There is little doubt about the scale of the new markets in China and India unleashed by the pace and scale of their urbanization. But businesses still need to be able to serve these markets in practical terms. The way cities are run—and the productivity that results—is a major factor for companies. Here, China is in much better shape than India. While India has barely paid attention to its urban transformation, China has developed a set of internally consistent practices across every element of the urbanization operating model: funding, governance, planning, sectoral policies, and the shape, or pattern, of urbanization, both across the nation as a whole and within cities themselves.
India has underinvested in its cities; China has invested ahead of demand and given its cities the freedom to raise substantial investment resources by monetizing land assets and retaining a 25 percent share of value-added taxes. While India spends $17 per capita on capital investments in urban infrastructure annually, China spends $116. India has devolved little real power and accountability to its cities, but China’s major cities enjoy the same status as provinces and have powerful political appointees as mayors. While India’s urban-planning system has failed to address competing demands for space, China has a mature urban-planning regime (emphasizing the systematic development of run-down areas) consistent with long-range plans for land use, housing, and transportation.