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Urban Policies

Competitive Cities: Changsha, China – coordination, competition, construction and cars

Z. Joe Kulenovic's picture

Cites are the heartbeat of the global economy. More than half the world’s population now resides in metropolitan areas, making a disproportionate contribution to their respective countries’ prosperity. The opportunities and challenges associated with urbanization are quite evident in the world’s most populous country, whose cities are among the largest and most dynamic on Earth. To better understand what a thriving metropolitan economy looks like in the Chinese context, our Competitive Cities team selected Changsha, the capital of Hunan Province, for inclusion among our six case studies of economically successful cities, as the representative of the East Asia Pacific Region.  
As recently as the turn of the millennium, Changsha’s economy was still dominated by low-value-added, non-tradable services (e.g. restaurants and hair salons) – an economic structure commonly seen today in many low- to lower-middle-income cities. Since then, Changsha has achieved consistently high, double-digit annual growth in output and employment, despite its landlocked location and few natural or inherited advantages, such as proximity to trade routes or mineral wealth. With per capita GDP surging from US $3,500 in 2000 to more than US $15,000 in 2012, Changsha has accomplished a feat so many other World Bank clients can only dream of: leapfrogging from lower-middle-income to high-income status in barely a decade, and an economy now comprised of much more sophisticated, capital-intensive industries. 


Photos via Google Maps

We took a closer look at the success factors behind this city’s dramatic growth story, and what lessons its experience may hold for cities elsewhere, especially in terms of (1) how to overcome coordination failures and bureaucrats working in silos and (2) how to ensure a level playing field for all firms in the city (that is to say, competition neutrality), even in industries with a strong SOE presence – something still not commonly seen in China these days.
Changsha’s (and Hunan’s) growth has clearly benefitted from a highly conducive national macroeconomic and policy framework, including a plan entitled The Rise of Central China, aimed at spurring development in areas beyond the country’s booming coastal regions. This and other initiatives provided for the removal of investment restrictions, more favorable tax treatment, and enhanced infrastructure and connectivity to coastal commercial gateways. China’s massive stimulus plan in 2009 (in response to the global financial crisis and recession) jump-started construction activity in the country, providing further impetus to one of Changsha’s principal industries, construction machinery and equipment manufacturing. And national government interventions in earlier decades – especially the establishment of dedicated research institutes – provided a critical contribution to Changsha’s accumulation of expertise in such disciplines as machinery or metallurgy.
Notwithstanding these national initiatives, responsibility for local economic development in China is highly decentralized, with municipal government leaders directly tasked with achieving GDP growth and tax revenue targets. Municipal governments also have rights over almost all land in cities, which can be leased or used as collateral to fund local infrastructure. In Changsha, municipal authorities used these prerogatives to improve their city’s economic competitiveness.

Play the 'Competitive Cities' game: See whether you're a guru of urban competitiveness

Juni Tingting Zhu's picture

To start the new year, I've designed a 10-question game to recap some of the major findings of our flagship report, “Competitive Cities for Jobs and Growth: What, Who and How.”

The report, which was launched at at a World Bank conference in Washington on December 10, 2015, has been gaining wide recognition in the news media. Positive coverage has included analyses in Citylab (edited by urbanologist Richard Florida) and in Citiscope (edited by urbanologist Neal Peirce), as well as an essay in The Huffington Post by Marcelo Giugale, senior economic advisor in the World Bank Group's practice group on Equitable Growth, Finance and Institutions (EFI).

This short 3-minute game features many of the central themes of the Competitive Cities initiative.  Please click on  this link – – to start the game.

For more information about the Competitive Cities initiative at the World Bank, please visit:  

Rethinking Cities

Abha Joshi-Ghani's picture

How do we go about bringing shared prosperity and ensure that development benefits the broad swath of population- and especially the bottom 40 percent of people living under 4 dollars a day? It is by no means an exaggeration to say that the path to shared prosperity inevitably runs through cities.

Today we are witnessing an unprecedented demographic and economic transformation. Some 2.7 billion more people will move into cities by 2030, mostly in developing countries and particularly in Africa and Asia. It is estimated that some 4 million people move to cities every week. They come to cities filled with hope and looking for opportunities.

Cities hold the key to jobs, housing, education, health. They also provide basic services such as water and sanitation and decent transport which are often missing in rural areas. So can urbanization be the platform to deliver these diverse goals? What makes some cities more competitive? Why do entrepreneurs and workers get attracted to some cities? Why do industries and services locate in one city and not another? Will mega-cities or intermediate-sized cities deliver these goals? What can policy makers do to improve the flow of goods, people, and ideas across cities? And what can be done to reduce fragmentation, segmentation, and social divisions within cities across formal and informal sectors, the rich and the poor, how do we ensure that cities are gender inclusive ? How does one tackle problems of air pollution, crime and violence, and the slums that one third of the world’s urban resident’s call home. Cities have not performed as well as can be expected in their transformative role as more livable, inclusive and  people-centered places, and they face massive challenges from natural hazards and the impacts of climate change.