Seeker Blog

Typical McKinsey — four scenarios and great graphics. In this just-released study “Meeting the challenges of China’s growing cities” the McKinsey team concludes that the best combination of high GDP growth and lower environmental impact is to encourage the growth of supercities with populations of 20 million or more, and by hub-and-spoke clusters of small and midsize cities growing around the largest one. The current urbanization trend is towards small and midsize cities growing by incorporating neighboring land and their resident populations.

Here’s a sample of the recommendations: The benefits of concentration

Actions taken today will shape China’s urban landscape irreversibly and affect the lives of vast numbers of people for years far beyond the scope of this study. Our interviews, models, and analysis show that a plan pushing China toward a more concentrated approach to urban development—the supercity or hub-and-spoke scenarios—delivers the optimal trade-off between the benefits and burdens of urbanization.4 Such a policy, however, would require a deliberate shift from the current development pattern: disproportionate growth in midsize urban areas.

In China, unlike many other countries, the largest cities—especially Shanghai—have performed better than smaller ones since the 1990s. We find no indication that this pattern will change. Apart from the natural efficiencies created by scale, large Chinese cities have the advantage of municipal leaders who are seasoned administrators promoted within the political system after running smaller cities, provinces, and even ministries. Upward movement has been based largely on achievement, particularly the promotion of GDP growth, and the best administrators have been channeled to the biggest cities.

Size also brings intrinsic advantages. Drawn by the superior infrastructure of China’s largest cities and their sizable market, multinationals have flocked to these urban centers, introducing more intense competition, new technologies and business practices, and higher-value-added jobs. Over the past 15 years, these cities have therefore attracted the lion’s share of foreign direct investment. Since Chinese companies there face greater competition at all levels, they must constantly improve their performance and can more easily create economies of scale because of the huge market at their doorstep. By 2025, these and other factors would drive GDP per capita about 20 percent higher under a concentrated approach to urbanization than under other scenarios. A dispersed approach—the distributed growth and small-city scenarios—would dilute these effects considerably.

What’s more, city governments finance education in China, and the largest cities can afford the best quality. Twenty-eight of the country’s top 40 universities are in the six biggest cities—18 in Beijing and Shanghai alone. The quality of education would improve as these institutions continued to flourish. Their graduates, other educated Chinese, and foreign talent are attracted to the brand-name employers and amenities of these cities; in Shanghai, for example, about a quarter of the workforce has a college education. While some small and midsize cities could develop excellent universities or provide attractive lifestyle amenities, a great many more would be starved for talent under the dispersed scenarios, since there would be more of these cities in the first place.

Concentrated approaches also create the greatest energy efficiencies; under the supercity scenario, for example, Chinese cities would use energy 18 percent more efficiently than they would under the distributed-growth scenario. For starters, the types of industries that settle in the largest cities tend to be more energy efficient—services and electronics rather than steel and textile mills, say. In addition, people there tend to live and work in smaller spaces, which require less energy for heating and lighting, and energy-saving initiatives (such as insulation) are easier to implement in a smaller number of bigger buildings than in a larger number of smaller ones.

To be sure, environmental concerns present a mixed picture and represent the greatest drawback of the concentrated approaches to urbanization. On the one hand, more farmland would be preserved. Water pollution would be mitigated, too, since China’s largest cities, which come under greater pressure from residents who tend to be wealthier and more demanding and from the central government, have enforced wastewater-treatment measures relatively strictly.

On the other hand, wealthier people use more water, and the concentrated approaches would further exacerbate China’s water supply problems. While air pollution will remain a concern in any case, peak-hour pollution in the biggest cities would be worse in the concentrated scenarios, even though in the country as a whole, emissions would be lower. (Nitrogen oxides emitted from automobiles will be the main source of pollution in the largest cities.) Traffic congestion, which could cripple many urban areas, would also be a more serious problem; by 2025, traffic in Shanghai could be three times the city’s road capacity, even considering planned improvements. That kind of congestion could hamper a city’s overall productivity by reducing available working hours.