Lessons from China: Central Planning and Satellite Cities in the Design of Smart Cities

By John Niehaus

During our Smart Cities discussion, I was reminded of a series of conversations that came up during my IXP trip to China a few weeks ago.  With around 18-20 million Chinese migrating from the countryside to the cities each year, urbanization is a key focus for the Communist Party.  During our class discussion on Smart Cities, we debated the point of just how applicable PlanIT Valley is to urbanization in the real world.  Sure, perhaps PlanIT Valley can succeed as a city of just a few thousand people, but are its results replicable on a larger scale?

If China chose to, it could build Smart Cities of millions of people because the Communist Party has a great deal of influence over where new housing developments are built and, more broadly, where new cities are built.  One concept which was mentioned in several of our meeting was the concept of “Satellite Cities” which the Communist Party has been encouraging.  The concept is to build a series of smaller cities about an hour or so outside of the major Chinese cities (Beijing, Shanghai, Chongqing, Guangzhou, etc) rather than deciding to build a city in the middle of the countryside.  Presumably, this will allow the government to leverage much of the existing infrastructure (water, electricity, highways, trains, etc) and give people the opportunity to work for companies in both their satellite city or in the major city itself.

While much of the West criticizes the sometimes authoritarian rule of the Communist Party in China, this example, to me, illustrates one of the great strengths of the Community Party, which is its ability to think long-term about the best interests of the country and implement public policy with minimal oversight from the general public.

In fact, one of the Americans that we met with in China, who has been in China for the last 20 years, said America itself could use some more “Central Planning” sometimes.  However, the American public is greatly averse to the thought of “Central Planning” in the post-Cold War era.  As part of President Franklin Delano Roosevelt’s “New Deal,” in an effort to combat unemployment and boost the economy, Roosevelt created a series of federal agencies, including the Tennessee Valley Authority in 1933 (still in existence today) to provide flood control and electricity generation in Tennessee and its neighboring states.  This was arguably the height of Central Planning in the US, with much of the power grid and national highway system being laid in the next couple of decades.

Today, high profile events like the levees in New Orleans breaking during Hurricane Katrina, the flooding of downtown Manhattan during Hurricane Sandy, and the lack of a true high speed train in the US point to a lack of infrastructure investment over the last few decades.  Clearly, there are other national budgetary restrictions at work here (Medicare, Social Security, the wars in Iraq and Afghanistan, etc), but I think it does raise the question of whether a democracy like the US can take the long-term view to invest in infrastructure and new cities (or hopefully Smart Cities) when it is necessary.

3 thoughts on “Lessons from China: Central Planning and Satellite Cities in the Design of Smart Cities

  1. As the population grows aligned with the economic and social development, urbanization indeed becomes a key focus for the Central government of China. When discussing the pros and cons of central planning, one has to take the context into account. Or in another word, to take the Great Leap Forward as a comparable is inappropriate, as the challenges facing the government and China as a whole country have shifted tremendously from that of the 1950s. In addition, with the respect that the central/local governments remain so powerful and influential in today’s China, there’s no way that they can plan “centrally” without an understanding of the market, or in another word, there’s no way that they will make the same mistakes as the one their predecessors made during the Great Leap Forward. In my opinion. to utilize the concept and the practice of “Smart City” more effectively in China, the policymakers at the central level of the government should be responsible for plan centrally for the fundamentals/infrastructure and etc., or alternatively, to provide the outline of the plan instead of detailing out what goes to where particularly.To invite the players from the private sector can be crucial – calling for a healthy development of PPP, to leave the detailed planning and development to the primitive drive of the market.

  2. During our discussion of smart cities, I, too was reminded of our IXP in China. I found the idea of satellite cities to be a very interesting solution to China’s rapid urbanization and I appreciate the long term view and relatively effective policy implementation of the Communist Party. However, I can’t help but think that there are many consequences to their approach to development. They are able to move with such speed in part because they are not bogged down by things like property rights or dealing with the various regulatory bodies that can be frustrating in the US but ensure accountability of the manufacturers and contractors.

    Satellite cities aside, I’m not convinced many of the Chinese infrastructure investments actually impact those who need them the most. The bullet train is exciting, but I find it almost disappointing to see such impressive feats of engineering minutes away from slums.

    That being said, you raise some very interesting points about infrastructure in the US. I think American infrastructure is often undervalued and taken for granted because our improvements are small and boring compared to those made in other parts of the world. However, I agree that we are not investing well for the long term, and events like Sandy and Katrina have made it painfully clear that these small improvements will not be enough for long. And yet, with our other (and seemingly more pressing and politically charged) financial obligations, it may take even more jarring incidents to make large investments in development a priority.

  3. Central planning can indeed be very powerful if we realize the pitfalls and work to mitigate them. Chinese authoritarian regime proved several times its ability do successfully deliver mega-projects that would not be accomplished in democratic countries. Chinese have long history of mega-projects starting with the construction of the Great Wall that was built by emperors over three centuries more than two thousand years ago or Xian Terracotta Army. More recent central planning triumphs include the Three Gorges Dam, Shenzhen developed from a village to 20 million inhabitants in 20 years, Shanghai Pudong, China beating the world in 2008 Beijing Olympics or building the world’s longest high-speed trail network within last few years.

    But look at the centrally planned Great Leap Forward that led to the starvation of millions or number of modern Chinese ghost towns (e.g. http://www.bbc.co.uk/news/magazine-19049254) where hundreds of thousands modern apartments stand empty.

    I think one of the main reasons why centrally planned projects fail is the lack of market understanding. It seems that the Chinese government learnt its lesson that people don’t want to move to the middle of nowhere and therefore the satellite cities are a step in the right direction. To break the chicken and egg problem that people won’t move into new cities if there is no work and vice versa, the government has to provide incentives for companies to go into new centrally planned cities. Fortunately Chinese government has lots of experience doing this via special development zones, such as Shenzhen or more recently Chongqing.

    The model will however be very different than PlanIT Valley. PlanIT Valley is a playground for technologies to be tested before they are rolled out on large scale required by Chinese cities. Nobody will roll out unproven technology in a city for millions, but if a technology proves successful in a small city like PlanIT Valley, it is much easier to just scale it up. Producing these technologies in large quantities for China will significantly reduce their price which will in turn make them attractive even for other cities around the world.

    There are advantages to both central planning and organic market economy and a nation can flourish best if it can choose the appropriate system for each problem. Decades ago, USA was economically much more successful, because China was too centralized. Having markets rule the economy however results in lots of short-termism and unwanted cyclicality that trouble the western world.. With all the deregulation and opening of free markets in the last twenty years, is it possible that China is now reaching the optimal point to benefit from both central and market economy and that it is one of the main drivers of the spectacular continued growth that no western economist predicted?

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