The once lively old neighbourhoods along Shanghai's Jianguo Road now lie in ruins. They have been leveled to make room for a project by Hong Kong developer Hutchison Whampoa.
"The old must go to make way for the new," Mao Zedong once said in an altogether different context. And so they have. The former residents of Jianguo Road, situated on the southern edge of the old French quarter, have moved on to suburban developments over the Xupu Bridge in west Shanghai, nearly one hour's commute from the city centre. But as they move to homes in Shanghai's new suburbia, these populations are part of a story much bigger than Li Ka Shing's latest project. That story is about a fundamental change in China's consumer landscape.
In China, suburbanisation is only beginning to get the attention it deserves. As early as l980, Zhang Tingwei, a professor at Shanghai's Tongji University, developed his own theory on the origins of suburbanisation, based on studies of North American cities. His study showed that suhurbanisation emerges as per capita GDP reached US$2,500 at l980 levels and ears begin to enter the family. When per capita GDP reached US$5,000, ears become widespread and suburhanisation intensifies. But these thresholds were then too remote to have any relevance for average Chinese.
Still, even as academies sought to discern the pattern of China's future development based on the Western experience, suburbanisation was launched without fanfare by governments in China's major cities. The pattern was very different from what Zhang had described. The first outward migrations were employed to address inefficient land use in cities like Beijing, Shanghai and Guangzhou. While this land was occupied by crowded and unsanitary housing, developers such as Hutchison Whampoa were queuing up to build new urban commercial and residential projects. So the old residential neighbourhoods were systematically demolished and the residents relocated to new, low-rise suburban developments.
Sam Crispin, a Shanghai-based real estate analyst, refers to this development pattern as a "virtuous circle." As city governments raised money through the sale of urban industrial or residential sites, this capital was rein-vested in suburban infrastructure. In turn, new urban development projects drove up property values further, enabling the sale of more land, freeing up more capital for suburban infrastructure, and so on.
This pattern is still being replayed in China's major cities, Jianguo Road being the latest example in Shanghai. And it is still generating massive interest in the real estate sector. "This is a very exciting stage of development," says Crispin. "All improvements in the urban landscape housing, roads, rail, office buildings and shopping centers, combined with strong economic growth create positive feed-back for the each other. So real estate values maintain a sustained upward curve."
But this is no longer just about real estate. As Crispin points out, suburbanisation should have major implications in a number of areas. "The family leisure industry, automobiles, suburban shopping and so on will all benefit enormously from this trend," he says.
Indeed, as the trend gathers speed, the suburbs are emerging as a force in their own right. Attention is turning increasingly to related markets. Retailers, for example, have noticed a huge fall-off in the number of shoppers visiting Beijing's urban retail district of Wangfujing in recent years. Where have they all gone? To the suburbs, naturally, where many former city centre residents have been relocated.
The trend is the same in Shanghai. Reed Hatcher, who heads up research at real estate services company DTZ, says municipal figures show that 70,000-8O,000 households have been relocated from the city centre to outlying areas in each of the past five years. Consumer traffic in fashionable shopping areas like Nanjing Road is now dominated by out-of-town populations, while locals are drawn increasingly to outlying shopping areas in places like Xujiahui, which lies about 8km west of the city centre.
So, as city residents move out to the margins, China's booming consumer market is moving with them. Foreign hypermarket operators, 'such as Germany's Metro, France's Carrefour and Thailand's Loms, are all established in the market and scrambling with domestic players for market share. Mean-while, this fierce competition is putting fuel back into the suburbanisation drive. Supermarkets and hypermarkets are under increasing pressure to provide quality and comprehensive product offerings at competitive prices. To achieve this, they require more space and better logistical networks. That means cheaper land and less congestion in the suburbs becomes increasingly attractive. Another advantage in the suburbs, of course, is more convenient access for consumers.
Carrefour, the world's second biggest retailer, has opened more than 30 hypermarkets in China (six in Shanghai alone) and is now looking to launch its Champion super-market brand here as well. The shadow of the world's number one retailer, Wal-Mart, should also loom large over the coming few years. In late 2002 it teamed up with China International Trust & Investment Corporation (Citic) to form East China Wal-Mart Stores, which will work on expanding retail outlets in Shanghai and the surrounding region. Tesco, the British supermarket operator, is also looking at entry options.
Suburban malls, those hallmarks of American life, are on the cards for China, too. Shanghai's Super Brand Mall, located on the riverfront in downtown Lujiazui, grabbed the headlines last year with its 250,000 sq metres of retail space. Despite the press frenzy, however, most of that space is still empty. It will be dwarfed by the gargantuan 330,000 sq metre Rainbow Mall, which is being built in Puxi's Gubei district and should open sometime next year. Rainbow will no doubt give the suburbanites of west Shanghai even fewer reasons to cross the river.
But the issue is not just about more consumers in suburbia. There is also a lot more suburbia in consumers these days. Lately, advertisements brim with visions of the good life in the suburbs – trees, verdant lawns and, most important of all, space. It appears that locals are buying it. "Chinese people are beginning to appreciate space. Space is a luxury that has been so out of reach that it has not even been aspired to, simply because no one knew what it meant," says Crispin.
Suburbia once seemed an unpleasant choice, if you had the luxury of a choice. Now, the suburbs are seen as quieter, cleaner, greener and much cheaper alternative to downtown. The notion of 'living in the suburbs and working in the centre' has become a widely accepted way of life, and is no longer merely the choice for foreigners and Taiwanese. In fact, Crispin says that about 90 percent of development in the suburbs is being driven by local demand. "The Chinese character is being reinvented," he says." Suburban living is not for everyone, but there are plenty of overseas Chinese in Europe, North America and Australasia that have discovered the benefits of the suburban lifestyle.
"The key issue is that, while distances remain the same, travel times fall dramatically what may have been a two-hour drive from the city centre becomes a 30-minute drive on completion of a new highway. Suburban properties are also more affordable because land is cheaper. Buyers can have more space or a lower total outlay. They have a choice."
However, Hatcher says many find it difficult to make the adjustment: 'While some locals share a [positive] view of the suburbs, I would say that far more have relocated to Shanghai's suburbs out of necessity – either as a result of losing their homes to development downtown, seeking to relocate to nearby industrial zones for work purposes or due to the relative affordability of apartment space there."
Certainly, not everyone is enthusiastic about the suburbs, even in places like Xinzhuang in the far west of Shanghai, which contains brand-new apartments and plenty of green space. This is especially true for those who have been forced out of their homes to make way for new developments.
Ma Aiyi, who recently moved from the centre to a small apartment block in Xinzhuang, misses the convenience of local shops and the sense of community. "Those of us of the older generation find the change hard to bear," she says. "It used to be that every time we went out, we would see others, say hello, ask how they were. If you had a problem, someone would always help you out right away. But after we moved out to the suburbs, we found that that kind of culture had disappeared."
Emerging car culture
Another factor to look out for over the next few years is the rise of the private car in China, which Professor Zhang once suggested was so central to the very notion of suburbanisation. Car ownership, which allows for more mobility, could open up new markets. And, for better or worse, China is making every possible effort to ensure cars enter the family in a big way over the next decade.
In an article on suburbanisation last year, Yuan Qiming, a researcher at Tianjin Univer-sity's school of architecture, wrote that because the ear industry is a strong force in industrial development in general, China is emphasising the auto industry in industrial policy planning and is making a concerted effort to encourage the popularisation of individual ear ownership." Many of these policies are already working, says Angela Gu, an analyst with Automotive Resources Asia in Shanghai. "Nationwide, as infrastructure improves and many policies and rules are relaxed, the cost of car ownership is moving down," she says.
China's emerging car culture can already be glimpsed in suburban areas. "The suburban developments are especially geared to accommodating Shanghai's emerging car culture – every house has a garage for a start. The locations are in many eases only feasible for residential development because of increasing car ownership," says Crispin.
"Discussions at architects and developers now center around whether a one car garage is enough or whether two-car garages are a requirement."