Contents - Previous - Next

This is the old United Nations University website. Visit the new site at

Policies and policy implications


During the 1960s, dramatic industrialization and export growth encouraged urbanization. By the 1970s, population had gravitated to two regional poles: the North (with Taipei as the regional centre) and the South (with Kaohsiung as the regional centre). In the prosperous North and South, housing and public facilities were strained by increasing demand. The social costs attributed to traffic congestion, air and water pollution, and the improper use of natural resources were increasing. In contrast, the less developed regions (the Centre and the East) experienced out-migration, a shrinking of the agricultural labour force, relatively low family income, poor public facilities, and deterioration in the living environment. In order to check this deterioration, the government emphasized the following policies.

Urban plans

Urban planning addresses the problem of urban growth and urbanization. The major objective is to promote better land use through adequate zoning control (including restrictions on construction and the siting of industrial estates), and to provide more public facilities, such as open spaces and green belts in urban areas. Urban plans are currently in force in 424 areas covering approximately 12.1 per cent of the island. The population in the planned urban areas accounts for 76.6 per cent of the total population.

Metropolitan plans

The intimate relationship between urban and rural areas, as well as between cities, has encouraged planners in Taiwan to seek another level of planning, which focuses on the metropolis and the region. A metropolitan plan is geared to meeting the needs of cities and new urban lifestyles. It aims to provide more sophisticated public facilities, planning for new towns, and the renewal of old sections of cities.

Regional plans

A regional plan considers the goals, policies, and priorities of regional growth. Major features include population distribution, economic activities, land-use patterns, transportation systems, and environmental conservation. Furthermore, to ensure effective implementation of such plans, growth centres such as new towns and growing towns are given priority within the context of the regional plan. Regional plans designate industrial sites to encourage the establishment of plants. More than 70 industrial areas have been developed in this way, promoting the balanced development of residential communities and industries.

Transportation programmes

During the period 1950-1970, transportation programmes included the expansion of the Keelung, Kaohsiung, and Hualien harbours, improvement of the highway system, construction of the north-south and the eastern railway systems, construction of the Taipei and Kaohsiung international airports, the development of inter-city road systems, and the improvement of rural roads. These programmes encouraged further dispersion of industrial establishments and contributed to a more even spread of regional population.

Through the 1970s and 1980s, the government implemented the Ten, the Twelve, and the Fourteen Major Construction Projects. These projects were transportation oriented and included the North-South Freeway, Suao Harbour, Taichung Harbour, railway electrification, the Taoyuan International Airport, the North-Link Railway, new cross-island highways, the Around-the-Island-Railway, widening the Pingtung-Oluanpi Highway, improving traffic flow in the Kaoping region, the undergrounding of Taipei's railway, the Second Trans-island Freeway, highway expansion (including expansion of the Binghei Highway and the Third Provincial Highway), and a mass-transit system in Taipei.

Table 6.30 Regional allocation of capital for major construction projects 1973 1990 (%)

Region Major Construction Projects Total
Ten Twelve Fourteen
1973-1979 1978-1984 1984-1990
Northern 23.56 16.87 41.48 32.86
Central 2.34 4.15 14.99 10.45
Southern 36.51 47.46 16.13 26.72
Eastern 0.00 3.00 0.00 0.72
Interregion 37.59 1.15 9.37 11.81
Island-wide 0.00 27.37 18.03 17.44
Total 100.00 100.00 100.00 100.00

Source: Construction and Planning Administration, Ministry of Interior, Study of Regional Development in Taiwan - Conference for National Construction, 1986.

With regard to capital for the three major construction programmes described above, about 32.9 per cent of the total capital allocated was for the Northern region, 26.7 per cent for the South, 10.5 per cent for the Centre, and less than 1 per cent for the East (table 6.30). These figures exclude capital for island-wide and inter-regional projects. It is obvious that the distribution of infrastructure investment in Taiwan has had a crucial impact on regional development and the formation of metropolitan areas and urban systems. This distribution illustrates why the Northern region has been the most developed and the most populated area, and why the Eastern region has been the least developed area and has experienced considerable out-migration.

Programmes for the improvement of social overhead capital

Prior to 1970, most libraries, museums, theatres, colleges, universities, and hospitals were located in Taipei and Kaohsiung. To achieve a better distribution of social overhead capital and to improve the overall level of social welfare and promote balanced regional development, the government has launched the following projects:

(1) Cultural Centre Development Projects: each city or prefecture is required to construct a cultural centre, including a library, a museum, and a music hall.

(2) New Colleges Development Projects: new colleges or universities are planned for construction in the Central or Southern regions.

(3) Medical Care Development Projects: medical services will be made available in each "living perimeter."

The implementation of these social overhead capital improvement programmes is expected significantly to reduce the concentration of population in Taiwan.

Agricultural and rural community development programmes

A major impetus behind urbanization is the "push force." For that reason, improvement of the agricultural economy can help decelerate urbanization. When agriculture stagnated in the late 1960s, the government improved the agricultural infrastructure to reduce agricultural production costs. And to raise farmers' income, improve the rural quality of life, and foster agricultural growth the government has carried out rural construction and infrastructural development programmes since 1973.


The following conclusions can be made regarding the implications of these policies for population deconcentration.

Zoning control, restrictions on construction, industrial estates, green belts, and the provision of more open space have reduced urban sprawl and alleviated the problem of squatting. On the other hand, better job opportunities and facilities in urban areas have continued to attract people to the cities, increasing their population.

Transportation programmes associated with industrial estates (in the regional plans) have promoted the development of medium-sized cities, which has eased in-migration pressure on the big cities and prevented the formation of a primate city.

Programmes to improve social overhead capital have narrowed quality-of-life differences between big and medium-sized cities, helping to balance population distribution.

Improvements in agricultural infrastructure have reduced farm costs, but attempts to increase farm income have been less successful. Programmes for the development of agriculture and rural communities continue to have an impact on urbanization.

Because of a lack of coordination among civil authorities, plans to slow the pace of urbanization have achieved only limited success.


A number of policies have influenced the distribution of population and the formation of the urban system in Taiwan. However, there has been no explicit policy to direct urban development. The rate and pattern of Taiwan's urbanization have been influenced more by national and international economic trends than by planning or public policy. With limited natural resources, Taiwan's economic growth relies heavily on international trade. Export-oriented trade policy has had a major impact on Taiwan's industrialization and industrial structure. Industrialization has further encouraged the movement of people into cities, creating large metropolitan areas. That is, Taiwan's urban system has been significantly influenced by changes in the international economy and the globalization of economic growth.

The well-designed and widely dispersed infrastructure, advances in transportation and telecommunications technology, and efficient public utilities have helped industrial estates spread throughout the whole island and cities have emerged in a multi-nucleated pattern. A primate city has not arisen in Taiwan, although there is a tendency towards the development of large metropolitan areas. The relationship between the sizes and ranks of cities corresponds closely with the rank-size rule. Metropolitan areas have gradually expanded their spheres of influence. Taiwan currently has three metropolitan areas: Taipei in the North, Taichung in the Centre, and Kaohsiung in the South.

The inflow of foreign capital has increased investment in industry and provided new technology for advanced production. A foreign banking network has made possible rapid foreign-exchange transactions. And foreign trading companies have set up a marketing system to collect orders for Taiwan's small and medium-sized enterprises. Because many trading services are provided by the domestic branches of foreign companies, there is no need for industrial firms to be located in central cities. As a result, cities are more widely dispersed than they would otherwise be.

Taiwan's future development will rely heavily on interdependence among countries, an international division of labour, and international cooperation. The inflow of foreign capital provided by multinational corporations will spur competition between the domestic and world markets by promoting the establishment of satellite factories, processing plants, department stores, and retail outlets. Academic, educational, cultural, and technological interchange will link Taiwan more closely with other parts of the world. These developments will affect the growth of commerce and services in Taiwan's cities, and thus speed up urbanization. Metropolitan areas, particularly Taipei, Taichung, and Kaohsiung, will attract an even greater population. Furthermore, the Chungli-Taoyuan region, Hsinchu, and Tainan will become metropolitan areas in the near future. These six metropolitan areas together will then accommodate 80 per cent of Taiwan's total population.


1. A "living perimeter" is a spatial unit for the planning and development of public services. Living perimeters are established to reduce regional differences in the quality of life. To achieve this goal, transportation will be organized so that:

(1) people living in every town and hsiang can reach a service centre within 30 minutes;
(2) people in each living perimeter can reach the nearest metropolitan area within one hour.

Each perimeter will consist of self-contained communities providing living accommodation, recreation, education, and medical and shopping facilities for residents, and will be served by rapid mass-transit networks.


Castells, Manuel (1989), The informational City. Oxford: Basil Blackwell.

Chen, Cheng-hsiang and Teh-Hsiung Sun (1958), "The Distribution and Movement of Taiwan's Population," Ao-Ming Industry Geographic Research Institute.

Council for Economic Planning and Development (1991), The Modernization of Taiwan's Economy. Taipei: CEPD (in Chinese).

Eldridge, H. T. (1942), "The Process of Urbanization," Social Forces 20(3): 311-312.

Hsing, W. C. (1982), Urban and Regional Planning. Taipei: Land Economic Institute, pp. 2-3.

Jaffe, A. J. and C. D. Stewart (1951), Manpower Resources and Utilisation. New York: John Wiley.

King, Anthony D. (1990), Global Cities: Post Imperialism and the Internationalization of London. London and New York: Routledge.

Kuo, Shirley W. Y. (1983), The Taiwan Economy in Transition. Boulder, Colo.: Westview Press.

Lee, Jui-Lin (1979), Urban and Regional Planning. Taipei: Land Economic Institute, pp. 11-30.

Liu, P. K. C. (1973), Interactions Between Population Growth and Economic Development in Taiwan. Taipei: Institute of Economics, Academia Sinica.

_____(1975), A Study of Urban Definition for Taiwan. Taipei Economic Planning Council (in Chinese).

_____(1976), "The Relationship Between Urbanisation and Socio-Economic Development in Taiwan," Industry of Free China 46(3): 15-38.

Mills, Edwin S. (1991), "Overurbanization and Government Urbanization Policies in Development," Draft, pp. 1-2.

Smith, M. P. and J. R. Feagin (eds.) (1987), The Capitalist City: Global Restructuring and Community Politics. Oxford and New York: Basil Blackwell.

Speare, A. (1974), "Urbanisation and Migration in Taiwan," Economic Development and Cultural Change 22:302-319.

Timberlake, Michael (ed.) (1985), Urbanization in the World-Economy. Orlando, Fla.: Academic Press.

Tsai, H. H. (1987), "Population Decentralization Policies: The Experience of Taiwan." In: R. J. Fuchs, C. W. Jones, and E. M. Pernig (eds.), Urbanization and Urban Policies in Pacific Asia. Boulder, Colo.: Westview Press.

_____(1988), "Urban Growth and Employment Restructuring in Taiwan." Presented at a seminar on The Extended Metropolitan System, 19-25 September.

Williamson, Jeffrey G. (1988), "Migration and Urbanization." In: Chenery Srinivasan (ed.), Handbook of Development Economics, vol. 1. Amsterdam: Elsevier Science Publisher B.V.


Globalization and the urban system in China

Economic reform and globalization in China
The globalization of china's economy
Foreign investment
Urbanization and urban system development in China
The effects of globalization on the urban system in China
Problems of urban development under the open policy
Policy implications and future trends in urban development

Anthony Gar-on Yeh and Xueqiang Xu


The year 1978 is a major turning point in the development of China. At an important meeting of the Communist Party in December 1978, it was decided to focus the country's efforts not on politics and "class struggle" but on economics and the Four Modernizations - in agriculture, industry, national defence, and technology. This involved reducing the dominance of central state planning and permitting a more market-led economy. This also included an "open (door) policy" to open up China to world markets and foreign investments and to promote economic and technical cooperation with other countries. The adoption of economic reforms and an open policy has had a profound influence on the economic development and urban system in China. Economic reforms have improved the national economy and at the same time work together with the open policy in integrating China with the world economy. Economic reforms have freed the market from the rigid state-controlled economy towards a more vibrant domestic market. The increase in the domestic market alone could not have achieved the economic growth that China experienced in the 1980s. Isolated from the world during the Cultural Revolution, it needed foreign investment and foreign technology, particularly production technology, to speed up its economic development and upgrade its production. It is difficult to envisage economic reform without the open policy. It is through this course that China is working its way through economic development.

In contrast to the sudden drastic change from a socialist economy to a free market economy in the former Soviet Union and Eastern Europe, China has adopted a gradual path of reform and development. Its economic reforms are gradual and so is its opening up to the world. Economic reforms are tested in pilot areas and sectors before being applied to the whole country. The opening up of the centrally planned economy to a market economy is carried out gradually. The open policy is also gradual in terms of geographical location and economic sectors. First, foreign investment was limited to the four Special Economic Zones (SEZs) and later extended to other special zones such as the open cities and economic and technological development zones. Secondly, foreign investment was allowed in manufacturing and later extended to property development, and now to the tertiary sector (e.g. shops and banks).

Since 1978, economic development has been rapid. China had an average annual growth rate of 14.3 per cent in the period 1978-1990, which is one of the highest in Asia and the world. Such high economic growth has been achieved through economic reforms and the globalization of its economy. The globalization of its economy is an intentional effect of the open policy adopted in 1978. Because of locational advantage, it is not surprising to find that economic growth is faster in the coastal provinces than in inland provinces. It is hoped that economic growth will later spread to the inland provinces. Coastal cities are developing more rapidly than non-coastal cities. The open policy has had a major impact on the spatial structure and urban system of China, influencing the pace and composition of development in different provinces and cities of China.

Economic reform and globalization in China

The 1978 economic reforms opened China's economy to foreign investment and market processes, reintroduced the private individual economy (geti jingji), with individuals owning their means of production and earning their living through their own labour, and the commodity economy (shangpin jingji). A series of reforms followed the adoption of the economic reform policy. Since 1978, the economic reforms that have affected urban system development in China are mainly rural reform, the open policy, and urban reform.

Rural reform

The early reforms mainly affected the rural areas, where communes were replaced by a production contract, the household responsibility system. Rural land was distributed to households according to household size, and each household bore the sole responsibility of fulfilling a predetermined production quota. After meeting the production quota, households were free to produce whatever they liked and could sell their products in the free market. Households could also contract to run agricultural production units such as duck farms, fish ponds, or orchards. This system has replaced the original commune system where farmers worked together and were paid according to the number of their work points. This reform has aroused the enthusiasm of farmers by the new system of "more pay for more work." Rural production has increased tremendously since the introduction of rural reform. There has been an increase in the number of "specialized households" that make use of special production skills. Households that preferred to engage in non-agricultural activities were allowed to sub-lease their plots to other people. The surplus labour freed from agriculture as a result of the increase in the productivity of farmers has stimulated the development of small enterprises in the rural areas, giving rise to rural urbanization.

The open policy

Foreign investment was considered conducive to economic development in China. The 1978 economic reform has led to the utilization of more foreign investment and the development of SEZs and special districts for attracting foreign investment.

To attract and manage foreign investment effectively, four SEZs Shenzhen, Zhuhai, Xiamen, and Shantou - were established in 1979. The SEZs represented a major attempt to attract foreign capital, enterprises, and technology in strictly demarcated zones, where experiments with new economic policies in dealing with foreign investments could be conducted (Jao and Leung, 1986). The SEZs had the initial objective of producing goods for export to earn foreign exchange. They also acted as social and economic laboratories where foreign technologies and managerial skills might be observed. They offered a range of inducements to foreign investors, including tax holidays, early remittance of profits, and good infrastructure.

Despite some criticisms, the SEZs were considered to be successful and could be used as a model for other cities in economic development. In 1984, 14 other coastal cities were opened up for investment (Yeung and Hu, 1992). These are Dalian, Qinhuangdao, Tianjin, Yantai, Qingdao, Lianyungang, Nantong, Shanghai, Ningbo, Wenzhou, Fuzhou, Guangzhou, Zhangjiang, and Beihai (fig. 7.1). These "open cities" were to offer similar concessions to foreign investments as the SEZs, although they are not provided with the same level of central government funding for infrastructure development.

Apart from designating SEZs and coastal open cities to attract foreign investment, other regions were designated as special zones for foreign investment. In 1988, three "open economic regions" were designated- the Yangtze River (Changjiang) Delta Economic Region (around Shanghai), the Pearl River (Zhujiang) Delta Economic Region (around Guangzhou), and the Minnan Delta Economic Region (around Xiamen) (fig. 7.1). They are attempts to spread the benefits of an open policy from the SEZs to other parts of the country.

The designation of SEZs, cities, and regions along the coast for foreign investment is understandable because they are more accessible than interior cities and regions to foreign investments. The open coastal cities and the SEZs were also previous ports in which foreigners had lived and traded with China.

After the adoption of the open policy, some US$27 billion of foreign capital was utilized in the period 1979-1985 (Phillips and Yeh, 1990). Of this, 72 per cent was in the form of external loans, whereas 27.8 per cent was direct investment. Hong Kong provided most of the foreign direct investment, followed by Japan and the United States. Because of the policy of designating SEZs, coastal open cities, and open economic regions along the coast, foreign investment is unevenly distributed spatially. It is highly concentrated in the coastal provinces, particularly in large cities such as Beijing, Shanghai, and Guangzhou and the SEZs of Shenzhen and Xiamen (Phillips and Yeh, 1990).

Urban reform

Urban reform was officially launched by the Third Plenary Session of the Twelve Central Committee of the Chinese Communist Party in October 1984, which adopted a policy to reform the economic structure. It tried to introduce the successful rural economic reform to the urban sector by giving more incentives to individual efforts. It consisted of expanding the autonomy of enterprises, giving material incentives to workers, loosening planning and price controls, replacing state investment with credit finance for industrial development, encouraging small-scale private enterprise, and allowing market forces to determine the distribution of goods and services. Enterprises were allowed to retain and allocate investment, plan production, hire and dismiss employees, and determine bonuses and prices. These reforms were mainly aimed at enterprises but, because most enterprises are located in the urban areas, they were referred to broadly as urban reform.

Fig. 7.1 China's Special Economic Zones, coastal open cities, and open economic regions, 1980s (Source: Phillips and Yeh, 1990)

Prior to the official announcement of the 1984 urban reform, Shashi was designated as the first city to carry out pilot economic structural reforms in July 1981. Since 1981, 74 cities (such as Chongqing, Wuhan, Shenyang, Dalian, Nanjing) have been approved as pilot cities for economic reforms; 20 of them experimented with institutional reform, 27 with banking reform, 14 with housing system reform, and 13 with market-oriented production reform (STB, 1990).

The globalization of china's economy

The economic reforms and open policy of 1978 ended China's earlier hostile attitude to foreign investment and trade and opened China up to the world economy, particularly to Asia. As a result, there has been a marked increase in tourism, imports, exports, and foreign investments. Non-Chinese tourists increased from 0.5 million in 1980 to 1.74 million in 1990 (a 248 per cent growth) and Chinese tourists, mainly from Hong Kong, Macau, and Taiwan, increased from 5.17 million in 1980 to 25.71 million in 1990 (a 397 per cent growth) (STB, 1991). Prior to 1978, the volume of trade was generally small and the major trading partners were mainly communist countries, particularly during the 1950s and 1960s. Since 1978, there has been a large increase in the volume of trade, especially with non-communist countries. Foreign investment was equally emphasized. Legal and administrative reforms have been introduced to attract foreign investment.


By promoting trade, China hoped to accumulate the funds and technology necessary for modernization. Foreign trade was not always important in the Chinese economy based on the pre-1978 principle of self-reliance. The annual volume of trade between 1950 and 1974 averaged no more than 4 per cent of gross national product (GNP).

This has risen considerably in recent years. In 1990, imports and exports rose to 30 per cent of GNP. Between 1965 and 1980, the average annual growth rate of exports and imports was 5.5 per cent and 8 per cent, respectively; between 1980 and 1985, the average increased further to 8.8 per cent per annum for exports and 17.6 per cent for imports. Imports and exports have increased rapidly since 1978, and since 1987 there has been a trade surplus because of China's fast-growing exports.

The recent role of foreign trade (particularly imports) has been to facilitate and accelerate modernization and economic development by enabling the acquisition of raw materials, machinery, equipment, and technology that are not available or cannot be produced in sufficient quantities domestically.

There has also been a major shift in trading partners since 1978 with the increase in trade with non-communist countries in the West (table 7.1). Trading with Asian countries, particularly Japan and Hong Kong, is extremely important. In 1990, Hong Kong and Japan accounted for 62.3 per cent of total exports and 42.7 per cent of total imports. The trade relationship with Asian countries varies between exports and imports. Exports are mainly to Asian countries whereas imports are mainly from non-Asian countries, especially Western countries. In 1990, 69.6 per cent of exports were to Asian countries and only 44.8 per cent of imports were from Asian countries.

China has a special trading relationship with Hong Kong and enjoys a large trade surplus. In 1990, the surplus was US$10.7 billion, enough to cover a substantial part of its trade deficits with other countries. Much of the exports to Hong Kong is composed of goods originating from Hong Kong and exported to China for processing and then re-exported to Hong Kong. Hong Kong is growing in importance as a staging post for goods into and from China. For many years, about one-third of Hong Kong imports from China were for reexport, but the figure in the mid-1980s rose to half. Apart from providing transshipment services, Hong Kong's efficient banking system handles transactions for China and its indirect trading partners, with which China may currently have no diplomatic ties. For example, in the past, Korea, Malaysia, and Taiwan were such countries.


China is rapidly developing its export-led economy. The proportion of exports in its GNP rose from 4.6 per cent in 1978 to 16.8 per cent in1990. Hong Kong is an especially important export market for China. It has always ranked among the top three. In the past, most of the exports consisted of food, but increasingly manufactured goods are exported that are then re-exported to other countries.

Table 7.1 China's major trading partners, 1990

Rank Country


US$ million % of total
1 Hong Kong 18,587 42.2
2 Japan 8,871 20.1
3 USA 4,815 10.9
4 USSR 2,133 4.8
5 Singapore 1,863 4.2
6 West Germany 1,816 4.1
7 Italy 707 1.6
8 United Kingdom 704 1.6
9 France 642 1.5
10 Netherlands 614 1.4
  Total 40,752 92.5
Total exports 44,078 100.0


  Country US$ million % of total
1 Hong Kong 7,854 28.1
2 USA 4,993 17.9
3 Japan 4,055 14.5
4 USSR 1,758 6.3
5 West Germany 1,717 6.2
6 Canada 1,316 4.7
7 France 1,204 4.3
8 Australia 1,199 4.3
9 United Kingdom 829 3.0
10 Italy 530 1.9
  Total 25,455 91.2
Total imports 27,912 100.0

Source: Almanac of China's Foreign Economic Relations and Trade, 1991.

Exports produce over 80 per cent of China's foreign currency earnings, with the remainder coming from tourism, labour services, and remittances from overseas Chinese. There has been not only a marked increase in the value of exports but also a structural change. Agricultural products declined from 55.7 per cent of the total value of exports in 1953 to 13.0 per cent in 1990. Light industrial products increased from 26.9 per cent in 1953 to 53.3 per cent in 1990, and heavy industrial products (including petroleum products) increased from 17.4 per cent to 33.7 per cent.

The distribution of exports is uneven, being mainly concentrated in the coastal provinces (fig. 7.2). The coastal provinces accounted for over 71.9 per cent of total exports in 1990. Most exports came from either the coastal provinces, or central municipalities with a strong industrial base, such as Tianjin, Liaoning, and Shanghai, or coastal provinces with a sound agricultural and light industrial base, such as Guangdong and Jiangsu.

Contents - Previous - Next