, otherwise their living
environment and traffic conditions will deteriorate. Urban management is particularly
needed in small towns which are growing rapidly but with little planning and control.
Environmental degradation of towns will be a serious issue if it is left unattended.
There is an urgent need to train professionals such as planners and public
administrators to plan and manage these towns and cities.
There may be a need to review the appropriateness of the national urban policy -
"control the growth of large cities, rational development of medium-sized cities, and
active development of small cities" - for guiding city size development. However,
there is a weak relationship between city size and economic efficiency. The economic
efficiency of cities depends not on city size alone but more on the level of investment,
industrial structure, and locational factors. There is also a great variation in economic
efficiency among city sizes and regions (Zhou and Yang, 1990). The control of city
size does not seem to be an appropriate policy because it may not fully utilize the
economic efficiency and locational advantage of some cities. Because of the
increasing influence of market forces under the open policy, urban development is
moving away from the policy of controlling city size. Most foreign investment has
occurred in extra-large and large cities in the Eastern Coastal region. Even the central
government is not consistent in this policy. It has just announced a grandiose plan to
develop Pudong in Shanghai, one of the largest cities in China. There may be a need
to develop different urban development strategies for different regions and such
strategies may need to be adjusted periodically to reflect the level of economic
development. For example, large cities may be developed in the relatively
underdeveloped areas in the Western and Central regions as focal points for
developing these areas with the support of some medium-sized cities. Small cities and
towns experiencing rapid economic development in the Eastern Coastal region should
be allowed to be further developed into medium-sized and large cities to maximize
their economic efficiencies and locational advantages.
Although the free market is playing an increasing role in urban development under the
open policy, public policy still plays an important role. One of the main reasons for
the rapid development of towns and cities in the Eastern Coastal region is that the
central government allows them to have more autonomy in attracting foreign
investment, which was one of the main factors influencing economic development in
the past decade. The central government also designated four SEZs and 14 open
coastal cities in the Eastern Coastal region as catalysts for economic development in
the Eastern Coastal region. The central government has allocated funding for the
development of the SEZs and coastal open cities. Without such policies and
investments, towns and cities in the Eastern Coastal region would not have developed
so rapidly.
Regional inequality between the Eastern Coastal region and the rest of the country is
increasing. This is understandable at present because it is hoped that, once economic
development has taken off in the Eastern Coastal region, it will diffuse to the interior
provinces. However, there is a need to monitor whether diffusion is occurring in order
to determine the need to give selected cities in the interior provinces, such as major
river ports along the Yangtze River, similar treatment to that at present enjoyed by
cities in the Eastern Coastal region in order to help develop the interior provinces.
Accessibility in transportation and communications plays an important role in
globalization. Coastal cities are developing more rapidly than non-coastal cities
mainly because of their accessibility to the outside world. If China is to develop the
interior provinces, its internal transportation and communication systems will have to
be improved.
The impact of globalization on the urban system in China is different from that in
other developing countries. In other developing countries, globalization is mainly
concentrated in a few cities, particularly the primate cities. In China in contrast,
although globalization is still concentrated in the coastal provinces, it is more
dispersed than in other developing countries. None of the cities or provinces has more
than 40 per cent of national total exports or foreign investment. Foreign investment is
mainly from Asia, which is a big contrast to other developing countries.
There has been increasing competition among cities and towns for foreign investment.
The competition is at all levels: among different districts of a city, among different
cities and towns, and among different provinces. To be more competitive in attracting
domestic and foreign investment, many preferential treatments are given and
sometimes rules are flexibly applied. This has created problems in planning and
managing cities and towns. However, more importantly, there is a rise of localism and
a lack of cooperation in regional development. Localism is especially visible in
regions that are developing very rapidly such as the Pearl River Delta. Four
international airports are to be built in Zhuhai, Macau, Hong Kong, and Shenzhen,
which are less than 50 km from each other. Unlike in the past, when the state allocated
resources for major infrastructure projects, local government can raise funding for
infrastructure projects. Because of the lack of coordination, it may be a waste of
resources. There is a need to have better coordination of regional development and
planning.
The boom in export industries and in foreign investment in the past decade owed
much to China's cheap land and labour. With the increase in labour costs and land
prices, there is an increase in competition with other countries in Asia, such as Viet
Nam. There is a need for China to improve the quality of its labour and its products if
it is to stay competitive in the world economy. Cities with better infrastructure and
higher-quality labour may need to be developed as commercial centres for better
integration with the world economy.
Notes
1. Eastern Coastal, Central, and Western are the regional definitions used in the
Seventh Five Year Plan (1986-1990). These are different from the regional definitions
commonly used by Chinese researchers in the early 1980s, which also divided China
into three regions, i.e. coastal, interior, and frontier. Eastern Coastal region is the same
as the coastal region with the inclusion of Jilin and Heilongjiang (i.e. Heilongjiang,
Jilin, Liaoning, Beijing, Tianjin, Hebei, Shandong, Jiangsu, Shanghai, Zhejiang,
Fujian, Guangdong, Hainan, and Guangxi). Western region excludes Nei Mongol of
the frontier region and adds Shaanxi, Sichuan, Guizhou, and Yunnan (i.e. Shaanxi,
Sichuan, Guizhou, Yunnan, Ningxia, Gansu, Qinghai, Xizang, and Xijiang). Central
region includes Nei Mongol, Shanxi, Henan, Anhui, Hubei, Jiangxi, and Hunan.
2. Cities are classified into four categories based on the non-agricultural population in
the city proper (shiqu) and suburban districts (jiaoqu) (State Council, 1984). Extra-
large cities are those with a non-agricultural population of over 1 million; large cities
are those between I million and 500,000; medium-sized cities are those between
500,000 and 200,000; and small cities are those with less than 200,000.
Acknowledgements
We would like to thank Huaying Hu, Xia Li, Wing Keung Tsang, and Fulong Wu for
their assistance in data collection, processing, and mapping for this chapter. We are
also grateful to the Urban and Environmental Studies Trust Fund of the University of
Hong Kong for financial support for part of the study.
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Global influences on recent urbanization trends in the Philippines
Introduction
Recent urbanization trends
A simple model for examining global influences
Global influences on urbanization trends
Concluding remarks
Acknowledgement
References
Orville Solon
Introduction
It is often argued that urban primacy in a developing country is largely a product of its
colonial past. The dominance of Metro Manila in the Philippine urban system today
continues to feed upon the same forces initiated during the Spanish occupation:
Manila still serves as the main link to the world economy and remains the seat of
political authority. This colonial heritage may be one of the more formidable obstacles
confronting efforts to promote broad-based and balanced regional development in the
Philippines.
Although the momentum generated by old global factors continues to influence the
landscape of the Philippine economy, new global influences have appeared and are
becoming more dominant. The concern is that the strength of new global forces,
which build upon a more pronounced international division of labour, greater reliance
on international finance, and more emphasis on international trade as the main engine
for growth, may only reinforce tendencies towards urban primacy. The argument is
that new global forces backed by new communications and transport technology work
on the world economy through a system of mega-cities and, in so doing, worsen the
unevenness of growth within countries (see chap. 2). Evidence showing the tendency
of foreign direct investment to locate in and around national capital regions lends
some validity to the hypothesis (Fuchs and Pernia, 1989).
However, more recently in the Philippines, the limited success of regional centres like
Cebu in Central Visayas, Cagayan de Oro in Northern Mindanao, and Davao in
Southern Mindanao in attracting direct foreign investment and in promoting exports
raises a number of questions. With global restructuring, can the regional comparative
advantages represented by regional urban centres compete directly at the global level?
Can the recent changes in transport and communications technology elevate regional
centres above the limits imposed by the existing national hierarchy of cities? The
argument being suggested concerns the possibility that global influences may be
harnessed to promote balanced growth via intermediate regional centres.
A preliminary examination of the question of whether or not new global factors have
an inherent influence towards urban primacy is the main purpose of this chapter. This
is done by looking at elements of both global and local influences on recent trends in
Philippine urbanization. In particular, this chapter will address three questions: (1) Do
global and local factors have different effects on urbanization patterns? (2) How do
global and local factors affect each other? and (3) Does the existing pattern of
urbanization itself affect the way global and local influences are applied across
regions?
In asking the first question, this chapter intends to determine the nature and relative
influence of global factors. The second question is raised to qualify answers to the
first by determining whether the two sets of influences crowd each other in or out. The
third question considers the possibility that global factors may not have an inherent
predilection for capital cities but are only observed to have such a tendency as they
respond to an existing pattern of urbanization. An underlying interest here concerns
the prospect of harnessing global forces to develop secondary or regional urban
centres.
The analysis here focuses on recent urbanization trends in the Philippines covering the
period between 1980 and 1990. An overview is presented in the next section.
Subsequently, an attempt is made to determine how changes in the relative levels of
urbanization of the 13 regions in the Philippines are affected by global factors,
particularly foreign direct investment and exports, using a simple model developed on
the basis of the hypotheses and results presented in previous studies of Philippine
urbanization such as those by Pernia et al. (1982) and Herrin and Pernia (1987). The
hypotheses underlying the model are tested using three-year, thirteen-region panel
data. The empirical specification of the model as well as the results are discussed.
Concluding remarks are made in the final section.
Table 8.1 Urbanzation trends in the Philippines, 1948-1990
1948 1960 1970 1980 1990

Population ('000)
Philippines 19,234 27,086 36,683 48,101 60,680
Urban areas 3,829 5,810 8,776 12,432 16,371
Metro Manila 1,569 2,462 3,967 5,926 7,929
Urbanization ratiosa
Urban/Philippines 0.199 0.215 0.239 0.258 0.270
(7.75) (11.53) (8.03) (4 39)
Manila/Philippines 0.082 0.091 0.108 0.123 0.131
(11.43) (18.97) (13.92) (6.06)
Manila/Urban 0.410 0.424 0.452 0.477 0.484
(3.41) (6.67) (5.45) (1.61)
Source: National Statistics and Census Bureau, Philippine Statistical Yearbook 1991.
a. Numbers in parentheses are percentage rates of change.
Keywords:
 new-build gentrification;
 demographic changes;
 socioeconomic implication;
 Shanghai
Abstract
In Shanghai, globalised urban images and a well-functioning accumulation regime are enthusiastically sought
after by urban policy, and explicitly promoted as a blueprint for a civilised city life. The city is celebrating its
thriving neo-liberal urbanism by implementing enormous new-build gentrification, mostly in the form of
demolition–rebuild development involving direct displacement of residents and landscapes. This study aims to
understand demographic changes and the socioeconomic consequences of new-build gentrification in central
Shanghai. The paper first examines demographic changes between 1990 and 2000 in central Shanghai, i.e.
the changing distribution of potential gentrifiers and displacees. It then looks into two cases of new-build
gentrification projects in central Shanghai, to compare residents' socioeconomic profiles in old neighbourhoods
and new-build areas. This study also examines the impacts of gentrification on displacees' quality of life and
socioeconomic prospects. Because the enlarging middle class and the pursuit of wealth-induced growth by the
municipal government are turning the central city into a hotspot of gentrification, inequalities in housing and
socioeconomic prospects are being produced and intensified in the metropolitan area. This study thus
emphasises that critical perspectives in gentrification research are valuable and indispensable. Copyright ©
2009 John Wiley & Sons, Ltd.
Recent urbanization trends
Indicators suggest that, although the tendency towards the primacy of Metro Manila
remains positive, it may be slowing down. Table 8.1 presents three measures of this
tendency: (1) the ratio of the urban population to the total population; (2) the ratio of
Metro Manila's population to the total population; and (3) the ratio of Metro Manila's
population to the total urban population. Rates of changes for these measures between
the five census years show that urbanization and urban primacy accelerated until 1970
but declined towards 1990. The upward trend is explained by Pernia et al. (1982) as
being the result of the import-substitution programme that was implemented in the
1960s. The decline may be a response to increasing congestion in the metropolis, to
rising land values, and to incentives underlying the industrial dispersal programme
initiated in the mid-1970s.
The relative decline of the primacy of Metro Manila after 1970 was anticipated by the
work of Pernia et al. (1982) and was observed by a more recent study by Lamberte et
al. (1990). An explanation for this trend is that Metro Manila's growth spilled over
into its peripheral regions: Central Luzon (Region 3) and Southern Tagalog (Region
4).
Fig. 8.1 Regional population shares in the Philippines, 1948-1990 (NCR = National Capital
Region; CAR = Cordillera Autonomous Region. Source: National Statistics and Census
Bureau, Philippine Statistical Yearbook 1991)
As shown in figure 8.1, the decline has not actually led to more balanced regional
growth.
The changing regional distribution of population over the five census years from 1948
to 1990 is shown in figure 8.1. The 13 regions of the Philippines are ranked in terms
of the 1990 regional population shares. The almost equal number of marks above (and
to the left of) and below (and to the right of) the curve shows how the regional
distribution of population tilted over time in favour of Metro Manila (the National
Capital Region) and its peripheral regions.
The distribution of the total urban population among the different regions may be
more telling about other aspects of recent urbanization trends. Figure 8.2 shows that
Metro Manila has the highest concentration of urban population with a 5 per cent
share. Whereas it was shown earlier that in terms of total population the regions
peripheral to Metro Manila (Regions 3 and 4) were among those with the largest
shares, these regions actually rank low in terms of urban population shares. This
indicates that the peripheral regions largely remain rural and that increased modern
economic activities located in these regions continue to enjoy amenities. Although
Central Visayas (Region 7) and Western Visayas (Region 6) are among the most
highly urbanized regions next to the National Capital Region (NCR), their individual
shares of the total urban population are less than a fifth of that of Manila.
Fig. 8.2 Regional population shares and growth in the Philippines, 19801990 (Source:
National Statistics and Census Bureau, Philippine Statistical Yearbook 1991)
Another interesting pattern shown in figure 8.2 concerns the rate of growth of the
urban population across regions. Between 1980 and 1990 Manila grew by 3.3 per cent
while the next most urbanized regions grew at slower rates (Region 7 at 3.1 per cent
and Region 6 at 2.2 per cent). What is surprising is that regions with less than half a
per cent share of total urban population actually grew faster than Manila. These
regions include Southern Mindanao, where Davao City is located, Central Mindanao,
where Cotabato City is, and Cagayan Valley, where Baguio City used to belong before
the Cordillera Autonomous Region was organized.
In terms of cities, regional centres outside Metro Manila are also shown to have
grown faster. In figure 8.3, the top 20 cities in the Philippines are ranked in terms of
population size. Ranked first is Metro Manila followed by Davao (Region 11), Cebu
(Region 7), Zamboanga (Region 9), Bacolod (Region 6), Cagayan de Oro (Region
10), and so on. Although it is not surprising that Manila remains at least 10 times
larger, there are a number of smaller cities that are growing at a noticeably faster rate
relative to Manila. Among the fastest-growing cities are General Santos (ranked 8th in
population size) in Region 10, which has recently been very active in food processing
of tropical fruit and marine products for export, and Mandaue (ranked 15th in
population size) in Metro Cebu, Region 7, where commercial, trading, and light
manufacturing activities have likewise been growing.
Fig. 8.3 Population growth of the top 20 cities in the Philippines, 1980-1990
The questions raised by the patterns revealed by figures 8.2 and 8.3 are the following:
Will the prevailing growth patterns (Manila vs. regional centres) be sustained?
Moreover, will these trends eventually effect a change in the urban landscape? How
are these changes affected by global factors, including foreign direct investment and
exports?
To begin answering the above questions, let us consider some indicators on economic
performance of the different regions. In figure 8.4, the regions are ranked according to
their respective regional gross domestic products (GRDP) relative to that of the
National Capital Region. The two other indicators shown are the GRDP growth rates
between 1980 and 1990, and the change in each region's share of the gross national
product for the same years, which is taken to indicate the region's performance
relative to others.
The regional distribution of national income follows a pattern similar to that observed
for the regional distribution of population. In figure 8.4, the line marked by squares
shows the gross domestic product of a region relative to that of Manila. It indicates,
for example, that the second most productive region (Region 4) is producing only as
much as 45 per cent of Manila's output while the poorest region (Region 2) is
producing only less than 1 per cent. The line indicates the degree of concentration of
productive activity in the national capital and its peripheral regions.
Fig. 8.4 Growth and shares of gross regional domestic product (GRDP) en GNP, 1980-1990
(Source: National Statistics and Census Bureau,Philippine Statistical Yearbook 1991)
It is also interesting to note that only four regions were able to expand their share of
total national income between 1980 and 1990. What is surprising is that the Central
Visayas Region (Region 7) is shown to be one of the fastest-growing regions. The
growth of the Central Visayas, particularly of Cebu, is reputedly driven by global
factors including direct foreign investment, tourism, and exports.
The general influence of some global factors such as foreign direct investment and
exports on urbanization is shown in figure 8.5. The observed pattern is that the level
of urbanization of a region measured in terms of its share of the total urban population
is positively correlated with the region's share of total exports and foreign direct
investment.
There are a number of notable kinks in the correlations shown in figure 8.5. Regions 4
and 1 are shown to have received shares of total foreign direct investment
disproportionately larger than their urbanization levels. Investments flowing into
Region 1 may be responding to location-specific resources of the region, especially
mineral resources. Foreign investments in Region 4 are still driven by economies of
size provided by Metro Manila. The provinces of Cavite, Laguna, and Batangas are
close enough to Manila for investors to enjoy banking facilities, communications
networks, and other infrastructure offered by the metropolis.
Fig. 8.5 Global influences on urbanization in the Philippines (FOR NV = foreign

investment. Source: National Statistics and Census Bureau,Philippine Statistical Yearbook
1991)
It is apparent from the discussion in this section that, although global factors tend to
be positively correlated with the existing urbanization pattern, developments in the
regions suggest the possibility that global influences need not necessarily lead to
greater urban primacy. A number of questions are subsequently raised. Do global
factors have any influence on the smaller and less perceptible changes at the regional
level and across time? Do local factors behave any differently? What about the
interaction between local and global influences? Does an existing urbanization pattern
have any influence over the way global forces are applied initially?
A simple model for examining global influences
The analytical model
The basic analytical model presented below is constructed with three basic design
elements in mind: (1) a simultaneous system of equations; (2) variables are expressed
in terms of shares; and (3) time is explicitly introduced.
URBSHRrt = URBSHRrt (GLBLSHRrt-1, LCLSHRrt-1) (1)
GLBLSHRrt = GLBLSHRrt (URBSHRrt, LCLSHRrt, STRCSHRrt) (2)
LCLSHRrt = LCLSHRrt (URBSHRrt, GLBLSHRrt, STRCSHRrt) (3)
where
URBSHRrt - share of total urban population by region r in time t
GLBLSHRrt - share of total global factor influence present in region r at time t
LCLSHRrt - share of total local influence present in region r at time t
STRCSHRrt - share of total structural facilities in region r at time t
Equation 1 shows how urbanization may be influenced by both global and local
factors. It will be through this equation that the question of whether or not global
influences exacerbate urban primacy is discussed. Equation 2 shows how the
application of global influence on the urban system may be influenced by existing
urbanization patterns, local factors, and structural facilities. Equation 3 likewise
shows how the distribution of local influences is affected by existing urban patterns,
global factors, and structural facilities.
The model is constructed as a simultaneous system of equations in order to address
three basic issues: (1) the nature of the influence of both global and local factors; (2)
the influence, in turn, of existing urban patterns on the way these factors exert their
influence; and (3) the interaction between global and local factors.
Since the focus of the analysis is on the influence of global factors on the pattern of
urbanization in the Philippines rather than on the urban growth of individual provinces
or regions, the model is cast to discern relative rather than absolute changes and
influences. A more meaningful examination of the question concerning globalization
and urban primacy, for example, can be made only in these terms.
The variables used in the model are, therefore, measured as shares. For example,
urbanization is measured as the urban population in the region over the total urban
population in the country. Hence, an increase in the share of urbanization of one
region necessarily reduces that of others. The influences on urban primacy become
more interesting to study under this formulation.
Take, for example, the relationship between foreign direct investment and
urbanization. If the variables in the model were to be measured in absolute terms, an
observed positive relationship would not be sufficient to show that foreign direct
investment promotes urban primacy. Cast in relative terms, on the other hand, the
model should be able to provide a sufficient test of this hypothesis.
To demonstrate this, consider the following simple linear regression model:

URBSHRr = b0 + b1FINVSHRr + u, where FINVSHRr is the share of total foreign
investment going to region r and u is the error term. If b1 were estimated to be
negative, this would mean that, as the foreign investment share of the average region
increases, the share of the total urban population of the average region declines. This
happens only when a substantial share of foreign investment is applied to only one or
two regions. As the urbanization levels in these favoured regions increase in response,
the shares of the other regions decline and then the average region will experience a
marginal decline. Hence, b1 < 0 will indicate a positive relationship between foreign
investment and urban primacy.
The other element built into the simple model is time. This is deemed necessary
considering that, whereas global and local factors have substantial short-run effects,
urbanization patterns tend to change only in the long term. Simple dynamics are
introduced in the model to reconcile the simultaneous examination of both short-run
and long-run variables.
Main hypotheses
The design parameters of the simple model presented earlier should allow for the
analysis of the following hypotheses:
(1) Global factors and urban primacy. As discussed earlier, the use of relative values
would allow us to determine whether global factors such as direct foreign investment
and exports help strengthen the dominance of the national capital city. If this is the
case, we should expect the partial effect of GLBLSHR rt-1 on URBSHRrt in Equation 1
to be negative.
(2) Local factors and balanced growth. The introduction of local factors as an
argument in Equation 1 should allow us to determine if local factors such as local
investment and government spending are more responsive to regional development
objectives. If this were so, we can expect the partial effect of LCLSHRrt-1 on
URBSHRrt to be positive.
(3) Existing urban patterns and the distribution of global and local factors. In both
Equations 2 and 3, the relative urbanization level of a region is presented as a
determinant of the way global and local factors are geographically distributed. The
interest here is to determine the ability of regional centres to attract these influences.
If the regions, through their city centres, had such abilities, the partial effects of
URBSHRrt on the right-hand-side variables of Equations 2 and 3 should be positive.
(4) Crowding between global and local factors. LCLSHRrt and GLBLSHRrt are
introduced as arguments in Equations 2 and 3, respectively, to test whether global and
local factors crowd-in or crowd-out one another. If both sets of factors crowd-in one
another, the partial effects should be positive. Otherwise, we should expect negative
partial effects.
Empirical specification and data
The model represented by Equations 1-3 is specified as a system of five linear

equations using regional-level data for 1980, 1985, and 1990. Urbanization is
presented in terms of the regional share of the total urban population (URBSHR) as
mentioned earlier. The influence of global factors is to be examined using regional
shares of total foreign direct investment (FINVSHR) and of total exports (EXPSHR).
On the other hand, the influence of local factors will be examined in terms of the
regional shares of total local investment (LINVSHR) and of government spending
(GSPDSHR).
Other variables introduced in the model as exogenous determinants are regional

shares of: total banking offices (BNKSHR), total electrical connections (ELCSHR),
total telephone exchanges (TELSHR), and total infant deaths (INFDSHR). The first
three are used as measures of structural facilities, while the fourth is introduced as a
determinant of government spending representing broad social objectives.
The basic empirical model is presented in the following system of equations:
URBSHRrt = b1 + b2FINVSHRrt-1 + b3EXPSHRrt-1 + b4LINVSHRrt-1 + b5GSPDSHRrt-

1 + u1 (4)
FINVSHRrt = b6 + b7URBSHRrt + b8LINVSHRrt-1 + b9ELCSHRrt + b10TELSHRrt + u2 (

5)
EXPSHRrt = b11 + b12URBSHRrt + b13FINVSHRrt-1 + b14BNKSHRrt + b15TELSHRrt +

u3 (6)
LINVSHRrt = b16 + b17URBSHRrt + b18FINVSHRrt-1 + b19BNKSHRrt + b20ELCSHRrt +

u4 (7)
GSPDSHRrt = b21 + b22URBSHRrt + b23INFDSHRrt-1 + u5 (8)
The system that consists of Equations 4-8 is taken to be the basic empirical
specification of the simple analytical model represented by Equations 1-3. It must be
noted that the way the empirical model is specified was primarily driven by data
restrictions rather than by theoretical soundness. First of all, data to complete a three-
year, thirteen-region panel are available only for the variables specified here.
Secondly, degrees of freedom limitations allow us to introduce truly exogenous
variables as well as lagged endogenous variables only sparingly.
In order to get around the second limitation, an alternative specification of the basic
empirical model is also presented. In the new system, more lagged variables are
introduced to test dynamic effects underlying the model. In particular, previous period
values of the dependent variables are introduced in each equation. The alternative
specification is as follows:
URBSHRrt = b1 + b2URBSHRrt-1 + b3FINVSHRrt-1 + b4EXPSHRrt-1 + b5LINVSHRrt-1 +

b6GSPDSHRrt-1 + u1 (9)
FINVSHRrt = b7 + b8URBSHRrt + b9FINVSHRrt-1 + b10ELCSHRrt + b11BNKSHRrt +

u2 (10)
EXPSHRrt = b12 + b13URBSHRrt + b14FINVSHRrt-1 + b15BNKSHRrt + b16EXPSHRrt-1 +

u3 (11)
LINVSHRrt = b17 + b18URBSHRrt + b19FINVSHRrt-1 + b20LINVSHRrt-1 + u4 (12)
GSPDSHRrt = b21 + b22URBSHRrt + b23INFDSHRrt-1 +b24GSPDSHRrt-1 + u5 (13)
Global influences on urbanization trends
The two models represented by Equations 4-8 and 9-12 were estimated using three-
year, thirteen-region panel data by three-stage least squares (3SLS). The results are
summarized in tables 8.2 and 8.3 respectively.
The first column of table 8.2 shows that increases in a region's share of exports, local
investments, and government spending increase the region's share of total urban
population. By specifying the model in terms of shares, the results imply that the
regional distribution of exports, local investments, and government spending tends to
produce a more even distribution of urban population.
The regression coefficient for foreign direct investment shares on urban population
shares suggests that the way foreign investment is distributed among the regions tends
to produce more uneven distribution of urban population. What seems to be happening
is that foreign investment tends to gravitate around one or two regions (consider the
peaks in fig. 8.5) so that urban growth concentrates on these regions. The growth in
these selected regions may be sufficiently strong that the share of the "average" region
(which is what the regression captures) diminishes. If this interpretation of the results
is correct, then one can say that direct foreign investment tends to promote urban
primacy.
The estimated equation for foreign investment determination is shown in the second
column of table 8.2. The results demonstrate that a region's share of total urban
population positively determines its share of foreign investment.
In the same equation, local investment shares seem to have no statistically significant
influence on foreign investment shares. This suggests that no apparent phenomenon of
crowding-in or crowdingout occurs between local and foreign investment. The other
two determinants of regional foreign investment shares, namely, electrical connections
and telephone exchanges, are shown to have unexpectedly adverse effects on foreign
investment shares. The results suggest that the greater the region's share in power and
communications facilities, the lower the share of total foreign investment. A possible
explanation for the results could be measurement problems: having electrical
connections does not necessarily guarantee that power is available (a significant
portion of firms have had to procure their own power generation facilities owing to
frequent power out-age); and having telephone exchange facilities does not
necessarily imply access to telephones.
Table 8.2 Three-stage least squares estimates of model 1 (Equations 4-8)
Dependent variables
Independent variables
URBSHRrt FlNVSHRrt EXPSHRrt LlNVSHRrt GSDPSHRrt
URBSHRrt 4.120500 0.090514 0.627620 0.271270
(11.209)* (0.200) (0.514) (7.560)*
FlNVSHRrt-1 - 0.228050 0.197010 -0.077599
(-4.433)* (4.312)* (-0.694)
EXPSHRrt-1 0.499110
(7.671)*
LINVSHRrt-1 0.378970 - 0.254180
(3.602)* (-1.066)
GSDPSHRrt-1 0.601820
(2.231)*
ELCSHRrt - 0.790800 - 0.371560
(-5.124)* (-1.336)
TELSHRrt - 1.628300 - 0.968120
(-4.765)* (-6.841)*
BNKSHRrt 1.908200 1.104800
(4.138)* (0.747)
INFDSHRrt 0.000075
(-0.873)
Constant - 0.019373 -0.034394 -0.017510 -0.021788 0.060266
(-0.944) (-1.192) (-1.458) (-1.059) (9.109)*
Adjusted R2 .793393 .775950 .930913 .625412 .684492
F-statistic 25.000730 22.645540 85.215490 11.434990 28.118580
Durbin-Watson 1.609393 2.694194 1.738095 2.304809 2.777634
Values in parentheses are t-statistics.

* Significant at the 1 per cent level.
The estimated exports share equation presented in the third column of table 8.2
suggests that share of urban population does not have any statistically significant
influence over export shares. This may suggest that, unlike direct foreign investment,
exports continue to rely upon resource-based comparative advantage. The proxy
variables for power and communications facilities are also shown to have adverse
effects on regional shares of total exports.
The estimated local investment equation reported in the fourth column of table 8.2
shows that shares of urban population, foreign investment, and power and banking
facilities do not have any statistically significant influence on the regional distribution
of local investment.
Finally, the estimated equation for government spending suggests that the regional
allocation of government resources is positively affected by urban shares but not by
the regional social status represented by shares in infant deaths.
Table 8.3 presents the 3SLS estimates of Equations 9-13. As mentioned earlier, this
system of equations was specified to test for the influence of lagged dependent
variables on the basic model.
The estimated urbanization equation implies that whatever effect foreign and local
investment as well as exports have on the regional distribution of the urban population
is absorbed and outweighed by the influence of previous period urban population
shares. Only government spending seems to have transcended such influence,
indicating that public expenditure may be an important accelerator of changing urban
patterns.
After introducing lagged dependent variables for the foreign investment, local
investment, exports, and government spending equations, the regional distribution of
urban population is now found to be a significant determinant. What seems to be
happening is that the introduction of lagged dependent variables in effect isolated the
effect of urbanization on the above-mentioned variables.
The results also suggest some indirect influence of direct foreign investment on
urbanization via exports and local investment. The previous period foreign investment
share is shown to have a positive influence over the current period export share of a
region. This may be capturing the effects of increasing foreign participation in the
promotion of non-traditional export commodities. On the other hand, as shown by the
local investment shares equation, foreign investment seems to be crowding out local
investment. These indirect effects could partly explain why foreign investment,
exports, and local investment are shown to have no significant final influence on
urbanization.
Table 8.3 Three-stage least squares estimates of model 2 (Equations 9-13)
Independent Dependent variables

variables URBSHRrt FINVSHRrt EXPSHRrt LlNVSHRrt GSDPDHRrt
URBSHRrt 3.180100 0.875820 1.351600 0.210900
(1.562) (2.571)* (5.189)* (7.618)*
URBSHRrt-1 0.701730
(7.842)*
FlNVSHRrt-1 - 0.037992 - 0.018691 0.091795 - 0.222690
-(1.040) (-0.106) (2.655)* (-1.934)*
EXPSHRrt-1 - 0.056181 1.037000
(-0.714) (12.088)*
LINVSHRrt-1 0.072502 0.102080
(1.059) (0.363)
GSDPSHRrt-1 0.780080 0.498070
(5.335)* (6.243)*
ELCSHRrt - 0.655730
(-1.419)
BNKSHRrt - 0.066869 - 0.621110
(-0.027) (-1.597)
INFDSHRrt 0.000047
(-0.678)
Constant - 0.035395 0.110680 -0.029500 - 0.017765 0.025000
(-3.162)* (-3.466)* (-3.927)* (-0.858) (3.284)*
2
Adjusted R .934967 .679622 .968618 .588741 .824761
F-statistic 72.883420 14.258200 193.907700 12.929640 40.220870
Durbin-Watson 1.494077 2.277040 1.709994 2.342220 2.701551
Values in parentheses are t-statistics.
* Significant at the 1 per cent level.
Concluding remarks
Despite the data used in the regression analysis and other limitations underlying the
model, a number of interesting results concerning global influences on recent urban
trends are noteworthy.
First of all, results show that the distribution of direct foreign investment across
regions contributes to the tendency of urbanization to be concentrated in one or two
regions. On the other hand, exports, the other global factor tested here, are shown to
be contributing to a more balanced pattern.
Local factors tested in the analysis were not shown to be contributing to urban
primacy. The share of local investment and government spending in a region increases
the region's share of total urban population.
The results also show that foreign investment tends to reinforce a region's exports
share, especially in the area of non-traditional export commodities. However, there is
some evidence that suggests that foreign and local investment may be crowding-out
each other. This indirect effect may weaken the final effect of these factors on
urbanization.
A region's share of total government spending tends to improve the level of urban
development. In turn, the distribution of government spending is also highly sensitive
to urban population shares, but unfortunately is insensitive to social needs
(represented in the model by the regional share of total infant deaths).
On the whole, the above results suggest that global factors do not necessarily lead to
urban primacy. The recent trend where the dominance of Metro Manila relative to
other regions seems to be declining may in fact be influenced by some global factors,
especially exports. But, despite the declining trend, the momentum generated by the
size of the National Capital Region continues to influence the distribution of both
global and local factors. Furthermore, it is unfortunate that government spending has
served to reinforce this phenomenon. But, as shown above, a reallocation of public
resources could potentially effect balanced regional development.
Acknowledgement
The author gratefully acknowledges the research assistance provided by Ma.
Peregrina Makabenta.
References
Fuchs, Roland J. and E. M. Pernia (1989), "The Influence of Foreign Direct

Investment on Spatial Concentration." In Frank J. Costa et al. (eds.), Urbanization in
Asia, Spatial Dimensions and Policy Issues. Honolulu: University of Hawaii Press,
pp. 387-410.
Herrin, A. N. and E. M. Pernia (1987), "Factors Influencing the Choice of Location:

Local and Foreign Firms in the Philippines," Regional Studies 21(6): 531-541.
Lamberte, Mario B., Rosario G. Manasan, Gilberto M. Llanto, Winfred M. Villamil,

Elizabeth S. Tan, Fernando C. Fajardo, and Maren Kramer (1990), Balanced Regional
Development Study. A study commissioned by the Asian Development Bank. Makati:
Philippine Institute for Development Studies, May.
Pernia, E. M., G. B. Reyes, and E. M. Soliman (1982). The Spatial and Urban
Dimensions of Development in the Philippines. Manila: Philippine Institute for
Development Studies.
The changing urban system in a fast-growing city and

economy: The case of Bangkok and Thailand
Introduction
Growth and transformation of the Thai economy
Urban population, settlement patterns, and employment distribution
The international dimension of the changing urban system
The internal dimensions of the changing urban system
The urbanization of bangkok: its prominence, problems, and prospects
Conclusions: towards a new national urban development policy for Thailand
Acknowledgements
Notes
References
Medhi Krongkaew
Introduction
The major purposes of this chapter are twofold. First, it will describe the
characteristics of the changes in the urban system associated with the rapid economic
growth and development of Thailand during the 1980s in general, and the growth of
Bangkok, its capital city, in particular. Secondly, it will discuss the effects of these
changes upon the future development of Bangkok and the future directions of
Thailand's urban development policy.
What makes the above topics interesting is the fact that, in a situation of high
economic growth, the process of urbanization (defined as the increase in the
proportion of the total population living in urban areas) could either further stimulate
the growth of the economy or hinder future growth after a preliminary period of urban
expansion. No doubt, the existing urban system in Thailand has helped contribute to
the present high rate of economic growth because it provides the location and the ease
with which the country could produce for the domestic market and for export, and
encourages the expansion of personal and commercial service industries such as
education, banking, transportation, and tourism. However, a most important question
still is: If the country is to continue its fast growthpattern, what changes or
adjustments are needed in the existing urban system, and to what degree?
Thailand provides an interesting and unique case in which a study can be made of the
linkages between rapid economic growth and the process of urbanization. On the one
hand, the two-digit growth rates in the last three years of the 1980s might be
considered very high, but not out of ordinary because similar growth rates (even
higher) had also been achieved by such countries as Korea, Taiwan, and Singapore.
On the other hand, Thailand possesses several unique physical, demographic, and
economic characteristics that make such a study interesting. For example, despite its
being labelled an upcoming newly industrializing country (NIC), Thailand still has
two-thirds of its population employed in the agricultural sector, where the per capita
value-added is less than 10 per cent of the per capita value-added of the industry and
service sectors. Thailand has only one large city, Bangkok, whose extreme primacy is
already well known, and the level of urbanization is still low compared with other
countries at the same level of economic development.
In many respects, the growth of Thailand is seen as the growth of Bangkok, and vice
versa.1 Bangkok provides a powerful growth engine that propels the whole economy
forward. In an era of rapid international communications, Bangkok could serve as an
important growth centre of the Asia-Pacific region, particularly the Indo-China or the
Golden Peninsula region. That Bangkok has become a world city is widely accepted,
but how can Bangkok share its wealth and prosperity with other cities in the nation?
How well has Bangkok provided growth linkages with other regions? How tenable is
the situation in which Bangkok prospers while the rest of the country or much of it is
still poor? What are the costs of growth and prosperity as far as Bangkok and the rest
of the country are concerned? What kinds of changes are pertinent in the urban system
under the rapid economic growth of Thailand? These are a few of the questions that
will be raised and discussed in this chapter.
Before the changes in the urban system in Thailand are discussed, the next section will
briefly discuss the pattern of growth and transformation of the Thai economy in the
past three decades, especially in the last half of the 1980s, to give a broad picture of
how Thailand slowly changed from a rural-based society to an increasingly urban-
based society. The third section describes the overall patterns and trends of
population, urbanization, and employment by location and sector, providing the
background against which specific aspects of the urban system in Thailand can be
analysed. The fourth section looks at the international dimension of the changes in the
urban system, particularly the involvement of foreign trade, investment, and tourism,
whereas the fifth section is concerned with the internal or domestic dimensions of
such changes as changes in household income, regional inequality, rural and urban
poverty, and so on. The sixth section considers the growth and urbanization of
Bangkok in the context of the Thai economy. Its urban development conditions will be
discussed, its major urban problems analysed, and some specific measures for coping
with existing and expected problems evaluated. Finally, the above changes in the
urban system under rapid economic growth form the basis upon which a future
national urban development policy could be built and operated.
Growth and transformation of the Thai economy
The modern era of the Thai economy began with the launching of its first National
Economic Development Plan in 1961. Prior to that, the economy was expanding at a
rate of 2-3 per cent a year, with rice being the most important crop in domestic
production and export. A few other crops and other primary products joined rice as
major foreign exchange earners for Thailand, namely, rubber, maize, kenaf, cassava,
teak, and tin. From the beginning of the first Plan, the government decided to play an
active but different role in the systematic process of economic development compared
with its role in the 1950s. It did so by concentrating on the provision of the necessary
infrastructure for the economy, and allowing the private sector to lead the economy
through private investment and transactions.
The Thai economy has been growing well since the launching of this first Plan. The
growth rate of GDP in the first 10 years between 1960 and 1970 averaged about 7.9
per cent per annum. Across sectors, industrial activities (which included
manufacturing) grew the fastest, at 10.9 per cent per annum. Agricultural growth was
lower at 5.5 per cent, but this was still higher than its historical trend. The service
sector consequently benefited from the growth in both agricultural and industrial
sectors.
During the second decade of systematic development, the overall economic expansion
became slower. The GDP growth rate during 1970-1980 averaged about 6.9 per cent
per annum. Still, this was a satisfactory rate of growth, with all sectors performing
well across the economy. The early 1980s were of course the period of world
recession, which also affected the GDP growth of Thailand. In 1985, GDP grew at 3.5
per cent over the previous year. Although this was one of the lowest growth rates ever
experienced in Thailand, it is still considered to be quite satisfactory during a time
when many other successful economies were experiencing zero or negative growth
rates. In 1987, however, there was a dramatic economic upturn, and the trend
continued in 1988 when a growth rate of 13.2 per cent was achieved. This has been
the highest growth rate ever experienced in modern Thai economic history.
The economic transformation between agriculture and industry had taken place even
before the first Plan, but the process was heightened when the economy entered the
modern era in 1961. The share of agriculture in total GDP in 1960 was estimated at
about 39.8 per cent. This share was progressively reduced to 28.3 per cent in 1970,
25.4 per cent in 1980, and finally to about 15.0 per cent in 1989. Over the same
period, the share of industry increased from 18.2 per cent in 1960 to about 37.5 per
cent in 1989, with manufacturing being the most important component in industrial
development. Based on this simple index of relative productive contribution, the share
of the manufacturing subsector in GDP surpassed that of the agriculture sector around
1984. For some, this is regarded as an important turning point in Thailand's economic
development on its road to becoming a full-fledged NIC.
It should be noted that, although the share of the industrial sector in GDP continued to
increase, this growth in production and income was not matched by a growth in
industrial employment. In other words, the economic transformation from agriculture
to industry occurred only in terms of value-added, but not much in terms of
employment. As will be discussed in detail later, despite almost three decades of
active development, an overwhelming proportion of the population were still engaged
in agriculture. For example, the census data showed that, in 1960, 82.4 per cent of the
population were found in the agricultural sector, whereas the corresponding
proportion in the manufacturing sector was only 3.4 per cent in the same year. In
1980, the agricultural population was still very high at 72.5 per cent. The latest labour
force survey for 1988 put the proportion of the agricultural population at 66.4 per cent
and the industrial population at 18.8 per cent. With the share of agriculture in 1988
GDP standing at 16.4 per cent and industry at 34.0 per cent, respectively, it is not
difficult to see the "imbalance" in the economic development of Thailand.
Urban population, settlement patterns, and employment distribution
Before looking into the way in which and the extent to which the above overall
growth and economic transformation affect the Thai urban system, two of the most
important characteristics of the urban system will be discussed. They are the structure
and settlement patterns of the urban population, and the locational distribution of
employment.
The urban population and its settlement patterns
One of the most often quoted statements about Thailand's urbanization found in most
literature on the subject is that the level of urbanization in Thailand is quite low in
comparison with other countries at the same development level. Although this
statement is generally true, it is not quite accurate and could be misleading. The fault
lies with the strict counting of municipal areas as urban areas or urban places, and all
the rest as rural areas. As Penporn (1990) convincingly argues, using municipal areas
to denote urban places seriously underestimates the degree of urbanization in
Thailand. This is mainly because, on the one hand, the number of municipalities has
increased very slowly in the past 30 years, and, on the other hand, many sanitary
districts2 have grown larger than 5,000 population and a minimum average density of
1,000 persons per km2 but have not been converted into municipalities. In 1960, for
example, the number of municipalities throughout the country was 120. In 1988, only
12 more areas were added to the rank of municipalities. In contrast, compared with
1975, the number of sanitary districts with over 5,000 population and the required
population density increased from 305 to 528. It is more appropriate, therefore, to
define these large sanitary districts as urban areas or urban places and their residents
as urban population.
The detail of the size and distribution of the urban population and urban places can be
seen from a series of tables produced by Penporn (1990), In table 9.1, for example, the
size of the urban population and the number of urban places by region and urban
status are presented. The table shows that in 1988 there were about 15.8 million
people living in 660 urban areas or places in Thailand. The urban population living in
Bangkok Metropolitan Area as a percentage share of the total population in all
municipal areas was high at 57.2 per cent in1988 but, when all urban sanitary districts
are counted as urban areas, this percentage drops to 36.2 per cent. The level of
urbanization in 1988 increases from 18.2 to 28.7 per cent when urban sanitary districts
are counted as urban areas. This is a more accurate figure for the level of urbanization
in Thailand.
Table 9.1 Size of the urban population and number of urban places by region and
urban status in Thailand, 1975-1988
Urban population ('000) Urban places (no.)

Region
1975 1980 1985 1988 1975 1980 1985 1988
Municipal areas
Bangkok 4,349 5,153 5,363 5,716 1 1 1 1
Bangkok Vicinity 192 210 251 438 8 8 8 8
Sub-Central 224 241 264 312 14 14 14 15
East 241 311 358 385 14 15 16 17
West 248 267 308 317 12 12 13 13
North-east 621 694 1,057 1,115 21 21 25 26
North 589 675 819 830 24 24 25 25
South 590 713 806 876 25 25 25 27
Whole kingdom 7,054 8,264 9,226 9,989 119 120 127 132
Urban sanitary districts
Bangkok - - - - - - - -
Bangkok Vicinity 380 507 648 821 22 28 31 33
Sub-Central 293 328 358 353 31 33 34 34
East 290 375 496 549 23 31 39 45
West 295 417 482 503 32 43 46 47
North-east 878 1,267 1,578 1,829 96 126 162 189
North 786 1,041 1,239 1,422 81 101 123 142
South 172 228 298 314 20 26 34 38
Whole kingdom 3,094 4,163 5,099 5,791 305 388 469 528
All urban places
Bangkok 4,349 5,153 5,363 5,716 1 1 1 1
Bangkok Vicinity 572 717 899 1,259 30 36 39 41
Sub-Central 517 569 622 665 45 47 48 49
East 531 686 854 934 37 46 55 62
West 543 684 790 820 44 55 59 60
North-east 1,499 1,961 2,635 2,944 117 147 187 215
North 1,375 1,716 2,058 2,252 105 125 148 167
South 762 941 1,104 1,190 45 51 59 65
Whole kingdom 10,148 12,427 14,325 15,780 424 508 596 660
Source: Penporn (1990:table 2).
However, it must be observed that, although the urban population share of Bangkok as
a region in the total urban population declines over time, this says nothing of the
concentration of urban population in Bangkok as a city, which is still as high as ever.
The primacy index - defined as the ratio of the population of the largest city (in this
case the Bangkok Metropolitan Area) over the population of the next three largest
cities combined - may have fallen from 17.1 to 10.7 between 1980 and 1988, but this
urban concentration is still very startling. 3 Moreover, since the above figures were
derived by using the population of Bangkok Proper or BMA, and not including those
in the surrounding cities that now form part of Greater Bangkok or Bangkok
Metropolitan Region (BMR), this primacy index could go higher if the integrated
Bangkok population figure were used for computation.
Although the overall level of urbanization in Thailand is considered relatively low, the
rate of urban population growth is considered quite high. The average annual rate of
growth of the urban population between 1975 and 1980 was 4.06 per cent, whereas
the rural population grew by only 1.37 per cent each year. Between 1980 and 1985,
the urban population growth rate became slower at 2.82 per cent, but this is still faster
than the growth rate of the rural population for the same period. During the three-year
period 1985-1988, the urban population growth rate rose again to 3.23 per cent while
that of the rural population fell. These trends are likely to continue. It should be noted
also that the fastest-growing areas in terms of urban population occurred in the
Bangkok Vicinity areas and the surrounding Central region, attesting to the fact that
these are dynamic areas of future urban development.
Finally, Penporn (1990) also provides information on the settlement pattern of the
urban population by looking at the distribution of the urban population by size of
place (under 10,000, 10,00049,999, 50,000-999,999, and 1 million and over).
Between 1975 and 1988, municipal areas and urban sanitary districts with a
population size of between 50,000 and 1 million grew in significance, rising from a
share of 9.1 per cent of all urban areas in 1975 to 15.3 per cent in 1988, whereas the
share of the largest urban areas (over 1 million) had reduced from 42.8 to 36.2 per
cent. In terms of the growth rate of these urban areas, the average annual growth rates
between 1975 and 1988 of the four different sizes of urban area were, respectively,
3.02, 3.78, 7.67, and 2.13 per cent. This again confirms the increasing importance of
urban areas with population sizes between 500,000 and 1 million.
Employment distribution
Because employment is one of the most important determinants of living location, the
employment pattern can depict something about the existing urban system. More
specifically, as agriculture is closely associated with rural areas, whereas industry and
services are more closely associated with urban areas, changes in employment in these
sectors could be useful in the study of the nature and scope of urbanization. In this
respect, the employment distribution over time would be helpful to this study of the
changing urban system.
As a part of his study in the National Urban Development Policy Framework project,
Jittapatr (1991) gave a summary account of how sectoral employment in Thailand is
distributed. In table 9.2, the numbers of people employed in three traditional sectors,
namely, agriculture, industry (mainly manufacturing and utilities), and services are
presented for three time-periods, 1980, 1984, and 1988. In 1988, for example, the
relevant figure shows that Thailand had about 29.5 million workers employed in the
three sectors. This labour force represented about 53.9 per cent of the total population,
an increase from 50.7 per cent in 1975.
The proportion of population employed in the agricultural sector was still very high at
66.4 per cent in 1988. This represents only a small decline in percentage share from
70.4 per cent in 1980. As for the manufacturing and service sectors, the employment
shares were 11.3 and 22.2 per cent, respectively, in 1988, which is not very large
considering the existing stage of economic development and transformation in
Thailand. However, this employment situation is changing quickly. The rate of
employment growth in the manufacturing sector increased substantially from 7.1 per
cent during 1980-1984 to 27.1 per cent during 1984-1988. The corresponding rates of
growth in the service sector for the same time-periods were 13.4 and 34.8 per cent,
respectively. A closer look at employment growth across regions reveals that most
employment growth took place in Bangkok and the areas surrounding it. Again, this
reaffirms the significance of Bangkok and its environs as a major source of industrial
growth.
Projections of population and urbanization

The study of national urban development policy in the seventh National Economic
Development Plan called for the research team at the Thailand Development Research
Institute (TDRI) to make a forecast of Thailand's population and level of urbanization
at least until 2010.4 TDRI has developed its own projection model, and the result of
the forecast is shown in table 9.3.
Table 9.2 Employment by major sector, 1980-1988 ('000)
Agriculture Manufacturing, Services Total employment

utilities, and
Region other industry
1980 1984 1988 1980 1984 1988 1980 1984 1988 1980 1984 1988
Bangkok 186 126 77 822 794 933 1,389 1,475 1,848 2,397 2,395 2,858
5 381 385 641 225 314 427 195 281 409 801 980 1,477
Provinces
Centre 2,362 2,627 3,097 501 501 638 823 728 1,206 3,686 3,856 4,941
North 3,910 4,433 4,581 295 417 535 712 860 1,099 4,917 5,710 6,215
North- 7,236 7,811 8,904 316 295 438 703 881 1,108 8,255 8,987 10,450
east
South 1,930 2,060 2,277 290 298 363 464 624 883 2,684 2,982 3,523
Missing 164 5 11 179
Total 16,005 17,606 19,577 2,449 2,624 3,334 4,286 4,860 6,553 22,740 25,089 29,464
Source: Jittapatr (1991:table 2-1).
TDRI estimated in 1990 that the population of Thailand would increase by 15 million
or about 26 per cent in the next 20 years, from 56.1 million in 1990 to 71.1 million by
the year 2010. The average annual predicted population growth rate for the kingdom
was 1.42 per cent during 1990-1995 and 1.19 per cent during 1995-2010. This is
slightly lower than the rate in the recent past and significantly lower than the rate of
increase in the decades prior to 1980.
For the BMR, the population was estimated to increase from 8.9 million to 12.6
million over the next 20 years, or an average increase of 16.3 per cent. Even more
striking are the projected increases for the extended BMR, which includes BMR,
Ayutthaya, Sara Buri, Chachoengsao, and the eastern seaboard areas. The population
within this geographical area will grow from 12 million to 17 million, and increase its
share of total population from 21.5 per cent in 1990 to 24.3 per cent by 2010.
The urban population of the BMR is composed of the population living in the BMA,
which is 100 per cent urbanized according to the geographical definition, and those
living in the surrounding five provinces. The urban population of the BMA was
expected to grow at about 1.5 per cent per annum between 1990 and 2000, and 1.1 per
cent between 2000 and 2010. This rate is much lower than the growth rate of the
urban population of the five adjacent provinces, which was expected to be about 3.6
per cent during the first decade of the twenty-first century. In number terms, the urban
population of the five provinces will increase from 1.5 million to 3.5 million, that is,
more than double within 20 years. In percentage terms, the urban population in the
five provinces will increase from 54.1 per cent to 75.8 per cent between 1990 and
2010. Within the BMA itself, however, much of the population growth will occur in
the urban fringes rather than in the central core area, where population densities have
decreased slightly over the past several years.
Urbanization rates throughout the country will change less dramatically than within
the BMR. Only the Eastern region was projected to have more than half of its
population living in urbanized areas by the year 2010. The percentage of urban
population in the North is next largest at 37.5 per cent, followed by the West at 34.7
per cent. The North-east and the South will remain the least urbanized with
urbanization rates of 32.9 and 32.1 per cent, respectively, by the year 2010.
Table 9.3 TDRI projected urban, rural, and total population by region in
Thailand, 1990-2010 ('000)
Region 1990 1995 2000 2005 2010

BMA
Total population 6,162 6,679 7,149 7,577 7,977
Urban 6,162 6,679 7,149 7,577 7,977
% urban 100.0 100.0 100.0 100.0 100.0
Growth rate: urban 1.61 1.36 1.16 1.03
Vicinity
Urban 1,519 1,944 2,418 2,928 3,468
Rural 1,289 1,275 1,238 1,179 1,107
% urban 54.09 60.38 66.15 71.30 75.81
Growth rate: Total 2.74 2.54 2.33 2.16
Urban 4.94 4.36 3.83 3.39
Rural - 0.21 -0.61 - 0.97 - 1.26
Upper Centre
Urban 770 906 1,056 1,214 1,377
Rural 1,985 1,993 1,983 1,949 1,893
% urban 27.96 31.26 34.74 38.38 42.11
Urban 3.25 3.05 2.79 2.52
Rural 0.09 - 0.11 -0.34 - 0.58
East
Urban 1,171 1,474 1,821 2,206 2,617
Rural 2,320 2,359 2,363 2,328 2,254
% urban 33.55 38.44 43.52 48.66 53.73
Urban 4.60 4.24 3.83 3.42
Rural 0.34 0.03 -0.30 -0.65
West
Urban 860 974 1,097 1,227 1,358
Rural 2,393 2,459 2,512 2,548 2,560
% urban 26.44 28.38 30.40 32.49 34.66
Urban 2.49 2.37 2.23 2.03
Rural 0.54 0.43 0.29 0.09
North-east
Urban 3,463 4,330 5,342 6,490 7,728
Rural 15,858 16,178 16,299 16,191 15,788
% urban 17.92 21.11 24.68 28.61 32.86
Urban 4.47 4.20 3.89 3.49
Rural 0.40 0.15 -0.13 -0.50
North
Urban 2,567 3,051 3,575 4,132 4,714
Rural 8,237 8,313 8,269 8,111 7,861
% urban 23.76 26.85 30.18 33.75 37.49
Urban 3.45 3.17 2.89 2.64
Rural 0.18 -0.11 -0.38 -0.63
South
Urban 1,513 1,891 2,314 2,798 3,340
Rural 5,975 6,379 6,674 6,910 7,074
% urban 20.20 22.86 25.74 28.82 32.08
Urban 4.46 4.04 3.80 3.54
Rural 1.31 0.90 0.70 0.47
Whole kingdom
Urban 18,114 21,379 24,950 28,802 32,579
Rural 37,968 38,827 39,160 38,987 38,537
% urban 32.30 35.51 38.92 42.49 45.81
Urban 3.32 3.09 2.87 2.64
Rural 0.45 0.17 - 0.09 -0.38
Source: Adapted from Teera (1990).
Finally, TDRI also predicted that in the next 20 years, the BMR and the Eastern region
would be the only regions to receive net in-migration from all other regions in the
country. The detail of this future net migration pattern is shown in table 9.4. It can be
seen that, between 2005 and 2010, about 116,000 and 316,900 in-migrants will be
received in the East and in the BMR, respectively. By that time the rural population in
most parts of the country will have declined in absolute numbers. If this is true, then
Thailand could be called a largely urban society within 20 years or so.
To conclude, it seems clear that Thailand is slowly but firmly moving away from an
agrarian economy into an industrialized or at least semi-industrialized economy.
Economic growth and transformation, of course, have had a great deal of influence
upon the existing rural-urban configurations, and the increasing process of
urbanization. To what extent have these conditions been brought about by exposure to
international linkages and contacts? To what extent was the change in the urban
system a direct result of some internal or domestic policy and pressure? These
questions will be discussed in the following sections.
Table 9.4 TDRI projected net in-migration to the Eastern region and the BMR,
1990-2010 ('000)
Region
Period
East BMA Five Provinces BMR
1990-1995 94.5 124.3 181.9 306.2
1995-2000 105.2 115.0 194.9 310.0
2000-2005 111.3 108.1 206.2 314.3
2005-2010 116.0 103.5 213.4 316.9
Source: Adapted from Teera (1990: table 2.9).

Socioeconomic Transformations in Shanghai

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Socioeconomic Transformations in Shanghai

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Socioeconomic transformations in Shanghai (1990–2000):

Policy impacts in global–national–local contexts

Zhigang Lia and Fulong Wu , b,

Available online 15 June 2006.

Keywords: Globalization; Shanghai; China

-The effects of globalization on the urban system in China

Table 7.7 Foreign direct investment in cities by region, 1990

Source: China Urban Statistical Yearbook, 1991.

Table 7.8 Foreign direct investment in cities by city size, 1990

Source: China Urban Statistical Yearbook, 1991.

Table 7.9 Top 20 cities for foreign direct investment, 1990

City Province City size Foreign direct

Source: China Urban Statistical Yearbook, 1991.

Table 7.10 Distribution of the source of foreign direct investment in Shenzhen

Sources: Shenzhen Statistical Yearbooks; Guangdong Statistical Yearbooks; Shanghai

Shenzhen is small, whereas foreign investment in Shanghai tends to be large. This is

Table 7.11 Distribution of foreign direct investment by sector in Shenzhen and

Sector Shenzhen Guangdong Shanghai National

Sources: Shenzhen Statistical Yearbooks; Guangdong Statistical Yearbooks; Shanghai

Problems of urban development under the open policy

The open policy, particularly the introduction of foreign investment, a commercial

The Institute of Urban and Rural Economic Development in the Ministry of

Urban land use and development control

The open policy, particularly the introduction of foreign investment, a commercial

The Institute of Urban and Rural Economic Development in the Ministry of

Urban land use and development control

The worsening situation of passenger transport can be attributed to the failure to

Traffic congestion is getting worse in the cities. There is an increase in commuting

Environmental degradation is an increasingly serious problem in China. Although the

Policy implications and future trends in urban development

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Fan, C. Cindy (1992), "Foreign Trade and Regional Development in

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Kwok, R. Y. (1988), "Metropolitan Development in China: A Struggle Between

Ma, Shiaoling and Qiang Binhuan (1988), "Environmental Management of Village

Ministry of Civil Affairs (1986), Administrative Districts Handbook of the People's

Phillips, D. R. and A. G. O. Yeh (1990), "Foreign Investment and Trade - Impact on

Skinner, G. William (1977), "Regional Development in Nineteenth Century China."

STB [State Statistical Bureau] (1990), The Forty Years of Urban

_____(1991), China Statistical Yearbook 1991. Beijing: State Statistical Bureau.

Xu, Xueqiang (1984a), "Characteristics of Urbanization in China - Changes and

Xu, Xueqiang, Hu Huaying, and A. G. O. Yeh (1989), "Factorial Ecological Study of

Yeh, Anthony Gar-on and Fulong Wu (forthcoming), "Internal Structure of Chinese

Yeh, Anthony Gar-on and Xu Xueqiang (1984), "Provincial Variation of Urbanization

_____(1990a), "Changes in City Size and Regional Distribution 1953-86." In: R. Y.

_____(1990b), "New Cities in City System Development in China 1953-86," Asian

Zhou, Yixing (1991), "The Metropolitan Interlocking Region in China: A Preliminary

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Global influences on recent urbanization trends in the Philippines

Table 8.1 Urbanzation trends in the Philippines, 1948-1990

1948 1960 1970 1980 1990

Contents - Previous - Next

Recent urbanization trends

Fig. 8.5 Global influences on urbanization in the Philippines (FOR NV = foreign

A simple model for examining global influences

The analytical model

URBSHRrt = URBSHRrt (GLBLSHRrt-1, LCLSHRrt-1) (1)

GLBLSHRrt = GLBLSHRrt (URBSHRrt, LCLSHRrt, STRCSHRrt) (2)

LCLSHRrt = LCLSHRrt (URBSHRrt, GLBLSHRrt, STRCSHRrt) (3)

URBSHRrt - share of total urban population by region r in time t

GLBLSHRrt - share of total global factor influence present in region r at time t

LCLSHRrt - share of total local influence present in region r at time t

STRCSHRrt - share of total structural facilities in region r at time t