Infrastructure Development and Urbanization in China

Abstract

The unprecedented infrastructure development in China has created huge opportunities for urban land development and economic activity. Recently, China has accelerated the construction of urban public infrastructure by investing as much as seven trillion Yuan ($1.03 trillion) during its 12th Five-Year Plan from 2011 to 2015. In this chapter, we provide empirical evidence on how different levels of infrastructure provision influence urbanization in China. By using a cross-sectional dataset from 650 Chinese cities, we examine the effects of infrastructure related determinants on urban expansion rates and urban land price. Additionally, we use the hedonic price model to explore the relationship between urban intra-infrastructure development and housing prices in the city of Shenzhen. The results indicate both intra- and inter-city infrastructure developments, including streets within cities, and inter-city express highways and railways connecting cities, have positive impacts on urban expansion. However, much of the convenience provided for intra- and inter-city commuters by streets, public transit and railways has not been capitalized into land price. In general, the findings clearly show that infrastructure has important effects on urban expansion rates, land prices, and subsequently, housing price. Finally, we examine whether recent infrastructure developments could help Chinese cities grow toward a sustainable future, and further discuss the challenges and critical issues associated with the current practice of infrastructure development in China.