*2.1. Urban Entrepreneurialism in China*

Understanding China's urban governance and its urban transformation, including new town development, requires an understanding of its post-socialist state-market relation in facilitating urban growth [31]. As already illustrated above, two main paradigms of urban growth machine and urban entrepreneurialism are often used to explain China's growth mechanism [7,15]. For example, drivers of urban development in Shanghai have been explained in terms of post-socialist pro-growth coalitions [18,32]. From the perspective of neo-liberalism and entrepreneurialism, post-socialist reforms have led to the creation of new local governments in China that are more 'entrepreneurial' in nature [17,33,34], but lacking in financial discipline and public accountability, which promote urban growth for political and economic objectives [21]. To understand how China's entrepreneurialism differs from that in other parts of the world, and the relations of its growth mechanism with new town development, it is first necessary to provide some more detail about the institutional context.

China's 1994 tax-sharing system reform is a key foundation of the land-driven economy and its concomitant governance. The goal of the reform was to increase tax revenue of the central government from lower tier governments. After the reform, local municipal governments had to transfer a larger share of their tax revenue to the central government, but in return they had more decision-making power in local urban development and were allowed to keep all revenue by leasing land to developers [19]. However, there is a gap between local tax income and public expenditure. In 2018, for instance, local governments collected 53% of the 'general public budget revenue' (tax revenue), but were responsible for 85% of total tax expenditure. Although the 'transfer payment' system has enabled provincial and central government to allocate tax revenue to facilitate those local governments in severe deficit, local governments in general have to seek extra budgetary revenue to support local development, and the revenue by leasing land has become a major source (which is also known as 'government-managed funds revenue'). The tax-sharing reform resulted in a decentralization of decision-making power in land politics, which made the behaviour of local government more firm-like [35]. The fiscal decentralisation not only laid the foundation for its formation of pro-growth urban development mechanisms, but also provided a new motivation for local governments to lead and promote local urban development projects.

Another significant institutional change is the shift in China's cadre appointment and evaluation system, which generates local leaders. Under China's cadre appointment system, local leaders are appointed by upper-tier governments. Since 1978, the economic performance of cities became a key criterion for evaluating the suitability of local leaders for positions in upper-tier governments [20]. Urban growth, especially new town development, became a preferred way for local governments to demonstrate local economic growth and modernization achievements after an extensive wave of industrialization (*kaifaqu*) in 1990s [4]. Thus, local leaders are often zealous in promoting conspicuous local economic growth in order to secure career promotion in China's administrative hierarchy [36]. For key local officials, like those in megacities, urban achievement is often more about prestige and less about functionality or sustainability [37].

Land and housing reform is another key factor in shaping local government's pro-growth approach. The establishment of a land leasehold market and the enacting of the Land Administration Law and Planning Act in 1998 made the previously strictly state-owned land and properties tradeable [38]. Local governments therefore have the legitimate right in land requisition, leasing out to developers, and retaining most income. Soon thereafter, local governments, as *de facto* owners of land within their jurisdictions, were not solely land suppliers but also major market players [21]. Local governments became more willing to initiate and lead urban projects to inflate local economic and political performance through local state corporatism [39], local state entrepreneurialism [40], and private–public partnership with developers [41].

After the above institutional reforms, local governments acquired significant autonomy in the disposal of land and finance, two vital resources in urban development [21]. From an urban governance perspective, local governments rely on non-public investors and form coalitions as it is not financially feasible to undertake large projects alone [42]. A pro-growth approach is therefore adopted, which has heavy reliance on the property sector to promote economic and urban growth [36,43]. According to such pro-growth approaches, infrastructure projects and property-led development have become an essential mechanism to restructure urban areas, build a good city image, and attract investment. However, it has also been criticised for resulting in a diversion of public resources from social needs [21], lacking public accountability and social goals [44], and causing overheated property booms. The approach also creates a reliance on land-driven revenue (*tudi caizheng*) of local governments, especially of the relatively developed cities. Due to the increasingly strict regulation and macroeconomic control in first-tier cities like Beijing, Shanghai, and Guangzhou, pro-growth strategies based around maximising land revenue have become more prevalent in second-, third-, and even fourth-tier cities in recent years [45]. In other words, pro-growth approaches have become a default mechanism for many local governments in China when planning urban development. The nature of this pro-growth mechanism is the focus of analysis in this paper.
