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Abstract

State capitalism has resurged in the aftermath of the global financial crisis. As China encounters geopolitical tensions, property market decline, economic slowdown, and public fiscal deficit, how does new state capitalism become relevant to China’s contemporary urban development? This paper examines post-pandemic urban development and governance and investigates a new trend of state capital expansion in large-scale urban development in Wuhan. The state-owned enterprises (SOEs) owned by the Chinese central government are mobilised to revitalise the post-pandemic economy. In particular, local governments collaborate with large construction companies to undertake suburban new town development despite housing stagnation and economic downturn. They demonstrate the transformation of entrepreneurial governance under state capitalism, where the state remains central in governing urban development, while the central state becomes a key player. We identify a new trend of upscaled state entrepreneurialism in China, where state centrality is increasingly achieved through the direct expansion of central state capital via centrally controlled SOEs. Extensive state capital investment in the production of urban space increases the risk of replicating the failure of land-driven urban entrepreneurialism.

Keywords

new state capitalism state entrepreneurialism urban governance state-owned enterprises China

Introduction

Neoliberal urban development has witnessed significant transformation in the context of austerity and fiscal difficulties in the aftermath of the global financial crisis, punctuated by economic stagnation in the post-pandemic era. Urban entrepreneurialism, characterised by growth coalition and market orientation, has transformed. On the one hand, urban entrepreneurialism is challenged by investor and bondholder value, as external financial investors capture local development to accrue financial returns (Farmer and Poulos, 2019; Guironnet et al., 2016; Peck and Whiteside, 2016). On the other hand, urban entrepreneurialism has been entrenched alongside strong state interventions (Beswick and Penny, 2018; Dagdeviren, 2024; Lauermann, 2018). Meanwhile, an emerging body of literature has discussed new state capitalism, signifying a ‘geohistorical moment’ as a rebuttal to neoliberalism (Peck, 2023). It draws attention to statist responses to geopolitical tensions, financial crises, economic recession, and sovereignty issues (Alami and Dixon, 2023; Kurlantzick, 2016; Su and Lim, 2023). These approaches include proactive industrial policies, the expansion of state-owned enterprises (SOEs), the introduction of state-backed financial products, and the outreach of state banks to achieve nationalism and strategic intentions (Alami and Dixon, 2020; Kurlantzick, 2016; Moisio and Rossi, 2020; Rolf and Schindler, 2023; Su and Lim, 2023; Zhang and Lan, 2023). Nevertheless, how statist approaches, as muscular responses to various challenges, affect urban development remains under-researched (recent discussion in Alami, 2025; Eagleton-Pierce, 2023; Su and Lim, 2024; Wijburg and Waldron, 2025). In particular, it is unclear how the state can go beyond ‘common sense’ operations to further govern the urban built environment and the implications for urban governance. To address this issue, we investigate an emerging form of urban development in China, where central state capital is expanding into urban construction.

For two reasons, urban development in post-pandemic China provides a vantage point for examining the interactions between new state capitalism and urban governance transformation. First, contemporary geo-political contexts and international backlash foreground the proactive role of the Chinese state in the state-capital nexus (Peck, 2021). Recently, the Chinese state’s active actions have been reiterated alongside a heated discussion on state capitalism (Leutert and Eaton, 2021; Petry, 2021; Rolf and Schindler, 2023; Zhang and Lan, 2023). Nonetheless, China’s market system has long operated under state guidance and management, showing features of ‘market in state’ (Zheng and Huang, 2018). Given the interventionist tradition of the Chinese state in governing the economy and society, what is ‘new’ about the current statist approach is debatable. This paper, however, identifies a new trend in post-pandemic China: centrally controlled SOEs have substantially expanded their role in constructing the urban built environment. This trend offers a concrete lens for investigating how statist approaches transform cities.

Second, China’s entrepreneurial urban governance has demonstrated the central role of the state, especially the local state, in devising, guiding, and directly constructing spaces for local growth (Feng et al., 2022; Guo, 2020; Li and Chiu, 2018; Lin et al., 2023; Wu, 2018). Thus, Wu (2018) uses ‘state entrepreneurialism’ to distinguish China’s urban governance from urban entrepreneurialism by highlighting the state’s proactive role in mobilising market instruments. However, previous studies focused on local state interventions and central state strategic guidance—through institutional designs and shifting mandates—to maintain state centrality. While state-orchestrated market instruments have been explored, they largely refer to local state-owned land corporations. Little is known about how central state capital is involved in local development or its implications for urban governance.

To investigate how statist approaches transform urban development and urban governance, we examine the role of central SOEs in urban development in post-pandemic China. We identify a new urban process driven by central state capital. A piece of solid evidence is that eight construction SOEs under central government direct control have increased their market share from 30% to 50% in the building industry since the COVID-19 pandemic (Figure 1). The expansion of central SOEs in urban development opens a new arena for urban studies and potentially challenges the previous understanding of urban governance in China.

Figure 1.

The increasing contribution of eight construction SOEs (centrally controlled) to the whole building industry.

We investigate how the expansion of central SOEs transforms urban governance based on practices in Wuhan. SOEs have been mobilised by the central state and invited by the Wuhan government to boost urban development. We find a new phase of state entrepreneurialism characterised by extended central state through direct state capital investment in urban development. First, the national state shows its intensifying power in driving urban development as a response to economic stagnation in the post-pandemic era (Wu et al., 2025). Second, the local state navigates financial restraints and regulatory challenges through collaborating with large SOEs to explore backdoor financing, which may lead to overaccumulation and produce more financial risks. Third, centrally managed SOEs, unlike local counterparts, are insulated from local state management, and their involvement in urban development introduces investors’ profit-driven logics, paradoxically mirroring the financialisation of urban governance elsewhere (Beswick and Penny, 2018; Hasenberger, 2024; Koelemaij, 2021). These new features provide nuance to understanding the transformation of urban governance under the resurgence of global state capitalism (Alami, 2025; Alami and Dixon, 2023; Whiteside et al., 2023; Wijburg and Waldron, 2025). That is, central state dominance is strengthened through direct capital expansion, while the profit-driving stance of central SOEs and local state’s needs for alleviating financial stress facilitate the new urban process driven by central state capital, further exaggerating speculative urban entrepreneurialism rather than leading to a progressive welfare state (cf. Wijburg and Waldron, 2025).

This paper is organised as follows. The next section reviews recent literature on new state capitalism, urban entrepreneurialism and China’s urban governance under state entrepreneurialism. Based on these three strands of literature, the following section puts forward an analytical framework for understanding how the urban process is driven by central state capital. The Methodology section explains our empirical site—Wuhan—and data collection methods. Empirical sections illustrate two examples of state capital investment in post-pandemic Wuhan, showing consistent operational logics, albeit with different origins. We also discuss the features of a new phase of state entrepreneurialism in China’s urban governance. The final section discusses all the findings.

‘New’ state capitalism and the transformation in urban governance

The resurgence of state capitalism

There has been a resurgence of studying the state’s role in the economy and beyond. Previous studies on state capitalism referred to a state-led variety of capitalism, echoing studies on the entrepreneurial state (Mazzucato, 2013) and the East Asian developmental state. Faced with intensifying geopolitical tensions and multiple crises of late capitalist society, recent studies have noticed a more visible role of the state, which is beyond fixing market failures, providing public services, or facilitating industrial development (Alami et al., 2024; Rolf and Schindler, 2023). Rather, ‘the state plays a powerful role as promoter, supervisor, and owner of capital’ (Alami and Dixon, 2023: 76). The prominent entry of studying new state capitalism is ‘state-capital hybrids’ such as state-owned enterprises, sovereign bonds, sovereign wealth funds, and state-owned banks (Alami and Dixon, 2020; Rolf and Schindler, 2023). Alami and Dixon (2023) suggest a ‘combined expansion of state-capital hybrids and of muscular forms of statism’ (p. 80). The states’ direct interventions are demanded to sustain capital accumulation and deal with emergent crises.

Nevertheless, there is a persistent debate on what is ‘new’ about new state capitalism, as there is no non-state capitalism (Peck, 2023; Whiteside et al., 2023). Although there are attempts to define new features of state capitalism (Alami and Dixon, 2020; Kurlantzick, 2016), distinguishing new state capitalism from normal practices of a state in capitalism is difficult.

Urban studies can potentially answer the ‘what’s new’ question by situating state-capital hybrids in urban production and incorporating the spatial dimension of capital accumulation (Eagleton-Pierce, 2023; Su and Lim, 2023). Nevertheless, state capitalism, characterised by active involvement of SOEs, has been crucial in urban development for decades (Shin, 2025). In many places, states endeavour to profit from the real estate market (Shatkin, 2017). It is unclear, first, how the so-called ‘muscular’ statist approaches differ from conventional state interventions. Eagleton-Pierce (2023) argues that the London Corporation in the UK has developed in association with temporal adaptations rather than a genuinely novel state-capital hybrid. Second, it is under-researched whether further state interventions in urban development lead to a more progressive welfare state or reinforce a profit-driven capitalist state (Wijburg and Waldron, 2025). All these questions require more engagement between state capitalism and urban studies.

Urban entrepreneurialism

Urban entrepreneurialism presents an explanation of how capital accumulation transforms the urban built environment. The conventional understanding of urban entrepreneurialism highlighted local growth alliances comprised of land developers, investors, and local governments acting as entrepreneurs (Harvey, 1989; Molotch, 1976). Recent studies have suggested mutations or alternatives to neoliberal urban entrepreneurialism amidst changing political economy contexts (Davies, 2024; Lauermann, 2018; Phelps and Miao, 2020). Urban governance featuring neoliberal entrepreneurialism has transformed, yet scant literature has connected urban entrepreneurialism with state capital extension (recent discussion in Su and Lim, 2024; Wijburg and Waldron, 2025).

Facing enduring austerity after the global financial crisis and escalating geopolitical tensions, local governments engage in financialisation beyond their control (Dagdeviren, 2024; Hasenberger, 2024). Recent studies have developed two perspectives regarding how capital expansion influences urban governance. The first strand emphasises that external financial capital transforms local growth politics to extract value (Farmer and Poulos, 2019; Guironnet et al., 2016; Koelemaij, 2021; Peck and Whiteside, 2016). Developers and financial investors package infrastructure, development projects, and other assets to create revenue streams and financial returns. Global investors control the decision process, surpassing the local actors (Guironnet et al., 2016; Koelemaij, 2021). In extreme cases like Detroit, bondholders value disciplines and reshape local growth politics into debt machines (Peck and Whiteside, 2016). To various extents, local governments are being reshaped to subscribe to speculative logics from capitalists (Farmer and Poulos, 2019; Koelemaij, 2021).

The second strand highlights the agency of local governments in utilising tactics and strategies, usually financialised tools, to sustain entrepreneurialism and maintain public services provisioning (Adisson and Halbert, 2022; O’Brien et al., 2019; Pike et al., 2019; Van Loon et al., 2019). In some cases, the agency of the local state is increasing rather than diminishing in political-economic transformations (Lauermann, 2018; Parnell and Robinson, 2012). Affected by systemic austerity, local state actors are compelled to adopt financial strategies and techniques to promote urban growth and maintain local operations (Christophers, 2019; O’Brien et al., 2019). Local governments ‘implement statecraft in a finance-mediated way’ (Lagna, 2016: 168). For instance, they use debt expansion to respond to budgetary cuts (Dagdeviren, 2024). This trend is associated with new urban managerialism and innovations within government bureaucracies (Phelps and Miao, 2020).

Urban entrepreneurialism is undergoing significant political-economic transformations, yet its transformation by state capital remains understudied (Alami, 2025; Su and Lim, 2024). First, entrepreneurial practices at the local level also relate to the spatial selectivity of the national state in the context of geopolitical tensions. The national state selects specific city regions to channel investment and achieve strategic goals (Jonas, 2020; Jonas and Moisio, 2018). Second, the state’s involvement as capital in the production of urban space needs further investigation (Su and Lim, 2024). Extant studies have mainly focused on local state capital, with insufficient discussion on the production of urban space by extra-local state capital, which has more implications for how state capital affects urban governance.

State entrepreneurialism in China

China’s urban development practices can be used to understand state interventions in urban governance, as the state has been prominent in China’s political economy (Peck and Zhang, 2013; Petry, 2021; Zheng and Huang, 2018). Wu (2018) uses ‘state entrepreneurialism’ to illustrate ‘state engagement with the market and its entrepreneurial role’ (p. 1,384). It foregrounds the state’s pivotal role in urban entrepreneurial practices, potentially connecting urban entrepreneurialism with state capital expansion.

As a Chinese urban governance model, state entrepreneurialism highlights two components: state centrality and market instruments (Wu, 2018). First, the Chinese state, especially the local state, has engaged with entrepreneurial-like practices to promote local growth and align with the central state rather than merely for capital accumulation (Wu, 2018, 2020). Different from urban entrepreneurialism in the West, where the main initiative of growth alliance derives from inter-city competition for international investment (Peck and Tickell, 2002; Swyngedouw et al., 2002), the institutional origin of China’s growth politics is that local government officials are evaluated by local development, so they behave entrepreneurially to pursue growth (Guo, 2020). Recently, the local state, as an agent of the Chinese state apparatus, has pursued urban growth and changed strategic mandates (Li, 2022; Wu et al., 2022; Wu and Zhang, 2024; Zhang and Lan, 2025). Urban governance demonstrates firm state strategic intention, which is devised by the central state and implemented primarily by the local state.

Second, the local state extends its financial capacity by exploring market instruments, showing the agency of the local state in China’s entrepreneurial governance. Unlike collaboration with private actors in Western studies, the local government in China usually establishes local development corporations to finance infrastructure and conduct development projects (Feng et al., 2022; Li and Chiu, 2018; Wu, 2018). These local corporations borrow against land collateral and government guarantees to secure funds (Feng et al., 2025; Pan et al., 2017; Theurillat et al., 2016). With financial capital, these corporations manage to develop land first and sell it to developers for land revenue later. These financialised entrepreneurial practices have been widely replicated. Therefore, state entrepreneurialism featuring planning centrality and market instruments denotes that urban entrepreneurialism is compatible with and even strengthened by state capital extension.

However, local entrepreneurial practices in China have been challenged in a conjuncture of financial stress, effective exhaustion of land-based entrepreneurialism, and central stringent financial regulations. The local debt issue is rooted in land-based entrepreneurialism. It has been exaggerated by macro transitions in the political economy in the aftermath of the global financial crisis and the COVID-19 pandemic. To combat the recession of the global financial crisis, the Chinese state initiated a 4-trillion-yuan stimulus plan in 2008 to stimulate the economy by investing vastly in infrastructure and urban development. Local governments were asked to borrow for the stimulus plan through local agencies such as development corporations (Bai et al., 2016; Feng et al., 2022). Consequently, local borrowing proliferated.

Extensive local borrowing led to significant financial risks, requiring further financial regulations (Feng et al., 2024; Li et al., 2025). The central state has tightened local borrowing channels and centralised the financial control (Li et al., 2024). For example, local government bonds were introduced to manage local debt, through which local borrowing is integrated into the top-down bureaucratic system (Feng et al., 2024). The COVID-19 pandemic further exacerbates local financial status because of massive expenditure in combating the pandemic and the ensuing economic slowdown. It becomes unclear how local governments can navigate financial stress, maintain entrepreneurial growth, and interact with the enlarged role of central state capital.

In sum, state entrepreneurialism potentially combines state capitalism and urban entrepreneurialism by explaining how urban entrepreneurialism works under statist interventions. However, previous studies mainly focused on local state capital and local state entrepreneurial practices under central strategic guidance. The interference of the central state, especially in the form of state capital expansion, has been under-researched. In particular, amidst changing geopolitical contexts and the re-centralisation of state power in President Xi’s era (Anguelov et al., 2024; Leutert and Eaton, 2021), it is essential to understand how central state capital expands in cities and what its implications are for urban governance in China.

A new urban process driven by state capital

Urbanisation is a spatial-temporal fix to the capitalist crisis of overaccumulation (Christophers, 2011; Harvey, 1978). Meanwhile, capital investment in urban space reflects the strategic intention of the state, which is the ground for observing state-capital nexus, multi-scalar state governance, and state capital accumulation (Brenner, 2019; Jonas and Moisio, 2018). We focus on centrally controlled SOEs to provide an analytical framework for unpacking how state capital drives urban development (Figure 2).

Figure 2.

A conceptual framework for understanding a new urban process driven by state capital.

State-owned enterprises as an extension of central state

First, the central state mobilises centrally controlled SOEs to invest in specific cities and regions as a state strategy responding to various crises. In a neoliberal context, the privatisation and marketisation of SOEs were promoted to facilitate globalisation and capital accumulation under the free market ideology. However, amidst ‘new’ state capitalism, SOEs are in a ‘post-privatisation era’ when the state management and control over SOEs have been strengthened (Singh and Chen, 2018). SOEs can associate the state’s objectives with direct actions and serve as ‘geopolitical agents’ (Rolf and Schindler, 2023). The state has increasingly managed and directed them to achieve goals beyond capital accumulation (Jonas, 2020; Zhang and Wen, 2022).

Mobilising centrally owned SOEs shows that the national state promulgates policies and directly allocates resources to achieve strategic goals. For example, the state uses SOEs to invest in technology-based urban development in response to geopolitical tensions, showing the ‘strategic urbanisation of the state’ (Moisio and Rossi, 2020). SOEs align with the national state policy, collaborate with local state actors, and use their connection with state banks to invest in urban production as a state strategy (Liu and Dixon, 2022; Zheng and Huang, 2018).

In the post-pandemic era, the Chinese state mobilised SOEs (especially centrally owned) to deal with economic stagnation and stabilise the economy. For instance, the Chinese economy experienced severe shocks in mid-2022, recording merely 0.8% quarterly GDP growth. In response, the central state urged central SOEs to take prompt action. The State-owned Asset Supervision and Administration Committee (SASAC) then asked all SOEs to invest heavily in infrastructure and meet the annual fixed-asset investment targets. These strategies stabilised the economy, making the GDP growth rate reach 3% in 2022, significantly supported by a 9.4% increase in fixed asset investment. The building industry stagnated in the post-pandemic era because of an economic downturn and a slow property market. However, eight construction SOEs (centrally owned) expanded their market share from 30% to 50% (Figure 1). In urban development, this trend results in massive investment from centrally controlled SOEs in urban infrastructures, buildings, properties, and industrial parks, significantly impacting urban landscape.

State-owned enterprises as market players

Second, SOEs’ investment in the built environment derives from the desire for profits. Recent studies on state capitalism have focused on the political functions of SOEs, yet they are also enterprises chasing speculative capital accumulation in various contexts. For instance, corporate managers in German cities asserted corporate interests in climate change mitigation governance (Wansleben and Neumann, 2024). In Jakarta, SOEs produced speculative state spaces (Anguelov, 2023).

In China, SOEs, especially centrally owned SOEs, are required to make profits. Jones and Zou (2017) find that the Chinese state has weakened its regulations on SOEs to let them become profit-driven actors. China’s SOEs were mainly established in the 1970s with inefficiency. Later, the state enacted SOE reforms to facilitate their economic performance and enhance their profitability. Since 2003, all SOEs have been managed by the SASAC, a State Council department, to achieve political and economic goals (Zheng and Huang, 2018). Moreover, the profitability of centrally controlled SOEs is prominent compared to local SOEs.¹ The profits of centrally controlled SOEs were 2.6 trillion yuan, while all the local SOEs earned 1.9 trillion yuan in 2023. The SASAC ‘is a successful promoter when its interest in ensuring the steady growth of state assets neatly coincides with the centrally managed SOEs’ drive for investment and expansion’ (Zheng and Huang, 2018: 393). In contrast to local development corporations that maintain close institutional connections with municipal governments, centrally managed SOEs are not subject to local administration nor dominated by local government officials. Thus, existing studies examining local corporations’ alignment with municipal agendas may not adequately explain the operational logic of centrally managed SOEs (cf. Feng et al., 2022; Li and Chiu, 2018). The imperative of capital accumulation and achieving state strategies coexist in centrally managed SOEs, complicating their behaviours in urban development and construction.

Tendency towards overaccumulation

Third, the urban process driven by state capital tends toward overaccumulation, posing a risk to both statism and capital accumulation. Centrally controlled SOEs’ investment in the urban built environment could be a spatial-temporal strategy for boosting local development and stabilising the economy. However, this type of investment is also ‘speculative in the long term and always runs the risk of replicating, . . . the very overaccumulation conditions that it initially helps relieve’ (Harvey, 2011: 12). The built environment serves dual purposes: the production of fixed capital and the infrastructure for various economic processes. Overinvestment usually results from individual capitalists seeking profits, as seen in increased investment in the built environment in the aftermath of the global financial crisis (Farmer and Poulos, 2019; Guironnet et al., 2016). These behaviours lead to overproduction of the built environment, where capitalists ‘find themselves dominated and constrained by their own creations’ (Harvey, 1989: 3). In the same vein, overaccumulation can also happen when the state excessively invests in the built environment for strategic purposes (such as infrastructure and urban redevelopment), leading to crises characterised by declining profits and devaluation of fixed capital. For example, overproduction of housing may undermine the profits gained by SOEs and jeopardise the capacity of SOEs to achieve the state’s selective strategies. This illustrates the intertwined relationship between the state strategic mandates and capital accumulation embodied in the operation of SOEs.

Methodology

We investigate urban development in post-pandemic Wuhan (Figure 3) to illustrate how central state capital drives urban development. Wuhan is a city in central China with a GDP of more than 2 trillion yuan in 2023, ranking eighth among all cities in China. It is a large city with a population of 13.77 million, covering 8,494 km². Wuhan is an unusual case for investigating post-pandemic urban development, as the COVID-19 pandemic in China started in Wuhan, and it suffered heavily from the pandemic, requiring substantial investment to stabilise the economy. Nonetheless, it is also representative. The strategy first implemented in Wuhan was later adopted across China. As the national economy suffered from pandemic lockdowns, centrally controlled SOEs have been mobilised to inject massive investment into urban development and construction projects. Wuhan’s experience reveals the ongoing trend in China as a whole.

Figure 3.

Locations of Wuhan and the development site of Changjiang New Area.

Following our analytical framework, we focus on the role of centrally owned SOEs in urban development in post-pandemic Wuhan and the implications for urban governance. We investigate two types of central state capital investment. First, the inflow of central state capital in 2020 was more like a political process. President Xi Jinping visited Wuhan during the pandemic and urged support from the central state to stimulate the local economy. SOEs’ massive investment in Wuhan ensued. We analysed the behaviours of SOEs, especially land purchasing, to reveal their operational logics. Second, SOEs have collaborated with the Wuhan government to construct a new town (Changjiang New Area in Figure 3) since 2022. We unpacked the drivers of new town investment in the context of housing stagnation and economic slowdown. Based on these two examples in Wuhan, we discuss how centrally owned state capital expands into urban production and the implications for urban governance.

The empirical study is based on our fieldwork in Wuhan in 2023. We conducted site visits, semi-structured interviews, and focus groups regarding urban development in a post-pandemic era. One author has participated in the consultation and planning process of Changjiang New Area and has first-hand insights into the project. We conducted twenty interviews with key informants of Wuhan’s ongoing urban development projects to triangulate their understanding of urban development practices and the role of SOEs therein. Our interviewees include eight urban planners, four scholars, three local government officials, and five managers from SOEs. Interviews lasted from 38 to 113 minutes. Our interview transcripts are complemented by archival data, including local statistics, planning documents, media coverage, and SOEs’ performance data. These data were collected during the fieldwork or collated from online sources such as local statistical bureaus, land transactions platforms, and public resources trading platforms. In particular, we developed a dataset of land transactions in Wuhan to analyse land purchasing by SOEs in the post-pandemic era. We also consulted the bidding system of government-related projects to access the contracts between SOEs and the local government. All data were analysed thematically to unpack the role of centrally managed SOEs in urban development and the implications for urban governance.

Revitalising Wuhan by mobilising SOEs as a state strategy

The first route of central state capital expansion derives from a direct central call. The central government has encouraged investment to revitalise Wuhan to counteract the aftermath of the COVID-19 pandemic. President Xi Jinping’s visit to Wuhan is a milestone. He visited Wuhan in 2020 during the lockdown and commented that ‘the central government and every national ministry should assist Hubei Province by promulgating a series of plans to support areas such as employment, finance, taxation, financial services, poverty alleviation and mega project construction’; ‘they should lend a hand and give a pull (da ba shou, la yi ba)’ (People’s Daily, 2020). Since then, the central state has mobilised various forms of state capital to facilitate development in Hubei Province, particularly in Wuhan. Hence, the state capital’s expansion into urban development is a centrally initiated state project.

The central government’s call for support in Wuhan’s development was mainly implemented by SOEs managed by the central SASAC. It introduced 21 measures to stimulate the economy in Hubei Province in May 2020. In doing so, it organised a meeting with leaders of all the centrally controlled SOEs and the Hubei provincial government. The meeting, themed as ‘SOEs’ support to reinvigorate Hubei Province after the pandemic’, resulted in significant progress. Hubei Province signed 72 contracts with SOEs in the single meeting, and the total investment reached 327.73 billion yuan (SASAC, 2020). These projects include new energy projects, ecological projects, infrastructure projects, and manufacturing projects. In 2020, SOEs initiated 401 new projects in Hubei province to stimulate the economy in response to the central initiative. Their response to the state’s mission is prompt.

One typical example is a project led by China Energy Engineering Corporation Ltd (CEEC). CEEC is China’s largest energy construction company with an asset level of 780 billion yuan. During the online meeting, the Wuhan government signed a contract with CEEC to construct a new city in the Qiaokou District of Wuhan. This project consists of urban redevelopment, public facilities, and ecological treatment, with a total investment of 50 billion yuan. As explained by a leader of CEEC, its involvement in Wuhan’s urban development is a ‘political task’ to achieve the state’s commitment to revitalising Wuhan.

[The collaboration] implements President Xi’s directive to ‘lend a hand and give a pull’. As a central enterprise, CEEC has an important political responsibility to assist Hubei Province and Wuhan City in winning the post-pandemic revitalisation battle for people’s livelihood and economic development.

(A leader of CEEC, 2020)²

In response to the central initiative, SOEs’ direct investment in Wuhan largely boosted the local economy after the pandemic. As seen in Figure 4, Wuhan’s economy was hit hard in the first half of 2020, but local development has recovered soon after the lockdown. Wuhan has returned to normal because of massive investments in fixed assets, mostly from SOEs.

Figure 4.

Wuhan’s fixed asset investment after the pandemic.

Apart from signing contracts for development projects, SOEs also purchased land from the Wuhan government. Land purchasing contributes financially to local governments, and developing purchased land brings in further investment to boost the local economy. We analysed the transactions of residential land in Wuhan.³ It shows that centrally controlled SOEs contributed more than 30% of all the land sales revenue in 2020 (Figure 4). Furthermore, compared with other land buyers, they purchased larger land plots at higher prices. The floor price of land purchased by centrally controlled SOEs was nearly twice the average price of residential land purchased by others (Table 1).

Table 1.

Residential land transactions in Wuhan (2020).

Enterprise type	No. of transactions	Land sales revenue (billion yuan)	Contributing ratio (%)	Land area (ha)	Building area (m²)	Average floor price (yuan/m²)
Private enterprises	70	71.85	39.80	695.51	15,553,154	4619.59
State-owned enterprises	59	108.67	60.20	640.03	15,551,850	6987.31
Central SOEs	24	57.68	31.95	205.53	5,506,923	10,473.33
Municipal SOEs	24	37.85	20.97	340.97	7,848,186	4822.67
Provincial SOEs	6	7.85	4.35	52.98	1,199,731	6540.99
District SOEs	5	5.29	2.93	40.55	997,010	5309.03
Total	129	180.51	100	1335.54	31,105,004	5803.40

Note. Land transaction data were retrieved from the online platform of the Wuhan land market at http://www.whtdsc.com. We categorised the developers based on their ownership structure. The ownership structure was consulted from www.qcc.com. Some enterprises are mixed-ownership corporations. If the enterprise’s main shareholder (holding more than 51% stake) is the state (district/municipal/provincial/central state), it is categorised as an SOE. If the state’s share is less than 51%, the enterprise is categorised as private.

Central SOEs’ land purchasing was mainly derived from a strategic intention to support Wuhan. As commented by a government official in charge of land transactions:

Many centrally controlled SOEs purchased land in Wuhan in 2020. That is because of the comments by President Xi. He asked the central government to help and support Wuhan after the pandemic. These SOEs are politically sensitive. But now they could not proceed. Many land plots remained undeveloped. SOEs suffered substantial losses.

(Interview with a government official, Wuhan, 14/11/2023)

Centrally controlled SOEs’ land purchasing in 2020 in Wuhan shows two characteristics. First, they are far more financially capable than locally owned SOEs and private developers, enabling them to purchase large-scale and expensive land plots. Confronted with housing stagnation, many local governments have resorted to locally owned corporations, especially urban development and investment corporations, to purchase land and contribute to local income. In Wuhan, municipal SOEs also purchased many land parcels, contributing largely to local land income (Table 1). Nonetheless, due to the central call for revitalising Wuhan, centrally controlled SOEs contributed more than local SOEs to local land transaction fees in 2020.

Second, centrally managed SOEs’ preferential access to premium land plots, namely high-value plots with great potential for value capturing, demonstrates that they leverage financial capacity and political mandates to make investment decisions (cf. Jones and Zou, 2017). Justifying land purchasing for ‘Wuhan’s recovery’, these SOEs embed profit-making motives in the political agenda. Therefore, they adjust their land purchasing activities according to changing situations. As shown in Figure 5, they scaled back their land purchasing when the national strategy became less urgent.

Figure 5.

The purchasing of residential land by centrally controlled SOEs in Wuhan (2020–2023).

Purchasing valuable land plots bets on prosperous real estate development in the future, which becomes a faded hope in the post-pandemic era when the housing market has been stagnant. Developing the purchased land would potentially lead to further losses. Consequently, many SOEs have not developed acquired land plots as originally planned. For example, in 2020, China Overseas Property Group Corporation, a subsidiary of China State Construction Engineering Corporation (100% owned by central SASAC), bought two land parcels in Wuhan for 14.4 billion yuan. The estimated investment for these two land plots is 30 billion yuan. The housing price should be 30,000 yuan/m² to cover the cost, but the current market price is around 20,000 yuan/m². Faced with potential losses, the developer has slowed down its developing progress. It has only developed 20% of the purchased land by 2024, and the selling price is 25,000 yuan/m². Despite this, the project is unable to offset its cost. Facing a tough situation in the real estate market, most SOEs postponed the development of purchased land, showing that they prioritise economic viability in general.

State capital for profit in new-town development

The second route of central state capital expansion embeds a strong profit-seeking motive in new-town development. In Wuhan, centrally managed SOEs specialising in construction have worked closely with the local government to construct new urban spaces for profit. We use Changjiang New Area as an example.

Changjiang New Area is a new town initiative proposed in 2017, now under construction in post-pandemic Wuhan. Previous studies believed that new town development was driven by an entrepreneurial incentive, that is, capturing land value and promoting industrial development (Chien and Woodworth, 2022; Li and Chiu, 2018; Shen and Wu, 2017). Building a new town demands land expropriation to make urban land, which local governments then sell to get massive land sales revenue. Changjiang New Area was also an entrepreneurial project for land expansion and local economic growth. The original plan was to build a new area in the northeastern region of Wuhan in 2017.⁴ The first round of planning was learned from planning in Xiong’an New Area because Changjiang New Area aimed at building a National New Area. However, the central state has halted the endorsement of National New Areas since 2017. Hence, the development of the new town slowed down and was completely suspended during the pandemic. After the pandemic, the provincial leader resumed the new town development initiative. In 2022, Changjinag New Area was formally established as a provincial-level new area. According to the latest plan, it covers three suburban districts in Wuhan, and the planning area is 610 km² (Figure 3).

New town development demands substantial investment, which is extremely challenging in the post-pandemic era when the local government suffers financial difficulties. Previously, local governments usually set up local land corporations as agencies to fulfil mega-urban projects (Feng et al., 2022; Li and Chiu, 2018; Shen et al., 2020). Wuhan also established a specific local development corporation—‘Changjiang Group’ for short. However, local SOEs have faced stringent financial regulations, impeding them from securing funds for the new town development. First, local development corporations were forbidden to use land as collateral since the central state has regulated local borrowing (Feng et al., 2025). This regulation hinders the financial capacity of Changjiang Group. Second, Changjiang Group’s asset level is small, which restrains its financial capacity. As the routine practice—mobilising local land corporation—could not raise enough funds to develop the new town, the Wuhan government cooperated with centrally controlled SOEs.

Wuhan has signed contracts with three large SOEs to conduct ‘comprehensive zoning development’ (pianqu zonghe kaifa) in Changjiang New Area.⁵ It works as follows. First, the local government asks Changjiang Group to calculate the expected costs and income (e.g. facility charge, management income, land income, and even expected local government bonds) from a designated area to seek a partner for investment and construction. Second, Changjiang Group opens a project bidding on behalf of the Wuhan government. Third, the successful bidder collaborates with Changjiang group, signing a contract together to conduct the development project. Although these bidding procedures are open to all, successful bidders are all centrally owned construction SOEs.

For example, China Construction Third Engineering Bureau Group (China Third Engineering for short), a subsidiary of China State Construction Engineering Corporation, the largest central SOE specialising in construction, is developing Changjiang Smart City in the new town area. The smart city project includes five sub-projects: roads, municipal facilities, ecological treatment, public services facilities, and industrial parks, with a total cost of 11.7 billion yuan. With an asset level of 217.45 billion yuan in 2022, China Third Engineer’s asset price is more than four times that of Changjiang Group. Its enlarged asset level enables it to unlock more financial products and financial capital.

The collaborating mechanism is called ‘Investor + EPC’ (Engineering, Procurement, Construction), which enables the central SOE to work as an investor and contractor at the same time. For instance, China Third Engineering and Changjiang Group first set up a project company to implement the development project. Their joint corporation, Wuhan Changjiang New Area Binling Construction Corporation, was established with a capital contribution ratio of 85% to 15% from the centrally controlled SOE and Changjiang Group. The project company undertakes fundraising, project management, construction and operating management. It has issued four tender notices to recruit contractors for road construction since 2023. The successful bidder has always been its parent company—China Third Engineering, with a total contract amount of 1.21 billion yuan. The collaboration mechanism is essentially recruiting construction projects for the central SOE.

The involvement of centrally controlled SOEs alleviates local financial burdens in new town development. Meanwhile, from the perspective of central SOEs, they invest in urban development for considerable profits. As commented by an interviewee,

The main reason SOEs do so is to make money. SOEs can earn huge profits from construction work. These SOEs represent the surplus capacity of construction in China. They now need to find new places to construct, so they need to work with the local government.

(Interview with a government official, Wuhan, 07/11/2023)

These SOEs can make profits from both financial returns and construction contracts. First, centrally controlled SOEs leverage their financial capacity to raise funds and receive financial gains. For example, China Third Engineering will work for ‘N + 5’ years before handling over the project to the local government. ‘N’ is the construction period of sub-projects, such as roads, facilities, and buildings in the designated area (usually less than 3 years). The project company will manage the built-up area for another 5 years after completing the sub-projects. The SOE will exit after the collaboration period. Then, according to the contract, Changjiang Group will pay for the development cost plus an annualised yield rate of 5.9% to China Third Engineering. Changjiang Group promised to pay the debt using management fees, special bonds, government subsidies, and other funding sources sought by the local corporation. The financial burden will be finally transferred to the city government because Changjiang Group is a local corporation wholly owned by the Wuhan government.

Second, by collaborating with local governments, construction SOEs can expand their business and sustain their operations. All SOEs involved in the new town development are centrally controlled SOEs specialising in construction. In the post-pandemic era, the stagnancy of the housing market has shrunk the housing sector and decreased the demand for construction projects. Urban investment is a fix to the overcapacity faced by construction SOEs, as new town projects largely contribute to their contract value. There are three ongoing development projects in Changjiang New Area with an estimated investment of 37.64 billion yuan, not to mention projects being proposed with other SOEs (Table 2). Taking ‘N + 5’ as 8 years, the total return of these collaboration projects would be 55.06 billion yuan (development cost plus financial fees). The construction SOEs’ rationale is to expand their business during an economic downturn, as they cannot profit without construction and engineering projects. They anticipate huge profits from the new collaboration model.

Table 2.

The collaboration with SOEs in developing Changjiang New Area.

Project progress	SOE	Project investment (billion yuan)	Collaboration period (years)	Annual rate (%)
Under construction	China Construction Third Engineering Bureau Co. (a subsidiary of China State Construction Engineering Co.)	11.70	N + 5	5.90
Under construction	China First Metallurgical Group Co. (a subsidiary of China Minerals and Metals Group Co.)	13.86	N + 5	5.89
Contract signed	China Railway Construction Investment Group Co. (a subsidiary of China Railway Construction Group Co.)	12.09	N + 5	5.55
Cooperation proposals	China Communications Construction Group Co., State Grid Corporation of China, China Energy Engineering Group Co., China Three Gorges Co., China Railway Engineering Co.	—	—	—

Note. Contract data were retrieved from the bidding system of Wuhan municipality. The successful bidding rate of China Railway Construction was ‘loan prime rate (LPR) + 170 bp’. The latest LPR (July 2024) advised by the Bank of China is 3.85%. Therefore, we calculated the annual rate as 3.85% + 170 bp = 5.55%.

However, substantial state capital investment places a more significant financial burden on the local government, which is expected to pay 55.06 billion yuan for the three collaboration projects 8 years later. This amounts to one-third of the municipal revenue, around 150 billion yuan. The city government cannot use local revenue to cover the debt, as it has to allocate funds for routine budgetary expenditures in service provision and management. While the involvement of SOEs addresses the current local financial challenges, it creates more financial burdens in the long term.

Discussion

Many cities face economic, fiscal, and political challenges in the post-pandemic era (Bloom, 2024; Doussard, 2025). They often have scant power and resources in their own hand to deal with these challenges, and hence resort to state resources (Doussard, 2025). China is not a mature capitalist state. Rather, it is located at the frontier of party-state capitalism (Wu et al., 2024). In that specific context, a new urban process driven by centrally controlled SOEs is a Chinese solution to these crises in the post-pandemic era. The effective exhaustion of previous local land-based urban processes is reified in the overinvestment and declining profitability of commodity housing, exacerbated by the post-pandemic economic shutdown, becoming a systemic challenge for developers, local governments, banks, and residents. Even worse, as local revenue heavily relies on developers’ land purchasing, it has shrunk due to housing stagnation. Restricted fiscal capacity limits local governance’s ability to address the crisis. Then, this local predicament becomes a political crisis as social discontent and economic stagnation challenge state legitimacy. Therefore, the central state has intervened in local development by expanding centrally managed SOEs to boost urban investment and development. This approach does not address the tensions within post-entrepreneurial cities, as seen in US cities (Doussard, 2025). The Chinese endeavour seeks to sustain entrepreneurial growth through central state capital investment, thereby deferring economic and political crises.

Based on the new urban process driven by central state capital, we identify an emerging form of urban governance—upscaled state entrepreneurialism, which involves extending central state capital to sustain urban entrepreneurialism and shore up state centrality. This finding contributes to the literature on state capitalism and state entrepreneurialism. ‘New’ state capitalism is an inflection point to reconsider the statist approach to development (Peck, 2023). However, haunting questions remain regarding how emerging state-capital hybrids operate in practice and to what extent these new interventions rewrite the rules of governance (Ward et al., 2023; Whiteside et al., 2023). The concept of state entrepreneurialism bridges state capitalism and urban entrepreneurialism, illustrating that the state governs urban development by mobilising market instruments (including state capital) to achieve strategic intentionality (Wu, 2018; Wu et al., 2025). It contributes to state capitalism by adding an urban perspective and its operation through entrepreneurialism. This research builds on that conceptualisation and identifies a new trend, termed upscaled state entrepreneurialism. This trend demonstrates consistent state centrality in orchestrating urban development, but through distinct features that potentially challenge the previous understanding of entrepreneurial governance.

The main feature of upscaled state entrepreneurialism is that the state strategy is achieved through centrally controlled SOEs’ investment in urban production rather than merely through local corporatism. The earlier form of state entrepreneurialism hinged on a growth coalition formed by the local government, arm-length local corporations and private developers (He and Wu, 2009; Lin et al., 2023; Shen et al., 2020), but now urban governance relies on a new form of alliance constituted by centrally managed SOEs and local state actors. This change is profound as central SOEs are not arms-length corporations aligning with the local government. Their strengthened influence in urban governance transforms the previous local state-dominated entrepreneurial model.

First, unlike local counterparts, centrally controlled SOEs’ general consideration is profit. One typical example is their land purchasing practices in Wuhan. They first invested in expensive land plots for high returns. Later, they curtailed land purchasing and changed the investment model by packaging financial services into the construction business. Central SOEs leverage their financial capacities to become the contractors for new-town development. Their market incentives confirm that SOEs are profit-driven actors rather than unconditional state instruments (Anguelov, 2023; Jones and Zou, 2017), showing the state as fragmented and plural actors with diverse incentives rather than a unified monolithic subject (cf. Jessop, 2007).

Second, centrally controlled SOEs capitalise on local limitations in sustaining entrepreneurial growth, intervening to drive urban growth and capture value. The local state faces significant financial pressure in the post-pandemic era because of stringent financial regulations and the fiscal shrinkage due to economic stagnation. Local governments can borrow by issuing local government bonds after 2014, yet the bond issuance system is strictly under the quota management system (Li et al., 2024). The economic stagnation in the post-pandemic era has deteriorated local fiscal status, demanding more financial resources. In this context, the local government collaborates with centrally managed SOEs, utilising their financial capacity to sustain entrepreneurial practices such as new town development. By shifting initial financial responsibilities to central SOEs, local governments circumvent quota-management restrictions while maintaining urban development capacity. Thus, the expansion of central state capital could be regarded as a new form of ‘backdoor financing’ (cf. Liu et al., 2022), when local SOEs’ land-based financial activities have been restricted (Feng et al., 2025). Centrally managed SOEs, unlike local ones, are not owned by local governments; hence, local collaboration with these SOEs does not increase the monitored debt of local governments. For the same reason, however, centrally controlled SOEs maintain their own operational logics to generate profits.

Finally, the new statist approach to revitalising the local economy through central state capital investment does not rewrite state-market relations; rather, it reasserts state dominance in the urban built environment. Moreover, the introduction of central state capital fuels a tendency towards further overaccumulation, generating new crises that threaten the effectiveness of state governance and reveal the limits of state entrepreneurialism. As commented by a planner in Wuhan,

Now, new growth poles in Wuhan lack momentum in terms of spatial growth. For example, Changjiang New Area was established several years ago, but only a few land plots were sold. Industrial development is also not good.

(Interview with a planner, Wuhan, 07/11/2023)

Developing new towns has not been as lucrative as it was in the past two decades. Changjiang New Area is a new initiative with an uncertain future progress. Even so, centrally managed SOEs’ financial capacity and profit-seeking stance drive urban investment and expansion to create more entrepreneurial spaces for speculation. The local government will have to pay for the development costs in the future. When urbanisation does not produce value as expected, the local government may need to seek financial channels, such as local government bonds, banking channels, and state bailout, to cover the cost. SOEs’ investment redirects urban governance into a more financialised status. In this case, SOEs are not different from private investors or financial stakeholders elsewhere in that they direct the urban process to accrue financial returns and hence financialised urban governance (cf. Farmer and Poulos, 2019; Peck and Whiteside, 2016; Ward and Swyngedouw, 2018).

Conclusion

This paper echoes the call for understanding how ‘new’ state capitalism transforms urban development and urban governance by providing concrete evidence for ‘urbanising state capitalism’ or the ‘urbanisation of state capital’ (Alami, 2025; Alami and Dixon, 2020; Shin, 2025; Whiteside et al., 2023; Wijburg and Waldron, 2025). While previous studies in China emphasised the function of the local state in pursuing growth agendas and conducting land development (Feng et al., 2022; Luan and Li, 2022; Shen et al., 2020; Wu, 2018), this paper shows a different picture: the local government cannot perform urban entrepreneurialism as it did in the period of land finance. The new actor is neither a private investor nor a local state agency, but centrally controlled SOEs with financial capacity that intervene in urban space production. Consequently, urban entrepreneurialism is sustained by central state capital extension, showing a new trend of upscaled state entrepreneurialism in China.

First, this model of urban development is not genuinely novel but an intensification of China’s state-led entrepreneurialism amidst global state capitalism. The expansion of central state capital in the urban production represents similar ‘muscular forms of statism’ (Alami and Dixon, 2023: 75) as a response to geopolitical tensions, economic stagnation and housing downturn. Over the past three decades, local governments have dominated land-backed finance to promote local entrepreneurial growth in China (He and Wu, 2009; Shen and Wu, 2017). In the post-global financial crisis era, the central government strengthened the land-based financing model to expand urban investment and stimulate the economy (Feng et al., 2022; Wu, 2023). Local governments have created more entrepreneurial spaces to sustain economic growth and achieve central state mandates, such as promoting indigenous innovation (Zhang and Lan, 2025). The crisis management approach at that time reflected a consistent logic in governing China’s urban development: utilising state-controlled market (financial) instruments to achieve state strategic intents (Wu, 2018; Wu et al., 2025). In the post-pandemic era, as local governments face severe financial constraints imposed by the central state, their ability to drive urban development has diminished. Consequently, the central state takes over by being directly involved in urban investment and construction via centrally controlled SOEs. This new practice demonstrates the state’s goal of stabilising the economy via urban investment and construction, showing consistent state expansion to deal with various internal and external crises, echoing global state capitalism’s resurgence (Alami et al., 2024; Kurlantzick, 2016; Rolf and Schindler, 2023; Su and Lim, 2023). Still, the resurgence of state capital expansion reflects ‘temporalities’ associated with global conjuncture (cf. Eagleton-Pierce, 2023), intensified by China’s consistent logic of state-led crisis management (He et al., 2020; Wu et al., 2025), echoing an ongoing trend of centralising state control in China’s political economy (Leutert and Eaton, 2021; Zhang and Lan, 2023; Wu and Zhang, 2024).

Second, we add nuance to understanding how ‘muscular’ statism featuring a new urban process driven by central state capital reshapes urban governance. The expansion of centrally managed SOEs into urban development has strengthened financialisation, a more intensified form of speculative entrepreneurialism, rather than leading to a progressive welfare state (cf. Whiteside, 2023; Wijburg and Waldron, 2025). Based on practices in Wuhan, we have illustrated two routes for centrally controlled SOEs’ expansion into urban investment: land purchasing in 2020 and ongoing new town development projects. In both cases, while centrally controlled SOEs provide financial support to the local government, they prioritise their economic benefits. The expansion of central state capital further transforms urban spaces into ‘speculative state-spaces’ for state actors—centrally managed SOEs (cf. Anguelov, 2023). This resembles private investors to extract value in urban development (Farmer and Poulos, 2019; Guironnet et al., 2016; Koelemaij, 2021; Ward and Swyngedouw, 2018). The ongoing expansion of central state capital into urban development intensifies profit-making logics, showing escalating tensions within China’s state-led financialisation (Feng et al., 2022; Wu, 2023).

Third, the agency of the local state in navigating financial stress facilitates the expansion of central state capital, thereby strengthening the role of centrally controlled SOEs in urban governance, rather than enhancing municipal control. Recent studies on urban governance have identified a new trend of ‘municipal statecraft’ or ‘entrepreneurial municipalism’, highlighting that local governments innovatively mobilise resources and entrepreneurial tactics to navigate financial stress and sustain public services provisioning (Dagdeviren, 2024; Lauermann, 2018; Phelps and Miao, 2020; Thompson et al., 2020). Resonating with these studies, we find that local governments in China actively seek state capital as a new urban development resource (cf. Deruytter and Bassens, 2021). However, the agency of the local state has been restrained because centrally controlled SOEs, especially construction SOEs, dominate and surpass the administration of the local state. Instead of addressing endogenous social needs, these SOEs channel massive investment into large-scale urban space production, further entrenching routine entrepreneurial practices. Their expanded role in urban investment further increases the risks of the speculative production of urban space, potentially leading to new crises.

Footnotes

ORCID iDs

Yi Feng

Zhigang Li

Fangzhu Zhang

Fulong Wu

Funding

The authors disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This work was supported by the European Research Council (ERC) under Advanced Grant No. 832845—China Urban and National Natural Science Foundation of China (Project No. 42171203, 42501257).

Declaration of conflicting interests

The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Notes

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