How To Make A Metropolis

As far as most people are concerned, Xinji is halfway to nowhere--that is, if they've even heard of the place. It's a landlocked former county seat in Hebei province, the heart of China's grain belt, some 250 kilometers southwest of Beijing. The guidebooks barely mention its existence. Why would they? There's nothing here for sightseers. The land is flat; what passes for scenery is just corn and concrete roads, and hardly any buildings have survived from before the communist revolution. The place is especially worth avoiding in hot weather, when the aroma of freshly tanned hides wafts through the air.

Still, watch what you say about the place in front of Xie Shaoming. Forty years ago he quit school at 13 and took a job with a local leathermaker for $6 a month. Today he's president of the Dongming Industrial Group, a business empire whose import-export trade last year amounted to $41 million in leatherwear, fur coats, sheepskins and tannery equipment. He has traveled the world on business and pleasure, gambling in Las Vegas and swigging vodka in Moscow. They're nice places to visit, Xie concedes. But nothing competes with his favorite city on earth: Xinji.

Crazy as it may seem, Xinji just might be the key to China's future. Beijing's leaders are desperately hoping Xie's attitude will catch on in other cities all across the interior. There may be no other way to stave off a massive social breakdown. Leading economists are warning that the income gap between peasants and city dwellers is approaching a level they describe as "explosive." Two thirds of China's 1.2 billion people still live in the countryside, many in abject poverty. Farmers prospered briefly two decades ago when Deng Xiaoping's first tentative experiments in market reform allowed them to turn a profit for the first time in their lives. Since then, however, the manufacturing boom in the coastal cities has left the old farmsteads literally in the dust. Rural incomes have stagnated, while taxes have soared.

Now the farmers are facing even worse troubles. As a stipulation of its long-sought entry into the World Trade Organization, Beijing agreed to gradually cut farm-import tariffs and let cheap foreign agricultural commodities into the country. In the next few years, millions of peasants are practically guaranteed to leave their farms. "It's anyone's guess whether the peasants will rebel or not," says Wang Xuefo, a farmer from a flyspeck Shandong village where the average income is less than $200 a year. "All I know is that the WTO will benefit city people, not farmers."

What will people do when they're forced off the land? Millions are likely to head for the coast in search of paying jobs. The rural exodus will only swell the existing ranks of migrants who have streamed into China's coastal cities in the last two decades. The "floating population" is already estimated at up to 150 million--an army of displaced workers greater than the populations of France and Germany put together.

It's the stuff of Beijing's nightmares. Even at current rates of growth, the coastal cities can barely cope. The last thing they need is to turn into the kind of ungovernable mega-slums that are spreading across Asia, suffocating on their own crime, gridlock, pollution and sprawl. So far, the world's most populous country has largely avoided the curse of such urban monstrosities as Jakarta, Karachi and Calcutta with the help of Mao Zedong's strict (household registration) system. Migrants have been deterred by laws that, at least until recently, hindered them from getting jobs, marriage licenses, even schooling for their children in cities where they had no official permission to live. But the old registration structure is falling apart, effectively creating an urban underclass, with soaring crime rates and all the other ills of social neglect.

That's where places like Xinji come in. China's planners are trying to relieve the pressure on the coast by nurturing new cities in the farm belt. The basic idea is to develop magnet industries, a scheme Beijing has been promoting for its farthest-flung provinces since 1999, with only partial success, under the slogan "Go west!" In theory, low-tech industries such as shoes and textiles will seek new homes inland, where labor and real estate are cheaper, as increasingly high-tech companies dominate the coast.

It's a huge job. Companies have to be convinced they can get good help cheaply enough to justify the costs of setting up new factories off the beaten path. Migrants need to be convinced that the new cities offer not only jobs but relative comfort. "You can't just fix a few roads and put up a few buildings," says Li Jian, deputy head of Anhui's provincial construction department. "If the economy and infrastructure aren't developed enough, people will not stay." That means building new highways, airports, schools, hospitals, water-treatment plants and other public facilities. And that, along with erecting factories, training new employees and providing social services for everyone, takes money.

The planners proudly display Xinji as a model of their art. Thanks to its booming leather industry, the city's population has doubled since 1986 to roughly 620,000. Some 60,000 people work at the town's 2,400 or so leather factories and workshops, which racked up $62 million in exports to Russia alone during the first six months of 2002. Farmers in the area have a per capita income of approximately $360 a year; leather workers can earn that much in a month, if you include merit bonuses. Evidence of the residents' new prosperity is everywhere. The broad boulevards are lined with newly built shops and showrooms, a hodgepodge of Doric columns, Palladian windows and other touches reminiscent of Middle American mall architecture. It's a good thing the streets are extra wide, since many local drivers seem to be learning the rules of the road as they go.

The hukou system gives the new cities a powerful lure. Fully a third of Xinji's leather workers are migrants. Most live there on temporary residence permits and have seasonal contracts. They work during the busy season, starting a month or two before Christmas, and leave town during the slack summer months. Those who find steady work are eligible for permanent-residence status, which conveys nearly all the key rights of a hukou, such as access to local schools and permission to buy a home. Even so, hukou isn't everything. Not long ago Hebei's provincial capital, Shijiazhuang, tried to increase its labor pool by offering 30,000 new household registrations. "The farmers didn't come," says Li. "Jobs, housing and schools weren't up to snuff."

Residence rights aside, it's hard to say how much credit the social engineers deserve for Xinji's success. Leather is hardly a new industry there. The surrounding area has been famous for its animal-hide artistry ever since the Ming dynasty (1368-1644), when local tanneries and artisans manufactured everything from intricately tooled saddles and harnesses to conical leather hats for the emperor himself. The city became an industrial city almost by default. Xinji's main interest used to be county bureaucracy, not leather goods. That changed 10 years ago when thousands of small tanneries were closed down because their run-off was discovered to be polluting local drinking water. The government built a new $24 million water-treatment plant in Xinji, and the tanners came to town.

City planners are not magicians. Economist Liu Chunbin, one of the earliest advocates of urbanization, says western China is littered with new cities that are barely able to keep themselves afloat, although he won't name any for fear of offending his colleagues. Despite all of Beijing's "develop the west" sloganeering, the most successful new cities tend to be in the relatively prosperous areas south of the Yangtze River, around Shanghai or in such well-to-do provinces as Shandong. It's simply too difficult and expensive to build the necessary infrastructure and create a qualified labor force from scratch.

The planners insist the new cities will work. The recipes for urban development vary from place to place, but the generic formula is roughly 45 percent manufacturing, 35 percent services and 20 percent agriculture. Officials say one of the biggest growth sectors will be small and medium enterprises. They predict that the number of such companies will rise from 9 million to 50 million by 2020, thanks largely to the growth of the new cities, where they'll have low labor costs and preferential tax treatment. The boom is expected to create 400 million new jobs. Anhui province alone needs to move 630,000 farmers a year to the cities by 2005 in order to meet its self-imposed goal of a population that is 35 percent urban. China's leaders never seem to lose faith in top-down social engineering.

What if the new cities fail? There's no doubt that China's small farmers will go broke by the millions in the next 10 years. They could head for the slums that are sprouting outside major cities, straining basic services. Or they could try to stay on the land. In that case, China is headed for environmental disaster, warns analyst Yang Fan. "Farmers will engage in illegal coal or gold mining, which releases toxic chemicals into the water supply," he says. Others are likely to uproot vegetation and clear-cut their woodlands for fuel, accelerating the spread of China's deserts, already expanding by 3,000 square kilometers a year. Failure may simply not be an option.