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Challenges of creating cities in China: Lessons from a short-lived county-to-city upgrading policy


  • Fan, Shenggen
  • Li, Lixing
  • Zhang, Xiaobo


It has been widely observed that China is under-urbanized. The central government has tried to use various policies to promote urbanization. In this paper, we evaluate one of these policies – count-to-city upgrading. Under China’s hierarchical governance structure, a city status can only be determined and awarded by the central government. In the 1980s and 1990s, China adopted a formula-based county-to-city upgrading policy. Based on a large panel dataset covering all counties in China, we find that the formula was not strictly enforced in the practice. Moreover, jurisdictions that were upgraded to cities prior to 1998 do not perform better than their counterparts that remained county status in terms of both economic growth and providing public services. Largely because of these problems, this policy was called off in 1997. Given the strong need for urbanization, more indigenous institutional innovations are needed to find a viable way of creating cities, which would also provide compatible incentives to local governments.

Suggested Citation

  • Fan, Shenggen & Li, Lixing & Zhang, Xiaobo, 2012. "Challenges of creating cities in China: Lessons from a short-lived county-to-city upgrading policy," Journal of Comparative Economics, Elsevier, vol. 40(3), pages 476-491.
  • Handle: RePEc:eee:jcecon:v:40:y:2012:i:3:p:476-491 DOI: 10.1016/j.jce.2011.12.007

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    References listed on IDEAS

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    Cited by:

    1. Chao Li & John Gibson, 2014. "Agglomeration Economies in China: Locations and Effects," Working Papers in Economics 14/02, University of Waikato.
    2. Chao Li & John Gibson, 2016. "Pareto's Law and City Size in China: Diverging Patterns in Land and People," Working Papers in Economics 16/09, University of Waikato.
    3. Mukim,Megha & Zhu,Tingting Juni, 2015. "Empowering cities : good for growth ? evidence from China," Policy Research Working Paper Series 7193, The World Bank.

    More about this item


    Urbanization; City creation; Governance structure; Political centralization; China;

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General


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