An aerial view of the crowded Datang Everbright City, a popular tourist attraction in downtown Xi’an, northwest China’s Shaanxi Province Photo: TUCHONG

In 2023, China’s per capita GDP hit $12,700, while its tertiary industry accounted for 54.6% of the nation’s total GDP. This signals the arrival of a service-led era marked by consumer cities, as residents’ expectations for high-quality, diverse, and personalized services have been growing. Service consumption demands “just-in-time” production and consumption, and relies on face-to-face interactions. Cities, big cities in particular, are more likely to gather service consumers and businesses and reduce consumption costs due to their super-large market size and high population density, naturally with an immense advantage in service consumption. Optimizing urban planning, construction, and governance of metropolitan areas can effectively promote the construction of effective and livable consumer cities.

Necessity of urban renewal

In the age of industrialization, renewal and reconstruction of downtown areas was typically accompanied by moderate population dispersal into suburbs, in order to improve the living environments and help residents strike a work-life balance. However, in service-dominated consumer cities, employment and consumer activities are highly concentrated in the center of each metropolis, so the strategy of lowering population density is likely to dampen the consumption vigor of these areas.

Some international metropolises which have entered the post-industrialization stage, such as New York, London, and Tokyo, also went through the transition from population dispersal to re-agglomeration, as the population density in downtown areas grew again.

Similar to the population flow tendency in these international metropolises, the working populations of large Chinese cities like Shanghai and Guangzhou have gradually refluxed to downtown areas with the service boom. This phenomenon indicates that the aggregation of the living and working populations in city centers is pivotal to invigorating economic development and raising residents’ quality of life.

In past decades, the model of satellite cities, as the principal strategy for China’s urban planning, aimed to curb disordered urban expansion. However, this model has diluted connections between cities, districts, or counties within metropolitan areas, as work and life, and life and recreation have been separated between the satellite cities—which serve a residential function—and downtown areas—which are used for leisure, entertainment, and consumption. This has not only impeded the coordinated division of labor within metropolitan areas, but also made it difficult for consumption’s regional linkage to take effect, especially for central cities to play their roles in gathering consumers and leading consumption.

In international metropolitan areas such as Tokyo and New York, the contiguous development of cities therein, tantamount to districts and counties in China, particularly the octopus-like development pattern along the rail transit network, have successfully optimized intraregional resource allocation and labor division, multiplying the effect of driving regional consumption through radial expansion.

In urban renewal, local governments are inclined to approve more commercial land use to attract investment and increase tax revenues, while strictly limiting the floor area ratio of residences. This inverts the prices of commercial and residential land, a practice which can reduce population density in downtown areas. However, global case studies show that a modest increase in population density can stimulate consumption.

For example, in the late 1990s, Tokyo managed to significantly increase population density by flexibly adjusting the use of commercial and residential estate. By 2020, the special wards of Tokyo and the Tokyo Metropolis saw their populations grow to 8.49 million and 12.548 million, respectively. During this period, Japanese residents’ personalized, brand-oriented, high-end, and experiential consumption thrived, injecting strong momentum into the country’s economic recovery.

In the digital economy era, online and offline consumption are not merely substitutive but mutually reinforcing, together driving the growth of the consumer market. While online platforms count on offline production, online sales and big data analysis can accurately delineate consumers’ demands to facilitate corporate research and development and sharpen market predictions, thus optimizing inventory management. Massive data, accumulated through online consumption, can lend great support to the development and marketing of new products, holding the key to the innovation of the business model in China and the world at large.

Nonetheless, varying offline consumer behaviors are also reminding policy experts that urban planning and commercial layouts should be informed by local consumption experiences and diversity. However, government-led urban renewal normally tends to unify the street layout and architectural style, which would diminish the population density and diversity of old city areas and devitalize consumption.

In addition, the layout of “wide roads, sparse networks, and large blocks” in China’s new cities and zones has posed difficulties to turn latent consumers into actual consumers in surrounding areas. This also accounts for insufficient consumption vigor. According to the Annual Report on Road Network Density and Traffic Operation in Major Chinese Cities 2023, the road network density of 36 key cities in China was 6.4 km/km2 only, far lower than 18.4 km/km2 of Tokyo, 18.6 km/km2 of Chicago, and 11.2 km/km2 of Barcelona.

Suggestions

Over the past 20-odd years, quick urban expansion and planning policies in pursuit of low density have substantively decreased the population density of Chinese cities, seriously undercutting the high-quality development of the service economy in urban areas. Pertinent studies show that the ratio of China’s service industry to the GDP was approximately 10 percentage points lower than that of OECD countries during the same period of history, and the decline in China’s urban population density accounted for 3 to 5 percentage points of the gap. Coordinating urban renewal and consumption upgrade is critical to advancing the high-quality development of the Chinese economy.

First, it is essential to acknowledge that higher population density can enhance the vigor of consumption from the perspective of urban renewal. Efforts are needed to further consolidate and exploit the “leader” advantage of Shanghai and Guangzhou in population density within their respective metropolitan areas, regarding population density as the key to the reconstruction of old parts of the city and new zones to realize people-centered urban renewal. It is necessary to create a “15-minute community-wide good life circle,” and coordinate living, services, recreational activities, transit, and work to shorten the physical distance among life, work, and consumption, ultimately balancing work and life, and life and leisure.

Sparsely populated new urban areas should increase the density of road networks, and expand the effective supply of parking lots to vitalize consumption in blocks. Measures such as integrating industries into cities, upgrading public services, and improving residential facilities should be taken to guide people to agglomerate in these new urban areas.

Second, attention should be paid to building an “octopus-like” spatial pattern in metropolitan areas to intensify the integrated development of consumption. The construction of central consumer cities will spearhead the future development of large metropolises in China, providing new impetus for national development. Therefore, population and land should be planned in accordance with the evolutionary trend of population’s spatial distribution, to create commuting and recreation circles in central cities and surrounding medium-sized and small cities.

During the urban planning and policymaking of metropolitan areas, top-level design should be reinforced to strengthen cross-regional coordination and break administrative boundaries. Transport infrastructure should be the conduit to connect central cities and peripheral satellite cities, constructing an “octopus” model characterized by close center-periphery connections. Within metropolitan areas, labor division and complementarity between central and peripheral cities should be promoted, with the central metropolis providing high-quality and diverse services while the peripheral cities offer services suited to low population density, such as leisure, sports, and tourism, thereby advancing integrated consumption.

Third, the spatial structure of cities should be optimized to elevate their economic and demographic bearing capacities. The rapid development of metropolitan areas has highlighted the significance of utilizing land resources efficiently, and planning spatial structures reasonably. It is crucial to strengthen the “centripetal layout” of affordable housing in light of the trend of population agglomeration in downtown areas. Trial projects should be conducted to alter architectural use, such as transforming idle commercial buildings into affordable rental housing to aggregate jobs and consumers.

Requirements for buildings’ floor area ratio in downtown areas can be loosened moderately, encouraging compact development to make land use more efficient while galvanizing consumption and fueling cities’ endogenous economic growth. Additionally, mixed land use is practical, as it can add cultural, sport, educational, medical, and social welfare functions to existing commercial and office buildings, further unlocking the potential of the service industry.

Fourth, online empowerment and offline spatial experiences should be integrated to energize consumer cities, augmenting the supply of experiential and interactional spaces. While renewing shopping malls within cities, efforts can be made to create shared spaces for social contact and new consumption scenarios that fuse food, social contact, entertainment, and consumption. “Third spaces” with social attributes can be crafted to engage like-minded groups for internal socializing and consumption.

The experience of regional iconic landmarks such as the Kuanzhai Alley in Chengdu, Sichuan Province, the Datang Everbright City in Xi’an, Shaanxi Province, and the Confucius Temple in Nanjing, Jiangsu Province, can be drawn upon to forge offline scenario-based consumption blocks. These blocks integrate architecture, yards, brick walls, streets, residents, and life to foster a novel four-dimensional relationship involving space, time, cities, and scenarios, and blend scenic spots and blocks.

With respect to large old blocks, infrastructure renewal is necessary to introduce new industries, new business formats, and environmental arts, thereby diversifying and upgrading consumption supplies and accelerating product updates. Chinese cities can expand service businesses along the street and be more tolerant of vendors to provide broader employment spaces and more diverse services, while making residents’ everyday life more convenient.

Lu Ming is a professor from the Antai College of Economics and Management at Shanghai Jiao Tong University. Peng Chong is a professor from the Joint Research Institute at Nanjing Audit University.