The secondary circuit of capital and the making of the suburban property boom in postcrisis Chinese cities

Abstract

Drawing on Harvey’s capital switching thesis, this study develops a heterodox approach from a crucial perspective to China’s post-2016 nationwide property boom. We trace the roots of this suburban property boom to the 2008 global financial crisis and investigate its nature as a solution to China’s post-2008 overaccumulation crisis. By scrutinising the serial policies formed at the central level, we unpack the continuous endeavours of the state in channelling excessive capital into city building and sustaining capital circulation in and out of land. Next, using Jiangyou as a case study and adopting Harvey’s theorisation of making the suburban property boom a state-mediated sociopolitical process to enable the realisation of surplus value in the secondary circuit of capital, we reveal why and how the local state collaborated with the central state, financial institutions and developers to create the suburban property boom. This study presents the actually existing secondary circuit of capital that occurred outside the Western context and in contemporary postcrisis capitalism and develops a state-centric approach to the secondary circuit of capital by bridging regulationist state theory and capital switch theory.

Keywords

Secondary circuit of capital capital switch China’s housing bubble overaccumulation crisis state-centric approach

Introduction

China’s great housing bubble and construction boom attracted the attention of scholars (Bian and Gete, 2015; Chen and Wen, 2017; Harvey, 2019; Zhu et al., 2018) and concern from international organisations (International Monetary Fund, 2015, 2016; The Economist, 2018b). Several commentators compared these phenomena with the present US stock bubble and regarded them as the two major destabilisers of contemporary world capitalism (The Economist, 2018a). Orthodox economists analysed the causes of this great housing bubble by quantifying influences from structural demographic and economic changes (Chen and Wen, 2017). Increased income level, a savings glut, labour and capital reallocation and the early entrance of the young generation into the housing market are commonly examined factors (Bian and Gete, 2015; Chen and Wen, 2017; Zhu et al., 2018). Acknowledging the explanatory power of these abstract econometric models for the rapid property inflation in some megacities, especially those with a robust economy and stable inflow of quality labour, is necessary. However, these interpretations are not plausible when examining the unusual and abrupt suburban property boom that has occurred in underdeveloped inland Chinese cities since 2016.¹ Moreover, as neo-Marxist political economy criticises, abstract neoclassical models disregard complex government motivations and interventions underlying crisis-prone capitalism that persistently reshape economic activities and socioeconomic life (Harvey, 1987; Jessop, 1990, 2001; Offe, 1984).

Adopting Harvey’s (1999) geographical political economy, this study develops a heterodox approach to China’s post-2016 suburban property boom. Drawing on Harvey’s capital switching thesis that views shifted capital investment into the construction of the built environment as the solution to the overaccumulation crisis² in capitalism, we trace the roots of China’s post-2016 suburban property boom to the 2008 global financial crisis. By analysing policy formation at the central level for channelling capital into the construction of the built environment, we investigate the nature of China’s post-2008 nationwide suburbanisation as a solution to the declining export-oriented production-based accumulation regime. Moreover, taking Jiangyou as a case study, which is an ordinary Chinese inland city, and adopting and developing Harvey’s (1974) conceptualisation of making the property boom a state-mediated sociopolitical process to realise surplus value within the secondary circuit of capital, we analyse why and how the local government collaborated with financial institutions and developers to intentionally create a suburban property boom.

This study has three major contributions to the existing literature. Firstly, we substantiate the existing sectoral capital switching process in China’s state capitalism, thereby justifying the generality of Harvey’s (1999) geographical political economy in understanding the geographical dimension of crisis-prone capitalism. Secondly, we present a crucial perspective for understanding the ongoing suburban property boom in China by delving into underlying political–economic motivations. Theoretically, we contribute to the state-centric approach to the secondary circuit of capital by bridging Jessop’s (1990) regulationist state theory and Harvey’s (1999) capital switch theory. Specifically, Harvey developed a capital-centric approach to geographical political economy, which largely downplays the role of the state in the capital switching process (Tickell and Peck, 1992). Subsequent works attempting to examine Harvey’s thesis noticed the importance of the territorial institutional environment in determining sectoral switching, which challenged Harvey’s capital-centric approach. Considering this missing link, we attempt to bring the state back to the secondary circuit/sectoral switching. Thus, we revisit Harvey’s initial works on the secondary circuit to identify three key functionings of the state in realising surplus value in the secondary circuit. Thirdly, we introduce Jessop’s (1990) regulationist state theory to develop a state-centric approach to the secondary circuit and use this new approach to analyse China’s rapid post-2008 suburbanisation and property boom. Moreover, post-Harvey scholarship focused on the formation of fixed capital in the built environment (capital switching) but overlooked how surplus value is achieved in the new circuit (sustaining the circuit of capital). In this regard, our research fills this important gap.

State-centric approach to secondary circuit of capital

(Sub)urbanisation, sectoral switching and crisis-ridden capitalism

Contrary to the orthodox definition that a property boom is an apolitical and isolated mechanism occurring in the real estate sector, David Harvey considered a property boom as a consequence and condition of the reproduction of capitalism. In his seminal book The Limits to Capital, Harvey (1999) reflected on how capitalism overcomes its inherent contradiction/periodical crisis by conceptualising three cuts of capital switching processes as corresponding means for overcoming a crisis. The first cut of capital switching refers to the sectoral switching of investment, in which an overaccumulation crisis in the production sector is temporarily addressed by the excessive capital channelled into the construction of the built environment. The second cut refers to the temporal displacement of a crisis through financial and monetary arrangements (Jones and Ward, 2002). The last cut stresses the spatial–temporal displacement of a crisis through the creation of markets aboard (Jones and Ward, 2002).

Among the three cuts of capital switching, sectoral switching, specifically, shifting investment from industrial production to city building (the secondary circuit of capital), garnered the most scholarly attention. Harvey’s (1978) original conceptualisation of sectoral switching stems from his awareness of the failure of the established urban theory in explaining spatiality in postwar urbanisation. The conceptualisation is also inspired by Lefebvre’s (1970) observation that in late capitalism, real estate functions as a secondary sector, that is, a circuit that runs parallel to that of industrial production, thereby making urbanism a productive force. Harvey (1978, 2018) developed this idea and argued that emerging property markets increasingly serve as a necessary sink for ‘fixing’ unproductive capital. Thus, (sub)urbanisation is the spatial manifestation of shifted capital investment into the construction of the built environment to address the overaccumulation crisis (Harvey, 1999). A property boom is not merely an outcome of (sub)urbanisation but also a necessary factor for the realisation of surplus value in the secondary circuit of capital (Harvey, 1999).

Following Harvey, urban theorists sought to incorporate uneven development (Gottdiener, 1985; Massey, 1984; Smith, 1982) into the switching thesis or spatialise the switching thesis by linking sectoral switching with geographical switching (cf. Kutz, 2016). The research of Smith (1982, 1987) on gentrification is one of these interventions. Smith (1987) stressed the role of undervalorised ‘rent gaps’ in determining blighted urban areas as sites absorbing excessive capital from the production sector. Harvey (1985) identified an inversely correlated property investment relationship between the United Kingdom and United States, which indicates the spatiality of sectoral switching on a global scale. Meanwhile, numerous scholars endeavoured but failed to substantiate this capital switching quantitatively in Western economies (e.g. Beauregard, 1994; Charney, 2001; Feagin, 1987; King, 1989). Christophers (2011) deduced two reasons for these failures, that is, the inappropriate selection of datasets and the complex nature of the modern economy (e.g. an intricate investment chain and equity ties among multicompanies and the financial derivative that complicates this chain). To overcome these issues, Christophers (2011) used data on private sector expenditures and pension fund investments to explicitly discern capital switching in the United States and United Kingdom at the onset of the 2007/08 financial crisis. The methodology developed by Christophers (2011) was extended by Kutz (2016), who noticed the neglect of the geographical dynamics of sectoral switching in Christophers’ work. Focusing on Spanish foreign direct investment to Morocco during the 1990s and 2000s, Kutz (2016) determined that excessive capital in Spain has been geographically displaced through investment in the Moroccan building industry since 2006. Thus, the author confirmed that uneven development (geographical switching) and sectoral switching are twin dynamics.

The work of Kutz (2016) inspired Goodfellow (2017) to inquire why the most backward African cities engaged in growing investments in the real estate sector despite a dearth of investment in the industrial sector. The author found a range of formal and informal incentives and constraints determining the inflow of global investment into the real estate sector rather than in the industrial sector in such late-urbanisation countries, which challenged Harvey’s original theorisation. The findings of Goodfellow (2017) somewhat echoed Feagin’s (1987) critique of Harvey’s thesis, that is, it ignored the fact that land has its own dynamics independent of the regularity of the production sector. Gourzis and Gialis (2019) developed a novel perspective for understanding sectoral switching by examining the correlation between labour underutilisation in manufacturing and growing investments in construction during the 2005–2012 recession in the Greek Capital Metropolitan Region. Overall, Harvey’s sectoral switching thesis was constantly interrogated, examined and enriched by scholars using updated evidence from the ongoing crisis-driven capitalism. Despite the previous failures in quantifying sectoral switching, recent empirical evidence supports the explanatory power of the capital switching thesis for industrialised economies. These later works also indicated the crucial role of the institutional environment and state in enabling sectoral switching (Goodfellow, 2017; Gourzis and Gialis, 2019) and thus challenged Harvey’s (1978) original account of the ‘autonomous’ nature of the capital switching process.

In this study, we do not develop the twin relationship between geographical switching and sectoral switching or a new methodology or perspective for quantifying sectoral switching. Instead, we are interested in developing and substantiating Harvey’s understudied thesis on the functioning of financial institutions and the government and their joint efforts in manipulating the property market to enable the secondary circuit of capital. According to Harvey (1985), capital meets spatial and temporal fixity in crafting the built environment into a new frontier of accumulation. This is because real estate is characterised by the long circulation turnover time or long period from value production to value realisation in commodity exchange (Gotham, 2009). Therefore, speculative financial instruments are necessary for converting illiquid assets into liquid securities, thereby eliminating spatial barriers to the circulation of capital (Gotham, 2009). The temporal deferral of the realisation of surplus value through financial and monetary arrangements is necessary to enable the secondary circuit of capital (Harvey, 1999; Lefebvre, 1970). However, why and how does the financial sector, which is governed strictly by modern capitalist states, respond to the needs of the capital in eradicating fixity in real estate? Is this an autonomous process? Harvey failed to provide a clear answer in his original conceptualisation. The aforementioned post-Harvey scholarship focused on the formation of fixed capital investment into the built environment during an overaccumulation crisis. Moreover, little attention was paid to the potential role of the state in enabling the realisation of surplus value in the secondary circuit. However, this downplaying of the state offers a neoliberal view of the market as a panacea within which housing supply and demand can be automatically matched. Considering this deficiency, we revisit Harvey’s original works and attempt to examine the role of financial institutions and the government in sectoral switching and the secondary circuit.

Our pursuit of a state-centric approach to the secondary circuit of capital is further underpinned by two other influential neo-Marxist schools of thought. The first is the regulation school, which focuses on the state’s role of changing function, form and institution in searching for and securing new accumulation processes (structuring a new capital circulation) when an overaccumulation crisis occurs (Jessop, 1990). The second is the Frankfurt School’s notion of crisis management, which has stressed the focus of securing economic growth as a source of state legitimacy since the 1970s (Habermas, 1975; Offe, 1984). Moreover, the recent emergence of the variegated capitalism approach calls attention to the territorialised nature of economic activities and state-mediated (financial and monetary) institutional transformation for overcoming economic crises (Dixon, 2012; Peck and Theodore, 2007). Harvey (1999, 2005) modified his previous capital-centric approach to a capitalism crisis by highlighting the role of the state (power) in restructuring accumulation processes at various scales. Furthermore, Harvey (1999) stressed that capital switching is a territorial strategy that recurs in evolving capitalism in different countries. Thus, constantly revisiting the idea of capital switching to examine its temporal and geographical variations is important.

In this regard, though the capitalist crisis/law of capital generates a structural force for sectoral switching, its materialisation relies on the operation of the state. The existing secondary circuit of capital is contingent on the tension between the structural capitalist crisis and strategic choice of the state in a temporally and geographically specific setting. Thus, we argue that sectoral switching is not merely the capital’s proactive plan to craft the built environment into a new frontier of accumulation but also a state project/political decision for restructuring the economy and overcoming the overaccumulation crisis to defend state legitimacy (Jessop, 1990).

Putting the capitalist state in its place

A critique of Harvey’s works in the 1970s suggested the vital role of the state in sustaining the secondary circuit of capital, particularly, in the production and consumption of real estate. According to Harvey (1974), class-based sociospatial segregation is not a consequence of (sub)urbanisation but a condition for the realisation of surplus value in the secondary circuit. In contrast to the orthodoxy that considers natural scarcity as a condition in the housing market, Harvey (1974) posited that the creation of an artificial scarcity by manipulating supply/demand conditions is central to the secondary circuit. This manipulation is executed through three key processes. The first process is the formation of a monopoly power over land supply (Anderson, 2014). The second process is the creation of socially and geographically different submarkets to promote competition in housing consumption through class differentiation in consumptive tastes and identities (Harvey, 1974). Thus, an artificial scarcity can be established and controlled within each housing submarket for each class (Anderson, 2014). The last process involves the financial sector manipulating credit access to create a housing demand within a certain group at a certain period of time (Harvey and Chatterjee, 1974).

In an analysis of Baltimore’s urbanisation in the 1970s, Harvey (1974, 1975; Harvey and Chatterjee, 1974) elaborated on how the aforementioned mechanism works. Firstly, the entrenched income disparity between the blacks and whites enabled the latter’s monopoly of land property in the inner city (Harvey, 1974). Secondly, the sudden cheap credits granted by financial institutions to poor blacks created a mass demand for housing ownership in the inner city (Harvey and Chatterjee, 1974). Thirdly, driven by their desires for different and segregated living areas for poor blacks, the whites turned to the suburban housing market. Accordingly, despite being landlords in the inner housing market, the whites were trapped by mortgaged living in the suburbs. Developers acting as monopolistic landlords in the suburban housing market manipulated supply/demand conditions easily. Eventually, wages ascended to the financial sector through housing consumption, thereby enabling the realisation of surplus value in the secondary circuit (Anderson, 2014). Wyly et al. (2006, 2009) extended Harvey’s inferences to an analysis of the property boom that occurred in pre-2008 America. The authors’ findings revealed that racial/economic residential segregation and the predatory lending to black homebuyers contributed to the sectoral switching.

Harvey’s story of Baltimore indicates that the realisation of surplus value in the secondary circuit (consumption of real estate) is a power-laden sociopolitical process involving a constellation of empowered actors capable of action. The story also demonstrates the necessity of three key functionings of the state for sustaining the secondary circuit. The first is the empowerment of certain groups to monopolise land/house supply. The second is the empowerment of certain actions to demonstrate symbolic power to foster/consolidate class differentiation in housing and class-based sociospatial segregation (the formation of housing submarkets). The third is the reregulation of the financial system to encourage real estate production and consumption. The purpose of financial reregulation is twofold, that is, to favour developers and certain social groups in accessing credit and to encourage financial innovations enabling developers and financial institutions to refinance land redevelopment-related debts (eradicate fixity in real estate). Although Harvey (1974) noted that the state plays a crucial role in enabling the secondary circuit by choosing to support the actions of financial institutions or protect society, he did not foreground the state (power) but rather insisted on a capital-centric approach.

In this study, we attempt to bring the state back to the secondary circuit of capital. Our understanding of the capitalist state follows Jessop’s (1990, 2001) regulationist state theory. Central to this theory is viewing the state in late capitalism as a site of power distribution through the formalisation of social institutions that empower certain actors and actions towards addressing capitalist crises/contractions (Jessop, 2001). According to Jessop, the state is not about a polity and ‘does not exist as a fully constituted, internally coherent, organisationally pure and operationally closed system’ (Jessop and Sum, 2006: 97). Instead, the state is an ‘emergent, contradictory, hybrid and relatively open system linked to the wider political system, other institutional orders and the wider social world’ (Jessop and Sum, 2006: 97). Thus, the state is a relative unity and site of power struggles among different social forces with their own interests and strategies for reregulating the accumulation process (Jessop, 1990). The result of these power struggles is a new institutional ensemble that selectively prioritises certain actors, interests, identities, values and actions over others in the reregulation of the accumulation process (Jessop and Sum, 2006). Hence, institutional transformation involves the establishment of a new opportunity structure within which certain forces, the utilisation of several strategies and the pursuit of some objectives are favoured over others to access state power (Jessop and Sum, 2006).

By combining Jessop’s (1990) regulationist state theory and Harvey’s (1999) geographical political economy, we clarify the role of the state in enabling actors (e.g. developers, financial institutions and local states) to channel/sustain capital into the secondary circuit through policymaking. We operationalise this state-centric approach to (1) understand China’s rapid post-2008 suburbanisation as a state-mediated capital switching process to address the territorial overaccumulation crisis and (2) understand the creation of the post-2016 property boom in Chinese cities as a sociopolitical process to enable the realisation of surplus value to sustain the secondary circuit.

Methodology

Jiangyou, which is a medium-sized city in Sichuan Province, was selected as the case study for two reasons. Firstly, as national or regional centres, China’s first-tier (e.g. Beijing and Shanghai) and provincial cities constantly attract labour and capital from surrounding areas. Thus, they experience a natural scarcity in the housing sector.³ Fluctuations in the property sector of large cities may be complicated by contingent factors, such as short-term speculation and capricious hukou, employment and industrial policies. By contrast, ordinary cities,⁴ such as Jiangyou, possess a simple industrial structure and comparatively enclosed property market, thereby providing a suitable condition for deciphering the mechanism of the unusual post-2016 suburban property boom. Secondly, owing to their deep involvement in the country’s post-World Trade Organization (WTO) export-oriented production economy, most coastal cities are characterised as having a complex suburban spatial structure, such as numerous industrial parks (Wu, 2016) and intricate periurbanised areas (Tian, 2015). Moreover, such cities have a comparatively large gross domestic product (GDP) and complex fiscal structure. These characteristics hinder the identification of the spatialised circulation of capital in and out of land and temporal relation with suburban spatial reconfiguration. As an inland city, Jiangyou has a small fiscal size and clear spatial structure, which is represented by a boundary between the inner city and the new suburban areas developed during the postcrisis period (Figure 1).

Figure 1.

Spatial layout of Jiangyou city.

The data used for the empirical examination were collected using two approaches. Firstly, secondary data were collected from government archives, news reports and the relevant literature to analyse why and how suburban new town building (SNTB) was employed as a strategy for overcoming the post-2008 overaccumulation crisis at the national level. Secondly, the first author conducted a field investigation in Jiangyou from July 2019 to August 2019. During the fieldwork, intensive in-depth interviews with members of the local governmental and financial institutions, developers, real estate agents and homeowners were conducted to identify key actors and the relationships among their actions that enabled the post-2016 suburban property boom in Jiangyou (Table 1).

Table 1.

Data collection.

Date source	Time (number of interviewees)
1. Collection of secondhand data at the national level from news reports, academic articles, government reports and online government archives	November 2017 to August 2019
2. Field investigation at the local level involving	July 2019 to August 2019
In-depth interviews with
Members of Jiangyou municipality	2
Senior officers of the Hongfei Group, which is the local financial platform (LFP) of the municipality of Jiangyou	3
Staff of local banks who specialise in the financial activities of the municipality	4
Professional local real estate agents	4
Staff of local developers	3
Four staff members of nonlocal developers	4
Local residents	12
Onsite visits to the two new suburban towns of Jiangyou

Source: Authors’ summary.

Suburbanisation as a solution to China’s post-2008 overaccumulation crisis

Wu (2016) stated that since the market-oriented reform in 1978, China’s political economy can be divided into two major periods. The first period is the early-market reformist regime between 1978 to 2000, when serial political–economic reforms were launched to liberalise the mobility of the population, resources and capital (Wu, 2016). These initiatives included a tax-sharing reform and political decentralisation, which encouraged intercity competition to promote local growth (Walder, 1995; Wu, 2003); land and housing commodification that enabled local states to utilise territorial resources to plan local economy growth (Hsing, 2010); and the decline of the danwei and hukou systems, which freed labour mobility (Wu, 2002). After creating appropriate conditions for capital accumulation in the wake of these painstaking reforms, China entered global capitalism and embraced a post-WTO accumulation regime in 2001 (Wu, 2016). Such an export-oriented industrial production-based accumulation regime was underpinned by local state entrepreneurialism, and the municipality endeavoured to fix footloose industrial capital under neoliberal globalisation (He et al., 2018). The municipality utilised fiscal income gained from selling land to developers to subsidise the construction of industrial parks and special economic zones (Hsing, 2010). Such activities led to a nationwide wave of the suburbanisation process characterised by the state-led acquisition of land from the peasantry, enabling suburban industrial land developments (He et al., 2009; Le Mons Walker, 2006; Wang and Scott, 2008).

Notably, suburban spatial reconfiguration under the post-WTO accumulation regime was complicated by three processes: (1) intensive urban redevelopment for city promotion and winning over intercity competition for capital investment, which caused the state-led mass relocation of the population to newly developed suburban settlements (He and Wu, 2005, 2009); (2) commodity housing developments near suburban industrial parks for fiscal balance (Shen and Wu, 2017; Su and Tao, 2017); and (3) anti-land-grabbing practices by the suburban peasantry who developed rural land illegally for profitable urban uses, which led to informal suburbanisation and periurbanisation processes (Zhao and Zhang, 2018).

However, the 2008 global financial crisis interrupted China’s post-WTO accumulation regime and introduced a new momentum for suburban spatial reconfiguration. The shrinking international trade due to the financial crisis caused a 40% reduction in export demand (Wen and Wu, 2019). Accordingly, industrial production growth decreased from 20% to below 5% in 2008, thereby indicating that a substantial amount of surplus in the production sector could not find an outlet (China's National Bureau of Statistics, 2009). This emergency forced the central state to resist the looming depression by seeking a new accumulation strategy (Wen and Wu, 2019). Channelling excessive capital into city building was imperative. In November 2019, the State Council announced a stimulus package called the ‘Four Trillion Plan’, which involved state-led investment in infrastructure and built environment construction (Tsui, 2011). According to the investment arrangement, one third of the investment came directly from the central budget and was allocated to large crossregional infrastructure projects. The remainder of the local governments’ loan from the financial sector was allocated to the construction of the local built environment⁵ (Tsui, 2011). To facilitate this process, the State Council implemented an ultraloose monetary policy that enabled sufficient liquidity in the financial system to be borrowed by the local state (Wen and Wu, 2019). Accordingly, many Chinese municipalities announced SNTB projects and assembled LFPs to finance and conduct suburban land developments (Tsui, 2011; Wu, in press). Between 2008 and 2014, 272 of China’s 281 prefecture-level cities (except Lhasa and provincial-level cities) launched SNTB projects. On average, every city had 2.5 new towns⁶ under construction by 2014 (Chang and Lu, 2017).

Despite an average GDP growth of 7% against the backdrop of the post-2008 global recession (Wen and Wu, 2019), intensive SNTB caused a rapid accumulation of debt among municipalities, leading to a nationwide local debt crisis between 2011 and 2013 (Pan et al., 2017; Tsui, 2011). Figure 2 shows the drastic increase in local government debts since 2008, and Figure 3 presents the spatial distribution of outstanding local government debts by 2013. To extend debt deadlines or temporarily defer the realisation of value in the secondary circuit of capital, the central state adopted two major measures. The first measure was a debt swap plan launched in 2015, in which provincial governments, on behalf of municipalities, issued low-interest long-term municipal bonds (munibonds) to swap the municipalities’ imminent high-interest debts (Chen et al., 2020). The second measure was a special financial arrangement established in 2014, which allowed the LFPs’ adoption of innovative financial tools to (re)finance accumulated debts and SNTB projects.⁷ These financial tools included medium-term notes, private placement notes, commercial papers and asset-backed securities (collectively called municipal corporate bonds [MCBs]). Both measures delayed local mass debt deadlines by three to eight years. Figure 4 illustrates the drastic change in the composition of local government debts since 2014 owing to the above two strong state interventions.

Figure 2.

Increased ratio of local government debts to GDP since 2008.⁸

Figure 3.

Spatial distribution of outstanding local government debts by 2013.⁹

Figure 4.

Changed composition of local government debt balance since 2014.¹⁰

Given that repayment required immediate settlement, the central state radically addressed the local debt issue by allowing municipalities to settle a large portion of the debt. Consequently, enabling the rapid appreciation and sales of suburban land/houses that can facilitate the realisation of value in the second circuit of capital was imperative and necessary to create a suburban property boom. This action rendered the ‘destocking of housing real estate’ a key task in the State Council’s agenda between 2014 and 2016. Two key policies were formed at the central level. One was the 9.30 New Policy, which requested the financial system to support households’ housing consumption and developers’ housing development by expanding access to credit,⁸ and the other was the Shantytown Redevelopment Scheme (SRS), which allowed local states to utilise cheap credit issued by central financial institutions to stimulate the local housing market (He et al., 2019). Table 2 summarises the policy formation at the central level, which aimed to sustain the secondary circuit of capital since 2008. The next section discusses the analysis of the system in Jiangyou on the basis of Harvey’s analytical framework to reveal the political–economic motivation underlying the post-2016 suburban property boom in China and how the municipality managed the policies and collaborated with financial institutions to sustain the circuit of capital in and out of land.

Table 2.

Policy formation at the central level to sustain the secondary circuit of capital.

Period	Goal as announced by the State Council	Policy formation	Political–Economic motivation	Interpretation through Harvey’s theories
2008–2010	Four Trillion Plan	1. Monetary easing2. Encouraging local fiscal spending on the construction of the built environment by borrowing	Stimulation of domestic demand to resist the depression caused by the 40% decline in export demand due to the 2008 global financial crisis	Channel excessive capital into suburban land development to address the overaccumulation crisis
2012–2014	Mitigate local debt crisis	1. Debt swap plan2. Special financial deregulation policy	Extension of deadlines for municipalities’ debts	Defer the realisation of surplus value in the secondary circuit
2014–2016	Destock housing real estate	1. 9.30 New Policy2. SRS	Stimulation of local housing consumption to facilitate suburban land sales to generate revenue for municipalities to repay debts	Facilitate the realisation of surplus value in the secondary circuit

Source: Author’s summary.

Creating a suburban property boom in Jiangyou

Located in the northwestern portion of the Chengdu Plain, Jiangyou is a middle-sized city with a population of 8,80,000 individuals, 3,50,000 of whom comprise the urban population living in central urban areas (Figure 1). The rest of the population lives in 39 peripheral rural townships. In the prereform period, Jiangyou served as an industrial military base owing to its proximity to mountainous regions. Several large state-owned industrial enterprises, including an oil company, a steel manufacturer, a machinery manufacturer and a nuclear research institution, occupy the western inner-suburban area, forming giant suburban worker communities called danwei communities. As the market-oriented reform dismantled the national scale of the economy, most state-owned enterprises in Jiangyou went bankrupt in the late 1990s. Liberalised labour and residential mobility integrated the western suburban danwei communities into the central urban areas in the 2000s. Driven by local entrepreneurialism, the municipality constructed an industrial park in the northern inner suburb to attract industrial capital investment. To offset the cost of industrial-park building and subsidise industrial enterprises, the municipality promoted small-scale commodity housing developments in the western inner suburb and property-led land redevelopments in the inner city. Given the enclosed population mobility, most of the homebuyers during the first wave of the property boom in Jiangyou were local government employees and laid off workers who became small-business owners. The average property price throughout the 2000s was approximately 1,000 CNY/m² to 2,000 CNY/m².

In summary, similar to other ordinary Chinese cities, Jiangyou experienced the first wave of the suburbanisation process and a small property boom in the early 2000s owing to the commodity housing reform and industrial-park building. The development of the real estate industry during this period was not considered a major approach for local growth but an auxiliary technique for boosting local industrial development or facilitating the primary circuit of capital.

Suburban new town plans and emergent local debt crisis

Since 2010, Jiangyou has shifted the focus of its agenda from extending industrial parks and attracting industrial investment to launching large-scale suburban land developments, which was driven by the strong state-led Four Trillion Plan and easy monetary policy. The municipality planned two new suburban towns between 2010 and 2012, that is, Mingyue Newtown (MYNT; 15 km²) in the southern suburb and Xishan Newtown (XSNT; 10 km²) in the western suburb (Figure 1). The municipality reconfigured the state-owned utility company Hongfei Group into a comprehensive enterprise and established the Jiangyou City Investment Company (Jiangtou) to finance and conduct the two costly land development projects. The urgency of such action lies in China’s institutional framework, which forbids municipalities from engaging in financial activities (Tsui, 2011). Hongfei and Jiangtou acted as LFPs responsible for the financial and construction activities for the two new towns. Owing to the post-2008 easy monetary policy and decline of the industrial sector, the bank system began favouring nonindustrial and state-backed borrowers, strongly encouraging real estate production. Consequently, the two LFPs borrowed over CNY 3 billion from local banks from 2011 to 2014. The acquisition of suburban rural land was less costly, because such land is not as intensively and informally developed as that in the Pearl River Delta. The loans were spent on land preparation and road network construction (total cost = CNY 3.9 billion) and flagship landscape projects, including the Sanqiao Riverside Park and Luohanyan Green Road (total cost = CNY 3.1 billion) in MYNT and XSNT.

In 2014, when Hongfei’s gearing rate reached 70% and most of the bank loans were approaching their deadline, Jiangyou encountered a growing debt crisis, which was addressed through the central state’s reregulation of the financial system. The municipality participated in the central state-led debt swap plan, in which approximately 40% of the highest loans on Hongfei’s balance sheet were swapped with low-interest ones through the issuance of municipal bonds. Given the special financial deregulation policy, Hongfei issued a private placement note in China’s debt market in 2016, raising CNY 0.8 billion to refinance its bank loan. However, though the debt crisis was temporarily addressed through the abovementioned means, the depressed local housing market indicated recurring debt crises in subsequent years. Although the municipality sold six plots from XSNT and eight plots from MYNT to local developers between 2011 and 2015, the lack of housing demand rendered the newly developed commodity houses slow-moving inventory.

Interviews with the developers involved in the early property developments in MYNT and XSNT revealed that eight large-scale real estate projects including over 20,000 houses were on sale from 2012 to 2015, among which only 40% were sold by 2015. The average property price was approximately 3,200 CNY/m², with a 30% reduction in the secondhand market. The unmarketability resulted in developers’ insufficient impetus and liquidity to purchase plots from the municipality. The developers and municipality also lacked cash on hand to repay the financial institutions, leading to a looming financial crisis. Figure 5 shows the rapid accumulation of the local government debt and growth of real estate investment since the launch of the two new town plans in Jiangyou in 2010. Similar situations were encountered in many Chinese municipalities during the time (Pan et al., 2017). Therefore, the Ministry of Housing and Urban–Rural Development and State Council announced the reduction of the housing inventory (Qu Ku Cun) as the priority agenda in 2014 and 2015 (Sina, 2015; TencentNet, 2014).

Figure 5.

Industrial investment, real estate investment and local government debt in Jiangyou since 2006.¹²

Producing an artificial scarcity in the housing market

The promotion of housing consumption in MYNT and XSNT was imperative for the Jiangyou municipality owing to the upcoming debt deadline. However, for most ordinary inland cities, such as Jiangyou, the inadequate inflow of population and low income levels resulted in the lack of housing demand. Echoing Harvey (1974), creating an artificial scarcity or manipulating demand/supply conditions in the local housing sector was necessary to promote housing consumption.

As mentioned previously, the central government implemented two key measures in 2014. The first measure was the 9.30 New Policy of the central bank and China Banking Regulatory Commission. This policy urged the banking system to enhance ordinary households’ access to mortgage (TencentNet, 2014). The second measure was the SRS, which was more crucial than the first policy. The SRS was implemented by the State Council to allow municipalities to flexibly ‘invent cash-rich households with rigid housing demand’ according to local conditions (He et al., 2019). The SRS required the central bank to grant mass liquidity to the China Development Bank and Agricultural Development Bank specifically for urban redevelopment projects. In addition, the scheme presented a vague and broad definition of a ‘shantytown’, thereby enabling municipalities to utilise the definition to seek approval for a large number of local redevelopment projects (He et al., 2019). The two aforementioned qualities of the SRS enabled municipalities to use high and attractive in-cash compensation as a substitute for conventional in-kind compensation to rework displacees into cash-rich housing consumers (He et al., 2019).

In Jiangyou, the municipality promptly deployed the two policies to produce a mass housing demand. From 2015 to 2,01,823 shantytown redevelopment projects were launched, including eight urban village redevelopments, six dilapidated danwei community redevelopments and nine suburban village developments. Over 10,000 households were involved in these projects. Through the SRS, Hongfei obtained over CNY 1 billion low-interest (4.9%) and long-term (10–15 years) loans from the Agricultural Development Bank. Owing to the abundant financial resources, in-cash compensation was upgraded to 4,500 CNY/m² in 2016, which was 20% higher than the average property price in Jiangyou. The compensated housing area was 1.2–1.4 times the size of the demolished area. For displaced rural households, an extra cash compensation of approximately CNY 50,000–80,000 was granted to each household member to motivate them to quit farming. Given that the average monthly income in Jiangyou was only approximately CNY 3,000, the in-cash compensation was quite attractive, and over 65% of the displaced households opted for the in-cash compensation (interview with an official from the Jiangyou Bureau of Housing and Construction [JBHC], September 2,22,019). The inflow of over 6,000 cash-rich but housing-deficient households into the property market caused the rapid consumption of developers’ inventory in the new towns. According to an interview with a local developer (September 2,82,019), the municipality proactively organised a group-buying programme in November 2016 (i.e. after the approved redevelopment of a large urban village) to facilitate the displacees’ consumption of the slow-moving housing inventory in XSNT. In this state-sponsored programme, the displaced villagers were encouraged to use their cash compensation to buy existing houses from the developers, with a 10% discount. This approach rapidly reduced the housing inventory in XSNT by 50%.

Through the SRS, Jiangyou created an artificial scarcity in the local housing market, resulting in a 70% reduction in the housing inventory in Jiangyou and an increase in the average property price from 3,500 CNY/m² in 2016 to 5,600 CNY/m² in 2017 (interview with an official from Hongfei, September 2,22,019). A total of 24 plots in MYNT and XSNT were sold by 2017, indicating the revival of the land market. In addition, the municipality consolidated its monopoly over urban land/housing provisions. According to an interview with an official from the JBHC (September 2,62,019), the implementation of the SRS between 2015 to 2018 caused the expropriation and transformation of 82% of the rural land in inner-city areas and 26% of that in inner-suburban areas into marketable urban plots. The sufficient land reserve enabled the municipality to utilise supply/demand conditions to appreciate land/housing prices. The local official stated the following:

We collected the land (from the peasants), but we won’t immediately sell the land, particularly that in the old city district. They (displaced peasants and residents) were happy, because they can freely choose new houses … The developers were happy they cleared out the inventory … We were also happy, (because) we had time and land to arrange high-end developments so that the land can be sold at a high price. (26 September2019)

Creating segregated housing submarkets

The intensive SRS in 2016 reinvigorated the property market. To further mitigate the debt pressure, segregated housing submarkets were created by the municipality to appreciate and sell other vacant plots in MYNT and XSNT, mainly through two actions. The first action was the intended sale of plots to famous nonlocal developers.⁹ One official from JBHU (September 2,62,019) expressed that this action aimed to ‘promote the image of XSNT and MYNT to attract rich residents’. Despite several large and high-end housing communities constructed during the early 2010s, suburban living was not perceived as superior owing to inadequate public facility provisions (interview with a realtor, September 3,02,019). Property price in the new towns was the same as the price of secondhand property in the inner city before 2016. By prioritising large developers in land auctions, five oversized plots were sold to several famous developers, including Country Garden and the Zhixin Group, in 2017 for high-end housing developments. Owing to its sophisticated financing system and marketing strategies, Country Garden immediately launched building activities and announced a selling price of 8,000 CNY/m² for its flagship housing estate in XSNT. Given that this price was 40% higher than the average property price, it directly boosted other developers’ pricing (interview with a local developer, September 1,32,019).

The second action was the launch of the Mingyue Islands Public Park Project in MYNT in 2017, which aimed to upgrade suburban living. The municipality did not delegate this costly project to its LFP owing to the heavy debt pressure. Instead, the municipality packaged the 23-million public project, with a large valuable plot for commercial and housing developments, as a comprehensive development project and delegated it to a local developer. To transform the area into a rich community, the municipality adjusted the land use plan to allow the development of villas (interview with an official from the JBHC, September 2,22,019). Towards the end of 2017, the developer priced its villas at 10,000 CNY/m², which also facilitated the high pricing of other developers.

Through the above actions, suburban living was marketed as a decent, superior and desired lifestyle in Jiangyou, along with the segregated housing submarkets in formation. An apparent distinction emerged between the firsthand housing market of suburban new towns and the secondhand housing market of old central areas. The former was characterised by high-quality modern real estate with well-designed amenities and a high average price of 7,000 CNY/m². Moreover, the purchase of homeownership was dominated by local middle-class households. The latter featured old dilapidated multilayer houses at a low average price of 3,500 CNY/m², and the purchase of homeownership was dominated by migrant households from surrounding rural areas.

Consistent with Harvey’s (1974, 1975) claim that class differentiation in consumptive tastes and identities is the key to nurturing segregated housing submarkets and competitive consumption in housing, desire to consolidate middle-class identity and the abomination of living with ‘uncivilised’ rural migrants were the momentum that created the continuous demand for new suburban houses since 2017. Given high firsthand property prices, migrant households flocked to the inner city for affordable secondhand homes, causing the salient social–spatial transformation of old inner-city communities. By contrast, troubled by the ‘inferior lifestyle’ of migrants, an increasing number of local middle-class residents left and pursued segregated and decent suburban living. A local resident stated the following:

The old community (in the inner city) has been occupied by countrymen. I saw my neighbours changed into these rural peasants. I cannot stand their uncivilised lifestyle. They were noisy, didn’t follow the community rules and aggressively occupied public space! They thought the urban community was their rural backyard. We were forced to leave … Most of my old friends and relatives now live in XSNT and MYNT. They are the places of the locals! (27 September 2019)

The demographic changes in the inner city and movement of the local people to the suburbs were confirmed by a senior real estate agent who has been engaging in secondhand property transactions in Jiangyou since the early 2000s. According to the agent:

Almost all the buyers of the old houses in the inner city were rural migrants. Locals have been leaving … living in the suburban Gaoji (high-end) community and driving out is the lifestyle for decent local households now … Locals who are still living in the old communities are taken as poor. (22 September 2019)

Harvey (1974) pointed out that unequal access to credit/mortgage was another contributor to the formation of segregated housing submarkets in Jiangyou. Given that the rural migrants were mostly informally/self-employed and lacked collateral, they were denied access to mortgage for new suburban homes, which were typically priced at over CNY 6,00,000 per unit. With a limited budget, purchasing cheap old houses for CNY 3,00,000 per unit was the only option of most rural migrants. By contrast, selling their old houses for downpayment and easy access to mortgage facilitated the local middle-class households’ attainment of new suburban homes. The creation of segregated housing submarkets enabled the manipulation of supply/demand conditions to maintain competition for new houses in the new towns (Harvey, 1975). Since 2017, when the growing desire for suburban homes was consolidated among the local households, collaboration between the municipality and developers emerged to control the annual new housing supply in the new towns (interview with an official from the JBHC, September 2,22,019). The main methods involved intentionally restricting the number of available new houses and obscuring the precise number of the housing inventory.

Sustaining the secondary circuit of capital

The realisation of surplus value in the second circuit of capital was achieved through a continuous suburban property boom (Table 3). The interactions between Jiangyou and financial institutions since 2010 suggest the leading role of the state in channelling capital into suburban built-environment building by acting as an indebted investor. From 2009 to 2012, the Four Trillion Plan and monetary easing enabled Jiangyou to launch two new town plans and finance their buildings. The long turnover time of real estate production entailed the local debt crisis in 2012. Jiangyou deferred debt payment by implementing the debt swap plan and special financial arrangement. Subsequently, the SRS and 9.30 New Policy granted Jiangyou favourable conditions for creating a continuous artificial scarcity in the housing market to enable the realisation of surplus value in the secondary circuit of capital. The SRS enabled the rapid consumption of the housing inventory in MYNT and XSNT, thereby creating a momentum for developers to buy plots from the municipality. Moreover, by introducing famous nonlocal developers, launching flagship projects and granting unequal access to mortgage, the municipality formed segregated subhousing markets and created continuous housing demand for new suburban houses. Furthermore, the wages of the local residents were transferred to the developers and municipality through the suburban property boom. Through debt repayments (from the government and developers) and mortgage payments (from the homeowners), surplus value ascended to the financial system, thereby underpinning the continuous lending to Jiangyou for a new round of investment for suburban land development.

Table 3.

Secondary circuit of capital in postcrisis Chinese cities with Jiangyou as a case study.

Time	Central policy formation	Jiangyou
Time	Central policy formation	Local practice	Local consequence
2009–2012(Channelling excessive capital into city building)	Stimulus package1. Four Trillion Plan2. Monetary easing and financial reregulation	1. Launch of MYNT and XSNT plans and establishment of LFP to finance and conduct suburban land development2. Investment of over CNY 3 billion for the construction of roads, pipelines and flagship projects in MYNT and XSNT3. Purchase of plots in MYNT and XSNT by developers from the municipality for property development	1. High gearing rate of the LFP, with over CNY 2 billion expiring debtUnsold and cheap houses in MYNT and XSNT
2012–2016 (Deferring the realisation of surplus value)	Addressing local debt crisis1. Debt swap plan2. Special financial arrangement	1. Swap of 30% of the expiring debt of the LFP with a long-term debt through the issuance of municipal bonds2. Issuance of a private placement note to refinance expiring debt using other financial tools	Relieved debt pressure and continuous land development in XSNT and MYNT
2014–2018 (Enabling the realisation of surplus value)	Destocking real estate1. 9.30 New Policy2. SRS	1. Launch of intensive redevelopment projects to create an artificial scarcity and promote the rapid consumption of suburban housing inventory2. Introduction of famous nonlocal developers and launch of flagship projects to upgrade the built environment of MYNT and XSNT3. Provision of easy but unequal access to mortgage for local residents	1. Formation of socially and geographically segregated subhousing markets2. Rapidly increasing suburban housing/land demand and prices3. Continuous land revenues maintaining the municipality’s debt refunding and restoring the balance sheet to enable the municipality to borrow funds to expand MYNT

Source: Authors’ summary.

Since 2017, the vibrant property market has underpinned an active land market in Jiangyou. As the sole landlord in the city, Jiangyou sold 13 plots to developers at a high price in 2018, gaining over CNY 10 million for the repayment of its accumulated debts. The rehabilitated balance sheet that made sustained access to credit possible enabled the municipality to expand MYNT to stimulate the local economy. Figure 1 shows that from 2018 to 2019, the municipality initiated several flagship projects, including a large amusement park, and along with intensive investment in infrastructure construction (roads, pipeline networks and bridges), expanded MYNT by 22 km². State-led investment in city building continued, and the consolidation of the segregated housing submarkets promised the sustainable circuit of capital in subsequent years. This phenomenon was reflected by the rapid sale of the two new housing estate projects located in the newly developed area of MYNT in 2019.

Conclusion and discussion

China’s unprecedented property-led suburbanisation and rampant housing inflation in the recent decade attracted extensive attention. Scholars following orthodox economics deciphered this housing boom through the lens of macroeconomics, arguing that income growth, a savings glut and labour reallocation are the key contributors to the housing bubble (Bian and Gete, 2015; Chen and Wen, 2017). However, according to the neo-Marxist critique of neoclassical economics, such abstract national-level analyses ignore the multiple roles that the state plays in guiding capital movement, viewing the circulation of capital in the land/property market as aspatial and apolitical (Jessop, 1990). Drawing on Harvey’s (1999) capital switching theory, this study deduces that China’s post-2016 nationwide suburban property boom is rooted in the global financial crisis that occurred in 2008. By taking Jiangyou as an example, this study presents a thorough investigation of how the government and financial institutions at the local and central levels channelled excessive capital into city building and postponed/facilitated the realisation of surplus value, thereby illustrating the actually existing secondary circuit of capital in China’s postcrisis age.

Thus, this study fills two knowledge gaps in the existing literature on capital switching. Firstly, post-Harvey scholarship commonly adopted a capital-centric approach following Harvey’s original theorisation, which largely downplayed the role of the state in capital switching processes. We develop a state-centric approach to the secondary circuit by enriching Harvey’s understudied conceptualisation of making the property boom a state-mediated sociopolitical process by introducing Jessop’s (1990) regulationist state theory. Secondly, existing studies focused on the formation of fixed capital in the built environment (sectoral switching) and ignored how surplus value was achieved in the new circuit (sustaining the circuit of capital in and out of land). We respond to this deficiency by foregrounding the role of the state in empowering certain actors and encouraging certain actions to create a property boom through policymaking/institutional arrangement. However, we do not intend to challenge Harvey’s original account of sectoral switching as ‘autonomous’ actions taken by capital. Instead, drawing on our empirical evidence, we argue that sustaining the secondary circuit of capital requires the state and state power in reorganising the economy, politics and society to realise surplus value. Sectoral switching can also be a state project for overcoming the overaccumulation crisis to defend state legitimacy. China experienced several small-cycle sectoral switching during the 1990s and 2000s (Wu, 2015). However, owing to the lack of strong state intervention in facilitating the consumption of newly built properties, excessive capital into the real estate sector eventually saw the burst of housing bubbles (Wu, 2015). In this regard, the inherent capitalist crisis/law of capital generates structural forces for sectoral switching. However, the existing secondary circuit is contingent on the tension between the structural capitalist crisis and strategic choice of the capitalist state in a temporally and geographically specific setting.

Shen and Wu (2017) revealed that the primary and secondary circuits were parallel in the formation of the Lingang economic zone in suburban Shanghai in the 2000s. Despite the concentration of footloose global industrial investment in Lingang, the local state intentionally channelled capital into the real estate sector for two reasons. The first reason was to offset the fiscal cost of constructing quality industrial infrastructure, and the second reason was to accommodate the inflow of workers (Shen and Wu, 2017). Such a state-mediated coupling of the primary and secondary circuits of capital echoes our account of the crucial role of the state in structuring capital switching in contemporary capitalism. Nevertheless, we do not intend to assert state determinism. Instead, we stress the variegated and evolutionary nature of territorial capitalism (Peck and Theodore, 2007) and the capitalist state (Jessop, 2015). Whether, how and the extent to which the state intervenes in capital switching vary geographically and temporally. Thus, we argue that the state-centric approach to capital switching should be developed further to gain a complete understanding of the ongoing coevolution of capitalism and the modern state.

Notably, Jessop and Harvey attempted to theorise the general condition of contemporary capitalism/capitalist state without a specific reference to Anglo-American economies. Both scholars were conscious of the evolutionary nature of territorial capitalism and the world system. Harvey (1999) argued that sectoral switching or spatial fix recurs in territorial capitalism, which is worthy of continuous reexamination. Harvey also stressed that the recent boom in land development in China is capital switching (Harvey, 2012, 2018, 2019). Jessop (2015) agreed with the variegated capitalism approach (Peck and Theodore, 2007) for examining the geographically specific evolutionary path of the state system under capitalism. In China, at the central level and within the Communist Party, different factions develop their own strategies for regulating the economy to favour certain social groups. Drawing on Jessop’s theory and variegated capitalism approach, Mvlvad (2015) disclosed how the two groups of political elites in China competed to promote their own hegemonic projects (national accumulation strategy) in 2010. One group favoured developed coastal areas and capitalists, whereas the other group favoured underprivileged social groups and inland areas. Meanwhile, certain factions developed a patron–client relationship with growing capitalist coalitions in postreform China. Different capitalist coalitions competed to shape institutional transformation towards a desired direction through patron–client relationships (e.g. Haveman et al., 2017; Lee et al., 2007; Wank, 2002). In deciphering state rescaling in postreform China, scholars also found that conflicts of interest between politicians and influential businessmen reshaped the rescaling arrangement (Zhang et al., 2020; Zhang and He, 2020). In this regard, postreform China did not fall outside Jessop’s theorisation of the capitalist state despite the seemingly ‘enclosed system’ within which a state project is arranged.

Although this study cannot open the black box on how serial institutions were arranged through struggles among different forces at the central level, such institutions favoured developers, financiers and property owners and empowered them to take certain actions to accomplish the secondary circuit of capital. At the local level, the state has been strategically open to developers since 2010. In Jiangyou, among many other Chinese cities, certain developers were introduced to the decision-making process for local land development plans. Nevertheless, such an inclusion is not fixed but varies with changing national accumulation strategies. During the post-WTO accumulation regime, industrial capitalists were included in local governance to carry out growth-oriented industrial projects (Hsing, 2010). Overall, we stand with the variegated capitalism approach to view China as not an exception in the ‘capitalist world’. Instead, we treat it as a historically attuned modern state with its own methods for facilitating capital accumulation and internalising capitalism contractions (Boyer, 1990; Zhang and Peck, 2016).

Notably, China’s post-2008 crisis management is a multidimensional, multithreaded and ongoing project. The search for a new accumulation regime is a crisis-driven, trial-and-error and path-shaping process (Peck and Tickell, 2002) dynamically shaped by changing international politics and internal conditions. After the local debt crisis and troubled by growing internal financial risks, the central government launched two new accumulation strategies in 2015. The first strategy is the Belt and Road Initiative (BRI), which aims to transfer low/middle-end Eastern manufacturing industries to Western China and radically address overcapacity by creating new markets in Africa, the Middle East and Europe (Huang, 2016). The second accumulation strategy is epitomised by the Great Bay Area Plan for the Pearl River Delta along with aggressive industrial upgrade policies. This strategy aims to enable made-in-China industries to climb the global value chain and compete in the market occupied by advanced economies. Despite several central state-led supportive projects, domestic industrial relocation/upgrade follows what Wu (2018) coined as ‘planning centrality, market instruments’. That is, the central state allows local states to implement innovative entrepreneurial strategies to compete for the favour of enterprises and capital investment instead of a rigid top-down industrial/investment arrangement. In Western China, the BRI evoked a new round of local entrepreneurialism, encouraging municipalities to mobilise/integrate local resources to become new industrial centres under the initiative (Zhang and He, 2020). These recent trends present a potential answer to our previously posed question. That is, if Jiangyou or any other inland city can utilise excessive high-quality infrastructures and the built environment to integrate the country’s new accumulation strategies, then it can avoid recurring debt crises by achieving a robust local economy.

Footnotes

Acknowledgments

We thank Dr. Brett Christophers and the anonymous reviewers for their valuable comments.

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Xiang Yan

Notes

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