Central versus local states: Which matters more in affecting China's urban growth?

To date, many geography studies have identified GDP, population, FDI, and transportation factors as key drivers of urban growth in China. The political science literature has demonstrated that China's urban growth is also driven by powerful economic and fiscal incentives for local governments, as well as by the political incentives of local leaders who control land use in their jurisdictions. These parallel but distinct research traditions limit a comprehensive understanding that can result in partial and potentially misleading conclusions of urbanization in China. This paper presents a spatially explicit study that incorporates both political science and geographic perspectives to understand the relative importance of hierarchal administrative governments in affecting urban growth. We use multi-level modeling approach to examine how socio-economic and policy factors - represented here by fiscal transfers - at different administrative levels affect growth in “urban hotspot counties” across three time periods (1995-2000, 2000-2005, and 2005-2008). Our results show that counties that are more dependent on fiscal transfers from the central government convert less cultivated land to urban use, controlling for other factors. We also find that local governments are becoming more powerful in shaping urban land development as a result of local economic, fiscal, and political incentives, as well as through the practical management and control of capital, land, and human resources. By incorporating fiscal transfers in our analysis, our study examines a factor in the urban development of China that had previously been neglected and provides an improved understanding of the underlying processes and pathways involved in urban growth in China.