The long shadow of the state: financializing the Chinese city

Abstract

Despite controversy over the meaning of financialization, there are two major dimensions to understanding whether the city is financialized. This paper explores these dimensions in China, namely whether the Chinese city (increasingly) uses financial instruments to carry out its urban development tasks and whether the utilization of financial instruments imposes a financial logic on urban governance. Financing the Chinese city involves creating land collateral and financial vehicles, extending shadow banking, formalizing and securitizing local government debts, and "deleveraging" developers' debts through urban redevelopment. Applying land instruments leads to financial securitization, showing a financial logic in operation. However, financializing the Chinese city is engineered by the state through its credit expansion to cope with the Global Financial Crisis and the ramifications of the entrepreneurial model of the "export-oriented world factory." It is a state-led financial turn, in which the financial logic is imperative but may not occupy a central position.

Beyond Growth Machine Politics: Understanding State Politics and National Political Mandates in China’s Urban Redevelopment

“…Urban redevelopment is a task that must be done even if it may not generate economic benefits. From these cases, we have seen that the motivation of these urban redevelopment projects is complex and mixed, reflecting a governance mode of "state entrepreneurialism" (Wu 2018a) to achieve extra-economic objectives through a wide range of market or non-market means (Ghertner 2014;Wu 2020Wu , 2021. Neither is this an authoritarian regime that resorts to direct administrative intervention.…”

“…Market‐oriented “pragmatism” has receded, and state strategies have begun to occupy a more prominent role in policy agendas (Huang et al. 2019; Wu 2021). Redevelopment involves more state and social actors (Lin 2015).…”

“…Indeed, in order to follow the mandate, these projects are against profitability and compensation for original residents is not aimed at cost saving. The government even leverages its own resources, which reflects a form of developmentalism under fiscal expansion (Wu 2021).…”

Urban Redevelopment, Displacement, and Governmentality in Nanjing’s Historic Inner‐City

“…In Qinhuai District, where our case study area is located, Baixia State Asset Management Corporation was commissioned to fulfil a similar task at district level. This form of local government financing vehicles (LGFVs) have become prevalent since the GFC in 2008, strengthening Chinese local governments’ borrowing capabilities and their investment in the urban built environment (Wu 2021). Since 2012, both LGFVs have been pre‐emptively issuing bonds and borrowing from both banks and non‐banking institutions (Nanjing Daily 2013).…”

Limits of Land Capitalization and Its Economic Effects: Evidence from China

“…Understanding how to convert solid, hidden, and even invisible economic resources into liquid capital to promote capital accumulation and improve economic efficiency is important for the development of late-developing countries [2]. In this context, land has been constructed as an asset by society, which is at the center of capital creation and has been widely discussed around the world [3][4][5][6][7]. Land capitalization is understood as investment in land productivity; the transformation of land into commodities through property rights transactions; and the emergence of land as a financial asset [3,[8][9][10][11].…”