Economic resilience of national and urban development in China

Abstract

This thesis articulates China’s economic resilience at both the national and urban levels, and explores the key factors explaining economic resilience and its relationship to urban development in China. Basing on Harvey’s discourses of capital circulation and spatial fix, this thesis provides a theoretical explanation of economic resilience as the ability to mobilize capital to follow a spiral process of capital circulation. In this study, economic resilience in China is investigated in structural, spatial, and policy dimensions, and through time series analysis, geographical comparative analysis, and case study approaches, respectively. Its core argument is that China’s economic resilience has been underpinned by the sheer scale of investment in the built environment and the prosperity of the real estate sector, rather than successful industrial upgrading and technological innovation.

The Hodrick-Prescott (HP) filter is used to detrend China’s aggregate and sectoral components of GDP growth rate from 1993Q1 to 2017Q2, generating the cycle component of economic growth as the proxy for economic resilience. Drawing on Modern Portfolio Theory (MPT) and Evolutionary Economic Geography (EEG), the impulse response function from vector auto-regression modeling is applied to examine the roles of eight major sectors in national (portfolio’s) economic resilience. The simulation results show that the construction, real estate, and financial sectors have the greatest potential to disturb the national economy, while manufacturing is a stabilizing sector. This finding contradicts the conventional view that manufacturing (services) is a source of economic vulnerability (stability). In addition, variations in economic resilience among Chinese cities are depicted, based on the resistance and recoverability indices of 285 prefectural-level cities in China after the 2008 global financial crisis. Correlation analyses conducted during 2007-09 and 2009-14 pinpoint that Fixed Asset Investment (FAI) played the most vital role in cities’ resistance to recession in both periods. Apart from FAI, government budget revenue and industrial output contributed to cities’ resistance only in 2007-09, while urban population and banking deposits contributed to cities’ resistance in the post-crisis period (2009-14). The study of Dongguan reveals the promotion of Strategic Emerging Industries (SEIs) and Replacing Workers with Robots (RWwR) only emphasized on industrial upgrading, while ignoring the lack of FAI in the built environment and social services, which undermined Dongguan’s ability to retain its labor force. Analyzing from the spiral process of capital circulation, the case substantiates the critical role of investment in the secondary and tertiary circuits in building economic resilience.

This thesis contributes to the study of resilience by interpreting economic resilience through the logic of capital movement, and deciphers China’s strategy of fixing capital in the built environment as a “resilience machine” for maintaining rapid growth and weathering economic turbulence. This thesis emphasizes the importance of capital accumulation and circulation in determining economic resilience. It calls for an extended understanding that the construction, expansion, and restructuring of a city (i.e. the urban process) is on par with inherent urban attributes in contributing to economic resilience.