Gentrification in global east with case study of Suzhou,China

The cause of gentrification from a Marxian perspective

The term “gentrification” was first coined by urban sociologist Ruth Glass in her book London: Aspects of Change in 1964, which refers to the demographic shifts within an urban community. She described this shift vividly, “One by one, many of the working classes quarters of London have been invaded by the middle classes – upper and lower. Shabby, modest mews and cottages – two rooms up and two down – have been taken over, when their leases expired, and have become elegant, expensive residences…Once this process of gentrification starts in a district, it goes on rapidly until all or most of the original working-class occupiers are displaced, and the whole social character of the district is changed.” (Glass et al. 1964)

The cultural perspective is that the younger generation have preference over nuclear family thus the demand for big house was decreased due to less children and higher divorce rate. They tend to live in the urban area as a continuation of previous life style driven by the search for socially distinctively communities as sympathetic environments for individual self-expression(Ley, 2003). However, this theory does not touch the core of gentrification.

The economic explanation by Neil Smith may capture this movement more precisely. Before the gentrification process, the depreciation of inner-city cycles should be examined. First, the house value is decreasing as decaying; second, when the house is built, the potential ground rent is assumed to rise in coherence with economic development ; however, due to the depreciation of the house value and the decreasing life quality in urban areas (air pollution, traffic jams…etc.), some of higher-income groups incline to move outwards the suburban , the capitalized ground rent keeps dropping, which is lower than the potential ground rent. Since the sale price is made up of the house value and the capitalized ground rent, a disparity between the potential ground rent and the sale price occurs, which is labeled as rent gap. Only when this rent gap is large enough, the capital will flow back to this area as reinvestment or redevelopment. The capital accumulation is achieved through the relatively low investment and high returns. The gentrified neighborhoods are targeted to the new middle-class or middle-class from other cities via different marketing strategies. Such restructure of inner-city dwellers is not a result of consumer preference that the new middle classes evoked first; instead, it is the production side that decides the market via the price filtering process (Smith, 1979).

Neil Smith further revealed that “gentrification is the leading edge of a larger process of uneven development which is a specific process, rooted in the structure of the capitalist mode of production”(Smith, 1982). Recall that gentrification is driven by the capital accumulation, when the individual and group capitalists could not make profits from a certain market, for example when the rent gap is closed, the economic expansion is triggered to overcome all spatial barriers, and thus is realized in the equalization in the capital circulation and production process. The hegemony of value across the borders is also an impetus in this uneven development. Cites are fulfilled with similar architectural style, similar cultural aesthetics and similar functioning land use areas, so gentrification is duplicating as viruses that press the pre-capitalist societies to join the game as well. The economic expansion in the forms of gentrification can be aroused by the cost difference in the production process, for an instance, the lower labor cost and cheaper raw materials. More labor-wage relationships are established and more untouched market to exploit from every procedure of both production and consumption sides. From the urban perspective, this can be translated into the exploitation of the land value shifts from one city to another, from one country to another. The generalization of gentrification is the core of the global urban strategy now (Smith, 2002).

The Gentrification mode in the global east

State-led gentrification in Hong Kong

In Hong Kong, the gentrification is a significant outcome of the state-led redevelopment activities led by the Urban Renewal Agency (URA). The first and most pivotal factor is that the land is a state-owned and -controlled resources as the public-sector asset. The right to land use is a lease-hold land management system in Hong Kong. With negligible exceptions, the rights to land use are alienated contractually through long land leases for specified periods (from weeks to 50-year terms), at a contracted ‘premium’ and with some newer leases including periodic ‘land rental payments’. Second, land-derived fiscal revenue is one of the most important sources of the social expending in Hong Kong, with welfare programs accounts for half of the government’s budget. Third, the urban morphology of Hong Kong is 60,000 people per/km2, while that of the old inner-city can be three times as much and some old buildings were poorly constructed and maintained. The urban redevelopment project was thus initiated for the purpose of city beautification, city dwelling improvement and government revenue source. Although it is a state-led redevelopment project, the private sectors are responsible for the part of the commercial real estate projects with the joint partnership of the local state, which led to a more evident gentrification signal that the local family restaurants and groceries are replaced with upmarket international cafes, galleries and other bourgeoisie places. Such speculation in the commercial real estate market is still ongoing in corners of Hong Kong (La Grange and Pretorius, 2016).

The government agency URA has developed a compensation framework called as Ex Gratia Allowances to provide financial aid for the lower-income owners and tenants who are displaced. The owners are entitled to the market-value of their property plus a governmental allowance which are two to three times of the property value. As for the tenants, the local housing authority aligned with the social organizations provide a quota of rental flats for allocation to the tenants who are evicted from the redevelopment projects.

Market-oriented gentrification in Seoul, South Korea

If the redevelopment-induced gentrification in Hong Kong is constrained to selected sites within neighborhood scale, the case of Nangok in Seoul, South Korea illustrates another form of urban redevelopment featured with a wholesale clearance and reconstruction.

First, the private ownership of the land has been the norm since Korea was liberalized in 1945. The top 5 percent of the private land owners and the corporate sector constitute the two salient groups that hold more than four percent of the nation’s land. The government can only acquire the land ownership through a two-tier land expropriation system, that is, either through a contract-based land acquisition by agreement or through a compulsory expropriation procedure. Home ownership and land ownership are separated. Second, the state government did not directly intervene with the urban redevelopment project, instead the Korea National Housing Corporate (KNHC) was founded as the major agency for public housing, which takes the responsibility of construction and compensation. The local governments are allowed to intervene or take control of a redevelopment project only under certain circumstances (Grange and Jung, 2004).

Based on the given backgrounds, the redevelopment project of Nangok neighborhood is twisted with the tensions between different interest groups. First, the speculative absentee landlords urged to proceed the redevelopment projects as the speculative interest declined with time, while the residents, consisting of the poorer owner-occupiers and the tenants, were reluctant to move due to the financial frustration caused by the displacement; second, the tenants only guaranteed with a modest compensation (Bang Shin, 2008), yet the municipal government insisted in maintaining the status quo offered by KNHC in the name of equality because the additional allowance would come from the land and home owners. After a seven years’ negotiation, the whole Nangok neighborhood was demolished and now upon the site are a middle-class neighborhood (Shin, 2009).

Although both of Seoul and Hong Kong are tiger economies, the governments played distinctive role in the urban redevelopment project. The Korea government adopts a market-oriented redevelopment project to close the rent gap, which heavily relies on the private sectors. The state government shows a trivial commitment to the redistributive social policies. The Korea National Housing Corporation (KNHC) claims that its purpose is to improve the citizens’ life quality through the realization of the stable housing, however indeed it facilitates to provide more middle-class home productions. Despite Hong Kong is quasi democratic government, level of provision service to some extents, mitigates the social inequality arouse from the redevelopment-induced gentrification. Considering Hong Kong’s quite spectacular economic development, the inner city is still accessible to lower-income groups and the government does not show an attempt to renew the urban areas at a scale matching with its economic status. The gentrification cases in other Asian cities such as Hanoi or Manila all reveal that the land development profits are either extracted directly as fiscal revenue by the state government or captured by the state-owned corporations (Shatkin, 2016).

Table 1. Comparison between redevelopment-induced gentrification in Hong Kong and Seoul

Case study: Ongoing gentrification in Suzhou, China

Gentrification is not a brand-new concept in mainland China. Considerable studies have been focused on the gentrification in Beijing. Shanghai and Guangzhou these three world-famous cities, yet few pay attentions to the second-tier cities which of crucial position in the megalopolises of Yangtze river delta or Pearl River delta. Henceforward, Suzou is selected as the study area in this paper to examine: (1) if the gentrification can occur in a transitioning industrial city in a non-capitalist country; (2) if the first assumption is valid, how the gentrification is redefined to the local context.

Suzhou, located in the north-east to Shanghai, is one of the most ancient cities in China. Th urban form of the city can be dated back to 2500 years ago. Since the launch of the market reform in 1978, Suzhou has developed into one of the biggest economies in China. According to the data, the gross domestic production （GDP） of Suzhou is 1.73 trillion CNY in 2017, ranking 7th national wide. The annual per capita net income of urban households is 54,531 CNY (7,078 euro) (Suzhou Bureau of Statistics, 2017), ranking 3rd among all the cities in China. More details about Suzhou can be viewed in Table 2.

During the 1990s, China started to undergo a historical neoliberal urbanization, the fiscal and administrative decentralization pushed the local governments to act as entrepreneurs instead of market regulators so as to achieve the potential maximum of economic growth (He and Wu, 2009a) (Pereira, 2004). At the same time, confronted with the labor shortage and operation cost increases, many industrial global companies started to relocate their plants out of Singapore into the other emerging Asia-Pacific regions, the Singapore government unveiled the “Strategic Economic Plan” as a response, of which the supranational industrial parks program was one of its key points (Pereira, 2004). The China-Singapore Suzhou Industrial Park (SIP) is a modern industrial township as a significant product of the economic collaboration between Chinese and Singapore government.

Figure 1. Location of Suzhou

Table 2. Suzhou Profile

Figure 2. Location of Suzhou Industrial Park in urban area of Suzhou

Entrepreneurial urbanism under globalization

Suzhou Industrial park (SIP), as other development zones emerged out of the state-entrepreneurism strategy, is a large urban project that combines both industrial and residential uses (Wu, 2018). Suzhou Industrial Park is a unique case among all the industrial parks in China. Both of the industrial zones and the residential zones are governed by the Suzhou Industrial Park Administrative Committee (SIPAC) even though geographically located in the Wuzhong District. To further accelerate the development of SIP, eighteen state-owned enterprises (SOE) and state-holding enterprises (SHE) were established under the administration of the State-Owned Assets Supervision and Administration Commission of Suzhou Municipal Government (SIPAC, 2019), which cover from the new urbanization construction, real estate development and municipal public utilities. Such public-private partnership that featured by the risk-absorption by the local government and moreover (Harvey, 1989), the SOEs and SHEs are used as an effective tool by the municipal government to acquire knowledge, foreign investment and raw materials.

In 2006, when the GDP of Suzhou reached over 400 billion Chinese yuan, the municipal government publicized the Outline of Suzhou Overall Planning on Land Use (2006-2020), which officially declared the ambition to reimage the city as a second-tier city in China. It was pointed out that the total construction land use occupied 30.39% of the territorial land area, which was 1.5 times higher than the average of the Jiangsu Province (Suzhou Municipal Bureau of Land and Resources, 2005). One of the development objectives would thus be focused on the utilizing the current land use to facilitate the urban development. The local government adopted the strategies of land management that seek to exploit urbanization processes in monetizing land by land leasing, transition and auction (Shatkin, 2016) (He and Wu, 2009b). The real estate market has become preferred, especially the high-valued-added residential housing. Figure 4 shows the annual floor size of buildings completed until the year of 2016, over 70% are for residential use. In the same year, the ratio of residential building over all buildings completed was 60.02% for Shanghai, 49.05% for Beijing and 64.47% for Shenzhen. Shenzhen is selected to make further comparison with Suzhou in real estate development because both of the cities are prospered as an industrial city as world-factory under the globalization and that the urban area sizes are approximate. The differences have to be clarified here are that (1) Shenzhen is a sub-provincial city which is higher than Suzhou at the administration level; (2) The Shenzhen city is already in the phase of hyper gentrification, which can be confirmed by the ratio of housing property price to income ranking 4th worldwide (numbeo, 2019). Shenzhen has already transformed into post-industrial era which focuses on high-tech industries such as information services instead of manufacturing while Suzhou is still in the transition stage.

Figure 3. Gross Domestic Production of Suzhou from 1978 to 2017, source: Suzhou Bureau of Statistics

New-build gentrification in Suzhou Industrial Park

Further inspected into the Suzhou Industrial Park, the construction land use coverage would be increased to 62.91% of the total area at the expense of the decrease of agricultural and other land uses. The total fixed assets investment in real estate of Suzhou Industrial Park was rocketing in the following years (seen in Figure 6 ). The data shows that just in 2016 and 2017, the excessive residential housing area, which only took into account the completed projects, summed up to 2,050,000 square meters, yet still more newly-built residential housing projects were put into construction. It has to be pointed out that the SOEs and SHEs are highly active in the real estate market in Suzhou industrial Park, especially in the commercial and high-end residential real estates. For example, China-Singapore Suzhou Industrial Park Development Co., Ltd. (CSSD) is one of the leading real estate developers, of which the SIPAC has 52% shareholdings. The corporation has already developed four high-end residential neighborhoods in the industrial park.

The urban projects in SIP both demonstrate the green gentrification and the new-build gentrification. Most of these properties are located around the Jinji Lake, which is a fresh water lake in the central of Suzhou Industrial Park. Such advantageous nature landscape area of course highlighted by the real estate developers and the SIP administration committee, which describe the industrial park as a livable garden city with abundant green infrastructures. The filtering process is further confirmed here, that is, only the new middle-class and the affluent domicile in these neighborhoods around lake. In 2016, the percentage of new residents domiciled in the Suzhou Industrial Park accounted for 31% compared with other districts (details seen in Figure 7). Given the strict household registration systems in China, Suzhou government implements a point-based administration measure of household registration that largely favors the young graduates and professionals. The population census confirmed that average education attained of the urban residents in Suzhou Industrial Park is that over 40% of them own a college degree or above, while that of whole Suzhou is 32%. Hence, it is quite evident that these new arrivals perceived as the emerging middle-class are the target consumers of the housing market. Second, the Suzhou Industrial Park has now been designed as the core business district （CBD） of Suzhou as well, which encompasses a high density of office buildings, shopping malls, luxurious hotels and stadiums, for an instance, the Jinji Lake Shilla hotel and Wanda Plaza. Suzhou municipal government perceive such mixed high-end commercial and residential zoning as an impetus to assimilate part of elite groups from the first-tier cities such as Shanghai and competing cities such as Hangzhou.

Figure 4. Real estate development over the years in Suzhou, source: Suzhou Bureau of Statistics

Figure 6. Total fixed assets investment in real estate in Suzhou Industrial Park，source: Suzhou Bureau of Statistics

Figure 7. Percentage of new residents domiciled in different urban districts of Suzhou in 2016，source: Suzhou Bureau of Statistics

Conclusion

The new-build gentrification in Suzhou Industrial Park is a product of the planning centrality under the entrepreneurial urbanism, however it is no longer fitting as the suburban mega urban projects described in the classic Chinese studies (Wu, 2018). First, the Suzhou Industrial Park has already evolved into the one of absolutely parallel centers in Suzhou. Second, the Suzhou Industrial Park Administrative Committee is the official authority for both industrial and residential administration, whilst other development zones or industrial parks still affiliate to the district government. It is different from the new-gentrification case in Shanghai where the boundary is still constrained to the traditional central city which does not include Pudong New District (He, 2010). Hence, people may object that it is an urbanization process instead of gentrification process in Suzhou Industrial Park, nor the depreciation of inner city exists. Gentrification is an active process that should not collapse under the frictions between urban processes when set in different societies and different countries(Davidson and Lees, 2005).

I insist the case of Suzhou Industrial Park is a state-led gentrification as it meets the two essence of the gentrification: (1) middle-class as the major residents; (2) the commercial landscape. Suzhou is a representative case of how second-tier cities in China tries to develop as the deputy in megalopolis. Developing more high-end neighborhood with relatively lower sale price, internationalizing the commercial areas, providing more generous housing provident fund… and other means are utilized by the municipal government to attract the human resources and investments. The displacement is not discussed here due to the difficulty in data acquisition. However, I would like to argue that the gentrification is now a transregional process in China that characterized by massive assimilation of human resources and capital from poorer cities. Thereupon the displacement issue should be extended beyond the aboriginal residents and their symbolic displacement. Recall the dualism and permanent residence registration systems in China, the remaining residents, who live in the cities with exodus of labors, may be the biggest victim in the state-led gentrification.

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