~ Pergamon PIh S0264-2751(96)00044-3

Cities, Vol. 14, No. 2, pp. 71-75, 1997

© 1997 Elsevier Science Ltd
All rights reserved. Printed in Great Britain
0264-2751/97 $17.00 + 0.00

'Marketization' and institutions in

Chinese inner-city redevelopment:
a commentary of Lii Junhua's
Beijing's Old and Dilapidated
Housing Renewal

Daniel Benjamin Abramson

Tsinghua University School of Architecture, Beijing 100084, People's Republic of China

The redevelopment of Chinese cities is a rapidly evolving game, in which both rules and roles
shift with dizzying speed. The preceding article by Professor Lii Junhua raises the fundamental
issues facing the redevelopment of inner-city neighborhoods. In particular, she outlines the
impact of the emerging land market. For readers not familiar with the Chinese context, how-
ever, some extra background explanation may be desirable. Moreover, since some of the content
of Professor Lii's article was written in 1993, the dynamics of development in Beijing have
changed, though the basic problems remain as she described. This short article is intended to
clarify some of this background and transformation by drawing in greater detail on our plan-
ning experience, and by focusing on how the interests of some key players are expressed in
the gray zone between market and planned economy. © 1997 Elsevier Science Ltd.

Market impacts on planning knowledge
To begin with, our group's dual role as academics
and as planners for specific renewal projects deserves
some explanation for readers unfamiliar with Socialist
China. The combining of research and teaching with
practice has been a hallmark of the design professions
in China since 1949. In accordance with Mao's dic-
tum "theory from practice", and in order to meet the
enormous demands of development placed on a tiny
elite of trained practitioners, 1 architectural education
qn the US there are approximately 350 architects per million
population (calculated from AIA statistics, www.aia.org/
pubaffs/indfacts.html, 16 May 1996), compared with 30 architects
per million population in China (from Forhad Ullah Mohammed,
'A study of professional architects in Beijing and Hong Kong',
unpublished Master's thesis, Tsinghua School of Architecture, Beij-
ing, June 1994, p 61). In 1949, when the People's Republic was
founded, this figure had to be even lower. Cuthbert (1989)
described a scenario in which the architectural and planning pro-
fessions in Hong Kong might experience a similar acceleration of
training and overloading of responsibilities after they are 'absorbed
into the larger labour market' of mainland China after 1997.
has long emphasized basic practical knowledge and
experience over speculative research. In the schools,
most undergraduate architecture and planning stu-
dents begin work on actual construction projects
before their final (fifth) year. The aim has been to
prepare students to take on major project responsi-
bilities as soon after graduating as possible. Graduate
programs themselves are quite new. Tsinghua Univer-
sity's School of Architecture graduated its first doc-
toral degree holder less than 15 yr ago.
Throughout the 40yr following 1949, the pro-
fessional counterparts to the schools were not 'firms'
per se, but 'Design and Research Institutes' which
were as likely as the academies to carry out research.
Research was geared toward adjusting design and
planning standards, better understanding user needs,
and exploring other ways of improving the product
of mass-organized construction. However, since the
1992 building boom and the ability of development
agencies and land-use-right-holders to profit by it,
these institutes have had little time to do research, and

71
 'Marketization' and institutions in inner-city redevelopment: Daniel Benjamin Abramson
have begun to behave more like professional firms in
the West. Meanwhile, at the schools, both faculty and
graduate students continue to rely on actual projects
for their research topics and funding, even as the con-
trolling authorities of these projects are increasingly
less interested in the social object of research.
The changed nature of the client is more fundamen-
tal a condition than the demands of increased con-
struction volume or the even the financial motivation
of the planning units themselves. In the 40 yr since
1949 the professed singular and common motivation
of both planning and development units to improve
the general social welfare allowed planning research
and planning practice at least to appear to be a seam-
less enterprise. With profit-making development
agencies becoming the client after the mid-1980s,
however, the margin for conflict over research
agendas is much wider, and the time available to plan
a project has decreased sharply. 2
In each of the case projects described in the pro-
ceeding article, for example, our group conducted site
and resident surveys almost despite the developer,
rather than with the developer's support. The devel-
oper needed to know the site's existing demographic
features, housing and tenure conditions and owner-
ship structure in order to calculate compensation and
relocation costs. Such detailed information as the
orientation of the residents' windows would become
factors in pre-demolition negotiations between the
developer and residents. Our group, on the other hand,
wanted to use the opportunity to study resident needs
and aspirations, social behavior in public space, and
other information that might allow us to conserve
more of the existing environment, that might inform
our designs for new construction, and that ultimately
might even inform renewal policy. Indeed, our group
has been using these projects as case studies for a
Ministry of Construction policy research program
whose grant funding was too small to support an
entirely independent study. Our interest, then, was
essentially to enhance our influence over policy, and
to leave a worthy mark on the city's social and archi-
tectural features.
Conflicts arose when our survey work interfered
with the developer's negotiating position. This could
occur in two ways: (1) by revealing that a redevelop-
ment project was about to take place imminently (the
decision to redevelop never involves the residents),
2It is impossible to identify an exact date on which development
agencies were transformed into profit-making entities. However,
the shift from the 1977 policy of 'unified construction' to the policy
of 'comprehensive development' in 1984 is a useful marker (see
CMHC, 1997). At the Second Plenary Session of the Sixth National
People's Congress on 15 May 1984, Premier Zhao Ziyang pro-
posed that "Urban residential districts ... should be contracted by
development corporations . . . . Such contracting companies should
be guaranteed the status of a legal entity and enjoy necessary inde-
pendence. While administering quality inspection and financial
supervision, authorities of a higher level should not interfere with
their normal business activities" (Lin, 1988).
72
which knowledge would then allow existing residents
to prepare their own bargaining positions, and could
even precipitate an influx of new 'residents' eager to
be compensated and relocated to better housing; (2)
by arousing resentment against the whole concept of
the redevelopment. In the cases of Guan Yuan and
Chaoyangmen Nei, our survey was done well enough
in advance of redevelopment that neither of these
problems arose. At Deshengmen Wai, however, the
development agency had done its own preparatory
survey, and gave our group only the data it thought
necessary to do the physical planning. On the eve of
demolition of the first phase of the project, we decided
to conduct our own survey of resident conditions and
attitudes, and to witness the negotiation process in
action. Our exercise of academic freedom very
quickly ran afoul of the developers operations in this
microcosm of the market.
Developers, residents and the struggle for
inner city land
As the day of demolition approached for Deshengmen
Wai, the developer hired staff especially for the
negotiations, which were carried out between teams
of two or three developers' representatives and each
household separately. The whole contract-signing and
relocation process was to last only 9 days preceding
demolition, though in fact it dragged on with some
households even after demolition of others' houses
had already begun. All parties were under intense
pressure; should residents feel they were being treated
unfairly, there was a special court to handle disputes
set up in the developer's field office just across the
hall from the negotiating rooms. This is not to say
that all the advantages were on the developer's side;
by simple virtue of their presence, residents could add
costly delays to the project by becoming 'nail house-
holds' (dingzi hu) and remain in their houses even
after everything around them was demolished. In this
way, they sometimes could hold out for better com-
pensation in the form of larger apartments or extra
cash, but the strategy could also backfire and result
in their being forcibly evicted.
At this stage in the process, the developer refused
to deal with any form of residents' collective rep-
resentation, including the most well-established
neighborhood-level institution, the Residential Com-
mittee (jumin weiyuanhui or juweihui). Residential
Committees are generally required to act as the devel-
oper's agent during the planning and relocation pro-
cess. This reflects the development agencies' own ori-
gins as branches (construction agencies) of the
municipal or district government - - usually the Pro-
perty Management Bureau (fangguan ju) or the Urban
Construction Commission (chengshi jianshe weiyuan-
hui, or jian wei). However, at De-Wai, at the same
time as our group interviewed various households
about their attitude towards the impending relocation,
defiant residents called on the Residential Committee
 'Marketization' and institutions in inner-city redevelopment: Daniel Benjamin Abramson
to undertake collective bargaining. The Residential
Committee agreed to try, but was rebuffed, not by the
developer directly, but by the next level up in the
local government, the Subdistrict Agency, sometimes
also called the Neighborhood Committee or Street
Committee (jiedao banshichu) which provided full
support to the developer. Meanwhile, the developer,
as our client, barred us from further investigations on
the site for fear that we would further arouse the resi-
dents' anger.
What were the residents angry about? Those who
could not afford to buy units in the redeveloped site
were given options to rent apartments in new highrise
buildings only 3.5 km farther out from the city
center - - in fact not far at all compared to most relo-
cation projects - - and fully equipped with modern
kitchen and bath, which were completely lacking in
their old, makeshift one-storey houses in the De-Wai
neighborhood. However, from the small sample of
households we were able to interview, we learned that
many people fell through the cracks of the relocation
system. Some residents depended on self-built rooms
to accommodate family members, but this informal
space cannot be counted for compensation, so these
families would be forced to pay extra for a larger
apartment, or would have to split up. Others depended
for extra income on self-built shop space, which
would also not be available in the new highrise hous-
ing. One household had a member who for lack of
space in the home had to live at the factory where he
worked nearby, even though his household regis-
tration (hukou) was at the home address; failure to
occupy his officially registered address disqualified
him from being compensated with space in the new
housing, and yet, once his family's hukou was moved
to the new district, he would be barred from living at
the factory. (Such catch-22s are common when large-
scale renewal projects fail to account for the intri-
cacies of social bureaucracy.) Another major source
of discontent was having to leave a good location - -
an area with a good school, nearby hospitals, and con-
venient shopping - - to move to a relatively peripheral
and incomplete district. On a less concrete level, some
residents expressed grief at leaving their home of up
to three decades, even though all their neighbors were
moving together to the same new district. Finally, in
addition to the crude and swift way in which they
were uprooted, the displaced residents faced from
6 months to 3 yr of life in temporary barracks-like
housing before they could move into their perma-
nent apartments.
In fact, being one of the earlier renewal projects,
De-Wai included relatively convenient relocation
housing for its displaced residents. Since 1992, devel-
opment has consumed most of the land at Beijing's
urban periphery. The most recent relocation compen-
sation policy declares that developers who provide
relocation housing anywhere within approximately
20 km of the original neighborhood are not under any
obligation to negotiate compensation with residents
beyond basic compensation rates based on standard
formulas. Only when asked to move to Beijing's sub-
urban counties are residents entitled to extra compen-
sation through negotiation.
Market impacts on the social geography of
the old city
As L0 Junhua has pointed out, the driving force
behind relocation and the negotiation process is the
emerging land market and, in particular, the land price
differential between the city center and suburban
locations. During the time that our group worked on
the four case studies described in the preceding arti-
cle, Beijing's land market occupied a grayer area than
it does now. At that time, the government levied no
land use fee per se on the developer. Instead, in
addition to paying a variety of infrastructure fees and
taxes, the developer was usually required to build, at
no cost to the city, whatever important component of
the city's infrastructure happened to lie adjacent to
the project buildings. At De-Wai, for example, the
developer had to provide a very large highway
through the middle of the site in exchange for the
right to build there. Indeed, the drawing up of renewal
parcels by the Municipal Planning Institute often
expressly facilitated this linkage.
Today, however, the cost of land is charged directly
to the developer in the form of land lease rents, on
top of all the other fees and taxes. The amount is
decided through government developer negotiations,
but the city - - under strong central government super-
vision - - has established minimum-price guidelines
according to concentric zones around the city center
with the most expensive zone at the center. In another
official recognition of differential land values, the
government has established similar guidelines for
commodity housing prices and office space. These
guidelines explicitly distinguish between domestic
and foreign-invested projects. Foreign investors are
encouraged to participate in inner-city neighborhood
renewal, but they generally avoid areas with poor
traffic access, low height limits and the burdens of
the relocation process, and thus prefer areas outside
the historic center. The cumulative effect of price
guidelines, restrictions on credit for construction,
restrictions on conversion of agricultural land, and the
difficulties in leveraging foreign capital have all
served either to dampen the operation of the market
in urban neighborhood renewal, or to skew it towards
only the most luxurious sectors.
Indeed, both city planning officials and private
development consultants concede that the Old and
Dilapidated Housing Renewal Program no longer
exists as it was originally conceived - - as a program
using preferential land allocation and tax policies to
entice developers to rehouse inner-city residents, pref-
erably on-site. Only one element of the policy now
remains: developers receive a reduction in the land
lease price if they allow 30% of the original residents
73
 'Marketization' and institutions in inner-city redevelopment: Daniel Benjamin Abramson
Figure 1 The redevelopment of Ju'er Hutong builds upon
Chinese architectural traditions
to return after redevelopment. However, even this pol-
icy has been defeated by the market; in the Ju'er
Hutong neighborhood renewal project (Fig. 1), most
of the original residents who returned to own apart-
ments in the new housing have now rented out their
units informally to wealthy outsiders at rents far
higher than the preferential prices they themselves
paid. Returning original residents who buy their new
units at preferential rates are subject to strict resale
limitations. No resale is allowed within 5 yr of initial
purchase; after 5 yr, the developer, sponsoring work
unit or local property management bureau have first
option to buy the unit back at the original preferential
price adjusted for inflation. In the meantime, however,
renting out has proved much more difficult to control.
The owner simply claims the new occupants are his
friends, and collects from them a rent of as much as
10 times his salary every month, which is usually
enough to find acceptable housing elsewhere with
plenty to spare.
The 'draining' of original residents from Ju'er
Hutong by the shadow housing market is significant
in the annals of Beijing's inner-city neighborhood
renewal because this project is widely considered the
Figure 2 Low-cost, low-rise, high-density renewal housing
at Dong Nan Yuan
74
most successful compromise between the conflicting
demands of economy, social equity and preservation
of the city's architectural character. The project com-
bines profitable development, traditionally-inspired
design, quality construction, and a mix of original
residents and wealthier newcomers who live together
in a highly integrated environment. 3
The failure of the preferential policy for returning
original residents illustrates the power of the market
to appropriate such a central location as soon as its
environmental quality is improved.
There are projects which have succeeded in rehous-
ing original residents satisfactorily on-site, but these
have been built to standards too low to attract current
market purchasers, as at Dongnanyuan (see Fig. 2)
and Xiaohoucang, or have been built in unmarketable
locations, as at the Baizhifang Cooperative in
Xuanwu District. Planning officials and development
agencies generally spurn these models as being too
low standard or too unprofitable, but perhaps they
deserve a second look. As the market matures, devel-
opment companies and agencies will have to serve
more finely graded social classes and market niches.
A more diverse group of institutions than the current
class of developers will also have to emerge. The
Baizhifang cooperative represents one kind of new
arrangement. Ironically, the original non-profit stance
of the local government development agencies may
have to be revisited and incorporated in new, special
non-profit companies prepared to operate in a more
market-oriented economy.
Geographically, the city center may be able to
accommodate housing of different standards and
prices, though this situation is much harder to predict.
Lti Junhua raises the question of how much of the old
city the luxury market will consume, given wide-scale
rebuilding and improvements in infrastructure. If
Beijing is to maintain its historic low skyline in the
center, the value of housing there will be that much
higher. Ironically, the only way to relieve this press-
ure may be to slow the improvement of the old city
while improving other areas to the point where they
can compete with the old city on an equal basis in
the market. But after 40 yr of neglecting the old city
already, it will be difficult for both political leaders
and citizens to accept further delay. Historic charac-
ter, social diversity and modernization in the old city
appear pitted against each other, even as the old city's
overall development races with the development of
the rest of the city.
References
Abramson, D B (1994) New housing in old Beijing: a comparative
studies of projects to date, China City Planning Review 10.
CMHC (1997) Canada Mortgage and Housing Corporation
(CMHC), China Housing Market Report, Ottawa.
3 See Abramson (1994) for a fuller discussion of these points.
 'Marketization' and institutions in inner-city redevelopment: Daniel Benjamin Abramson
Cuthbert, A R (1989) Between two worlds: the environmental pro-
fessions in Hong Kong after 1997, Habitat International 13
145-146.
Lin, Z (1988) Comprehensive development of urban areas, Building
in China 1 3.

75