Penn Calendar Penn A-Z School of Arts and Sciences University of Pennsylvania

The Shanghai Effect: Political Devolution and Mega-Project Development in China and India

Xuefei Ren and Liza Weinstein
March 9, 2008

For the past five years, the term ‘Shanghai’ has been ubiquitous in the discourse on urban development in India, particularly so in Mumbai, beginning in 2004 when Prime Minister Manmohan Singh declared in an electoral address his government’s ambition to transform Mumbai into Shanghai, even better it.

Gradually, the word has shifted from a proper noun to a verb, being invoked in Mumbai’s desire to “shanghai itself” or “be shanghai-ified,” with no relation whatsoever to the traditional dictionary meaning of ‘shanghai,’ to force or trick into a place of undesirable position.

In these new references, the Chinese metropolis is a clean, slum-free city, with tall skyscrapers and impeccably modern infrastructures. Even though most of Mumbai’s politicians and bureaucrats have only a vague idea of the governance practices in Shanghai, they implicitly attribute the “shanghai-ification” of Shanghai to China’s single party state, less public agitation, and seemingly limitless budgets.

But how has Shanghai been able to transform its built environment and attract international investment, while Mumbai has had more difficulty making these transformations? Party politics, authoritarian response, and financial resources all matter to a certain degree, but urban governance, and particularly political devolution of the Chinese state, has played a particularly crucial role in China’s urban transformation.

The differences in China’s and India’s political systems are substantial. India is a democratic country with regularly-held, directly contested elections while China is not. Meanwhile, with China’s gross domestic product (GDP) estimated at almost two-and-a-half times that of India, the country’s relative differences in wealth are significant. And, culturally speaking, Indians and Chinese are very different people with unique histories and distinct political cultures.

Despite the importance of these differences, they do not negate the effects that China’s political devolution has had on the transformations of Shanghai’s built environment in the past twenty years. And while similar efforts have been made in India to devolve political authority and resources to the local level, these efforts have been conflict-ridden and ultimately less successful.

Put simply, political devolution and empowered urban governance largely explain the different development experiences of Shanghai and Mumbai over the past two decades.

In the early 1980s, both China and India embarked on efforts to decentralize their governance institutions and devolve financial resources and decision-making authority to the local level. In China, these efforts were laid out by the Central Government in the sixth Five Year Plan (1981-1985). In a 1982 report on the plan, then-Premier Zhao Ziyang called for the use of large- and medium-sized cities as engines for economic growth. The plan gave metropolitan governments greater autonomy over urban policy in order to lease land and attract investment. Up to this point, limited authority and a strong anti-urban bias in socialist national policy had resulted in little investment in China’s large cities.

Even though Shanghai – like Mumbai – contained many capital-intensive industries and contributed the largest proportion to the national economy, the city’s revenue was tightly controlled by the Central Government. Shanghai was left with little revenue to reinvest in its housing and basic infrastructure. The reforms of the 1980s began to alter these arrangements and resulted in considerable administrative reshuffling over the next decade.

Among the changes introduced in Shanghai, the city’s geographic area was expanded more than 20 times, from 282 square kilometers to 6000 sq. km. (108.9 sq. miles to 2316.6 sq. miles). Administratively, the city was transformed from a single municipality into an urban region with nine central city districts, five inner suburban districts, four outer suburban districts, and one rural county. Each of these districts is administered at the municipal level, thus giving the municipality more authority over its regional economy. The municipality can now, for example, relocate industries to the new suburban districts and open up space in the central city districts for specialized service sectors. Recently, the power and authority to devise policies to attract investment capital have been further devolved from the city to district governments.

Also beginning in the 1980s, pressure emerged in India to similarly devolve authority and resources down to the local level. This pressure came from two disparate groups representing different interests: pro-democracy social activists and pro-liberalization economic reformers. In the mid-1980s, development economists and social activists began making the connection between India’s rampant inequalities and the lack of political representation at the local level. Devolved power, advocates argued, would ensure political participation and more equitable resource allocation. The Sixty-Fourth and Sixty-Fifth Constitutional Amendments were proposed in 1989 to devolve political representation to rural and urban local bodies respectively, but they failed to garner the requisite support in Parliament. In the wake of India’s adoption of economic liberalization reforms in 1991, the movement to politically empower India’s municipalities was reinvigorated; this time recast as a component of structural adjustment. Included in the package of reforms advocated by the IMF, political decentralization was identified as a structural precondition for liberalization. With support from these strange political bedfellows, the Seventy-Third and Seventy-Fourth Amendments, defining a wider scope of authority for rural localities and urban municipalities, were adopted in 1992.

But with the Centre hesitant to intervene in state affairs, it has merely encouraged the states to devolve powers, rather than forcing implementation. And with states tending to view local governments more as rivals than partners, most states – including Maharashtra – have chosen to retain the powers of urban development. While some administrative reforms have been made in Mumbai, urban development policy-making remains under state administration. Consequently, development schemes in Mumbai continue to require action by the Government of Maharashtra and coordination by the central, state, and municipal authorities.

The increased autonomy and resource flexibility Shanghai has attained since the 1980s have enabled it to “fast track” large scale development projects that have rapidly transformed the city’s built environment and bolstered it efforts to attract investment.

On the other hand, Mumbai, with limited authority at the municipal and regional levels, has had more difficulty moving comparable projects forward. If we compare, for example, Shanghai’s 2010 World Expo (WE) and Mumbai’s Dharavi Redevelopment Project (DRP) – similar development schemes currently underway in each city – the relative effects of local authority become apparent.

In 2002, Shanghai’s city government won the bid to host the WE and quickly designated prime land along Huangpu River in the central city as the Expo site. Thousands of residents, dozens of large manufacturing factories, warehouses and shipyards had to be relocated to vacate the site for the urban spectacle. In less than two years, Shanghai was able to acquire land, invite international architects to design ‘signature buildings’ for the site, and relocate residents.

Meanwhile, the DRP has been in the works since 1997 to dramatically transform a vibrant mixed-use district of Mumbai. But rather than relocating the residents, industry, and commerce, the DRP proposes the on-site ‘rehabilitation’ of most of Dharavi’s residents and many commercial activities. The more than 10 years it has taken to move the DRP forward have been spent building a political consensus among conflicting interests and convincing the State to allocate the political and financial resources required for the project.

The WE and DRP differ in their immediate objectives, but both reflect the cities’ efforts to bolster the exchange value of centrally located properties, attract international investment, and position themselves as global commercial capitals. Shanghai’s relative ease carrying out large scale development schemes like the WE can be attributed to numerous factors, but these efforts would not have been possible without the authority and resource flexibility Shanghai has achieved since the early 1980s. More than differences in democratic character, relative resources of the state, or political culture, Shanghai’s transformation has been enabled by the structural reforms that have politically and financially empowered the municipality.

The shanghai-ification of Indian cities such as Mumbai will ultimately, then, depend on whether such structural reforms that are aimed at the devolution of administrative powers can be successfully replicated.

Xuefei Ren is an Assistant Professor in the Department of Sociology and Global Urban Studies Program at Michigan State University.

Liza Weinstein is a Ph.D. candidate in Sociology at the University of Chicago.

India in Transition (IiT) is published by the Center for the Advanced Study of India (CASI) of the University of Pennsylvania. All viewpoints, positions, and conclusions expressed in IiT are solely those of the author(s) and not specifically those of CASI.

© 2008 Center for the Advanced Study of India and the Trustees of the University of Pennsylvania. All rights reserved.