China’s development strategy has been remarkably successful, driving one of the most significant economic transformations the world has ever seen. Urbanisation has played a critical role. China’s cities power 90% of its GDP and continue to grow – by 2050, 4 of 5 Chinese are expected to live in cities.

But in 2020, this rapid urbanisation and development was put on hold when China was the first country to suffer from the COVID-19 pandemic and related economic crisis. China’s economy still grew 2.3% in 2020, and though this growth rate was much lower than that of recent years, it is a better performance than the contractions recorded by many other countries. However, China’s CO2 emissions grew in 2020, and its consumption of coal, oil and natural gas all increased.^{1https://www.carbonbrief.org/analysis-chinas-co2-emissions-surged-4-in-second-half-of-2020}

At the same time, inequality in China has increased, and the concentration of production in coastal megacities has exacerbated severe pollution and environmental degradation. China also faces significant natural disaster risk that could undermine its poverty reduction and future growth.

China is particularly at risk for typhoons and flooding with over 13% of its population in coastal zones less than 10m above sea level. Ninety-two percent of these are in urban areas. Changing weather patterns, heat waves and severe droughts are also expected to reduce water availability in parts of China, with implications for agriculture, food security and energy.

On the cusp of the COP26 Climate Change Conference, China’s continued leadership in climate action can grow its economy and support the international community in reaching global climate ambitions. In 2020 China made historic commitments to tackle the climate emergency, with President Xi Jinping announcing a pledge to peak emissions before 2030 and to reach carbon neutrality by 2060. The recent October 2021 guidelines to cut China’s reliance on fossil fuels to below 20% by 2060, along with other defined targets, are a welcomed step to reach these goals.

China’s newly-released NDC charts a path toward peaking by 2030 and net zero by 2060, with a reduction of its emissions intensity per unit of economic output by more than 65%. It aims to do this through expansion of hydropower, energy storage, energy efficient new construction and transport powered by clean energy.²Hook, L., Olcott, E. and White, E. “China unveils new climate plan as UN chief warns on targets.” Financial Times, October 26, 2021. https://www.ft.com/content/bb5e8f78-59bd-4327-9710-6dce1a42088f However, China’s plan does not reduce reliance on coal beyond previous commitments, and comes at the same time as indications of pressure to increase the power sector’s coal consumption amid the country’s worst on-going energy crisis in decades. The plan also promotes natural gas and non-conventional fossil fuels, which remain sources of carbon dioxide.³Stanway, D and Xu, M. “China issues plan to hit carbon emission peak before 2030.” Reuters, October 26, 2021. https://www.reuters.com/business/cop/china-cabinet-issues-action-plan-reach-carbon-emission-peak-before-2030-2021-10-26/ Continued reliance on coal and natural gas risks locking in unsustainable infrastructure, which will have to be replaced, and could counteract China’s own strides towards peaking and carbon neutrality.

China’s cities offer the national government an opportunity to address climate and economic aims. Our research shows that major investments in low-carbon cities have some of the highest potential to unleash new economic activity, create local jobs, build resilience, increase public health outcomes and set cities – and countries – on a path of prosperity and sustainable long-term development.

Recent analysis from the Coalition for Urban Transitions finds that a collection of currently feasible, low-carbon measures and investments in Chinese cities could cut emissions from urban buildings, materials, transport and waste by close to 50% in 2030 and nearly 90% in 2050, making a significant contribution towards China’s 2060 carbon neutrality goal.

These low-carbon measures would require incremental investments of US$5.5 trillion to 2050, but yield returns with a net present value of at least US$7.7 trillion over the next three decades. They could also support more than 15 million new jobs in 2030, mainly in building energy efficiency.

China can seize this moment of opportunity to steer its urbanisation towards an ecologically sound green growth pathway by prioritising low-carbon investments to build smart infrastructure, creating healthier cities, enhancing energy efficiency and promoting the development of advanced low-carbon technologies and innovative business models.

Three opportunities for climate-resilient growth

Based on our work in-country, we identify numerous opportunities and associated priorities for national action that can help overcome China’s current social, environmental and economic challenges and accelerate the transition to an inclusive, resilient and low-carbon future.

Create a new national system of cities underpinned by basic infrastructure and a world class intercity mass transit system to rebalance growth away from coastal areas towards the interior.

The transformation towards inclusive, resilient, compact, connected and clean cities will be possible only through a concerted, coordinated effort by all tiers of government working towards common goals.

Local communities bring different ideas about how a neighbourhood or city should function, and national governments have unique roles to play in ensuring that all these voices are heard. China will need to craft a coordinated vision for its urban future, while creating space for local innovations and adaptation that accommodate the unique characteristics of its many cities. It is crucial to scale up efforts that incorporate decarbonisation and resilience objectives.

China is already doing this well in some frontrunning cities:

Case Study

In response to its climate-related risks, in 2013 China’s national government launched the Sponge City Programme, promoting wider adoption of nature-based solutions including absorptive roads, permeable pavements and green infrastructure such as rain gardens and parks. The national government dedicated US$3 billion for 16 pilot sponge cities between 2015-2017. Wuhan is a leading example of the benefits of this approach to increasing urban resilience to climate change, which cost almost CNY 4249 (US$600) million less than upgrading the city’s drainage system. Additional co-benefits include improved air quality, support for biodiversity and conservation, positive impacts on health and lifestyle, and increased land value. China now aims to have 80% of urban built-up areas meet Sponge City standards by 2030.⁴Oates, L., Dai, L., Sudmant, A. and Gouldson, A. 2020. Building Climate Resilience and Water Security in Cities: Lessons from the sponge city of Wuhan, China. Coalition for Urban Transitions. London, UK and Washington, DC: https://urbantransitions.global/en/publication/china-frontrunners/

In addition, smaller interior towns and cities should focus on improving equitable access to services including healthcare, education and housing to make them more attractive destinations for prospective urban migrants and ease pressure on the eastern metropolises. Policy should also promote the industrial development of China’s interior to open job opportunities.

Investing in efficient and low-carbon mass transit is an important measure to ensure connectivity across the country. Creating a network of smaller towns and cities with robust public transport links could provide greater economic vitality not only for urban residents but for rural residents as well. Improved rural-urban linkages would create more inclusive development by providing rural workers with access to a wider array of economic opportunities.

NATIONAL PRIORITY: Place sustainable cities at the heart of China’s 14th Five-Year Plan, annual investment plans and second NDC, with the goal of developing a new national system of compact, connected and clean cities across the country.

If China could support efforts by cities to peak their carbon emissions by the end of the 14th Five-Year Plan (in 2025) – and put this effort at the heart of its NDC – the country could unlock not only economic growth, but social and environmental advancements in line with the idea of an “ecological civilisation”.

Support small and mid-sized cities to enable them to drive compact, connected, clean and resilient urbanisation, with people at the centre. This is a chance to foster sustainable development and improve inter-regional equity.

More than half of China’s urban abatement potential is in cities that now have fewer than 1 million residents, which offer prime opportunities to shape urbanisation more sustainably.

People in low-carbon cities are healthier and more productive than people who live in cities with heavy emissions. The concept of compact, connected and clean cities recognizes both the importance of preventing dangerous climate change and the benefits associated with more resource-efficient, less polluting models of urban development.

More compact, connected cities and neighbourhoods deliver multiple benefits, including higher living standards, greater access to livelihoods and reduced environmental impacts of sprawl. One estimate suggests that China could reduce infrastructure spending by up to US$1.4 trillion by pursuing more compact, connected cities. Compact cities also contribute to increased resilience and food security, by preserving surrounding agricultural land and key ecosystems.

Walkable, well-connected neighbourhoods can also be attractive and healthy places where workers want to live:

Case Study

In 2017, Shanghai had more than 80,000 public bikes, making it one of the largest public bike systems in the world. In May 2017, China’s Ministry of Transportation drafted the first country-wide framework for regulating dockless bike-sharing. Later that year, Shanghai enacted the country’s first urban bike-sharing regulations to keep track of bikes, monitor parking and provide insurance to users, among other measures. Analysis suggests that bike-sharing in Shanghai has reduced particulate matter and emissions of nitrogen oxides, preventing an estimated 23 premature deaths a year and avoiding hundreds of hospital visits and tens of thousands of respiratory events such as asthma attacks.^{5 Sudmant, A., Mi, Z., Oates, L., Tian, X. and Gouldson, A. 2020. Towards Sustainable Mobility and Public Health: Lessons from bike sharing in Shanghai, China. Coalition for Urban Transitions. London, UK and Washington, DC: https://urbantransitions.global/en/publication/china-frontrunners/}

Creating clean, efficient cities by decarbonising buildings, transport and solid waste management can reduce greenhouse emissions and improve social well-being and environmental health.

Prioritising energy-efficient buildings – new constructure and retrofits – in future stimulus packages and other spending could significantly improve people’s health by reducing severe air pollution and could reduce energy bills. Many Chinese cities – including Shanghai, Shenzhen, Beijing, Qingdao and Fuzhou – are already leaders in building energy efficiency; China can leverage these cities’ success and expertise to drive nationwide progress in low-carbon urban development.⁶CUT. 2021. “Seizing the Urban Opportunity.” Global Report. London and Washington, DC: Coalition for Urban Transitions, in partnership with C40 Cities Climate Leadership Group and Ross Center for Sustainable Cities, World Resources Institute. https://urbantransitions.global/en/publication/seizing-the-urban-opportunity/ This is a prime opportunity to create large numbers of jobs in cities and slow the rise in electricity demand.

Case Study

Changning District in Shanghai has emerged as a leader in the green building sector. The local authority established the Changning Low Carbon Office to coordinate local efforts on energy-efficiency retrofitting, working with the municipal and national government to offer subsidies to incentivise retrofit investments. It also established China’s first online platform for monitoring the energy performance of buildings. Retrofits have been rolled out across almost half of the district’s public commercial floor space, reducing energy use by 20-30%. These efforts prevent annual emissions equivalent to removing 65,000 cars from Shanghai’s streets.^{7Oates, L., Zhongjue, Y., Sudmant, A., He, Q., Gouldson, A. and Lee, A. D. 2020. Improving Energy Efficiency for All: Lessons on sustainable building retrofits from Shanghai, China. Coalition for Urban Transitions. London, UK and Washington, DC: https://urbantransitions.global/en/publication/china-frontrunners/}

NATIONAL PRIORITY: Align national policies behind compact, connected, clean and resilient cities by stopping the sale of fossil fuel-powered motorbikes, cars and buses; reducing the demand for energy and materials; and fuelling a clean energy revolution.

Compact, connected and clean cities – low-carbon and zero waste cities – can be a pillar of urban sustainable development while greening production, lifestyles and the environment.

Reform local governance and national and subnational fiscal systems to tackle debt, generate sustainable financing flows for investment in sustainable infrastructure and enhance long-term urban planning.

Enacting national policy effectively requires all levels of governance to be empowered and operational. Local governments must be afforded greater capacity and held to greater accountability to deliver high-quality urbanisation.

While China’s subnational governments are largely responsible for delivering healthcare, education and other essential services, most of their funding comes from shared revenues that are set and administered by the central government. The result is that subnational governments are given spending mandates but have no meaningful capacity to increase their revenues to meet them.

China has the opportunity to create stable own-source revenues for its municipalities which could in turn finance new sustainable infrastructure projects.

Key Fiscal Reforms

Three key fiscal reforms could help create the right incentives for a sustainable, inclusive, urban transition, supporting China to achieve its broader development objectives:

NATIONAL PRIORITY: Build a sustainable financing system for cities, enhance local governance and capacities for urban planning, and introduce national to subnational income tax piggybacks and property taxes.

In this way, China’s fiscal policy can help secure national economic prosperity and improve quality of life while tackling the climate crisis.

A new form of sustainable urbanisation means a new era of urbanisation, which could act as an engine, rather than a brake, on China’s development. From 2021 to 2025, the period of the country’s current Five-Year Plan, the Chinese government must seize the urban opportunity for continued prosperity and environmental security.

This is a critical moment to address the simultaneous challenges of pandemic recovery, widespread inequality, and the climate crisis. As China leads the world out of the COVID-19 crisis, it can show that recovery measures can also accelerate the transition to the inevitable low-carbon economy, sending an important signal to the rest of the world.

The example that China sets for the rest of the world will also influence the development and growth path that will be followed by many other countries. China can demonstrate strong and meaningful leadership on a global stage by following a low-carbon, inclusive and resilient urbanisation pathway.