Expansion of market finance and urban development in Asia, the case of China and India

Funding French Agency for Research (ANR)

Time frame 01/2013-12/2015

FINURBASIE is a research project jointly coordinated by Natacha Aveline and Ludovic Halbert, developed by the French Centre for Research on Contemporary China (CEFC) and the Techniques, Territories and Societies Laboratory (LATTS). It is concerned with the financialisation of urban production processes in China and India. It sets out to explore, in two highly populated and fast-urbanizing countries, the multifarious forms taken by the circulation of finance capital in the real estate sector, and their effects on the production of the urban built environment. The project deals first with the role of property markets in economies that are increasingly interconnected and affected by recurrent global financial crises. It also questions the ways in which urban development in large-scale “emerging” countries is financed. Going past often a-spatial approaches, the project will analyze the specific geographies associated with the growing amount of finance capital invested in the urban built environment. It will discuss both its geographic diffusion and the resulting territorial differentiation processes.

The deregulation of capital markets has fuelled the circulation of transnational capital flows on a global scale. The steady economic and urban growth in large-scale “emerging” countries such as China or India attracts investment in the real estate sector because of its potential profitability. Yet financial flows are not evenly located but follow socialized and spatialised circuits that tend to concentrate investments in financial centres. Institutional arrangements are developed at local level to attract capital, increase the volume of investments, anchor them in local property development channels and circulate them in systems of secondary cities.

It is acknowledged that finance capital plays a growing role in the production of the built environment. Its impact is all the more visible in that it predominantly contributes to the making of large-scale urban objects – office and residential high-rise buildings, multifunctional real estate complexes, large facilities and infrastructure – in mostly large-scale urban regions. Yet, the influence of capital markets may be more pervasive. The circulation of finance capital may support the adoption of increasingly “neo-liberal” policies which attempt to “anchor” mobile capital. It may also reveal the limited capacity of public authorities to regulate the urban and social imbalances resulting from the increased land competition associated with capital flows. Furthermore, the penetration of finance capital in the urban realm may support the diffusion of new norms in the conception of real estate projects and therefore contribute to processes of standardization, thus potentially reshaping the social and material fabric of cities.

The challenges brought by the growing role of finance capital in the making of urban regions in China and in India are related to the demographic size of these two nations – which concentrate over a third of the world population – and by their steady rate of urbanization. These countries will inevitably continue to attract a growing share of finance capital property-related investments to support their urban development. If the so-called “backwardness” of their financial system has preserved them from systemic crises so far, the expansion of financial markets will accelerate the convergence between real estate and finance, and will thus increase these two countries’ exposition to the ups-and-downs of global finance. In return, the financial challenges of China and India’s urban growth will have greater impact on the global economy since a significant share of their economic growth is now related to property markets and land appreciation dynamics. Despite the major economic and political issues at stake, not a great deal of research has been done on these financialisation processes. Therefore, their exploration remains a major scientific challenge that the FINURBASIE research project intends to take up.

Research team:

China group

Aveline Natacha, geographer/economist, CNRS professor, Laboratory Géographie-cités, Paris1-Sorbonne, Paris 7
Gaulard Mylène, economist, associate-professor, Grenoble university
Li Ling Hin, economist, associate-professor, Hong Kong university, department of Building and Construction
Lin Tzuchin, economist, Land Department, university National Chengchi Taiwan
Theurillat Thierry, geographer, post-doc at university Neuchâtel
Vendryes Thomas, economist, associate-professor, ENS-Cachan (Paris region).

India group

Halbert Ludovic, geographer, CNRS associate-professor, LATTS (Paris East university)
Rouanet Hortense, geographer, PhD candidate, LATTS
Varrel Aurélie, geographer, CNRS associate-professor, Center for India and South-East Asie Studies, EHESS, Paris.