MARCHING TO THE FUTURE: Ongoing construction on the sites of Luowan Business District and Yujiabao Financial District of the newly established Binhai New Area in Tianjin on August 16, 2010 (LIU HAIFENG)

July 1 marked the first anniversary of the reorganization of Beijing's central districts. Just a year ago, Dongcheng, Xicheng, Chongwen and Xuanwu districts that comprised the core of Beijing were merged to form new Dongcheng and Xicheng districts.

On June 8 this year, the Shanghai Municipal Government said the State Council, China's cabinet, had approved its plan to merge Luwan District with Huangpu District to create a new Huangpu District.

In recent years, several other major cities in China also redrew their administrative borders.

In 2006, Dongli District in Harbin, capital of northeastern Heilongjiang Province, was merged into Xiangfang District. In November 2009, Binhai New Area was established in Tianjin on the basis of the merger of Tanggu, Hangu and Dagang districts. And in June 2010, Liangjiang New Area was officially founded in southwestern Chongqing.

"With the development of the economy, the original administrative structures of many cities have become outdated. In order to adapt to the new situation, the merger of small-scale downtown districts has become an irresistible trend," said Liu Weixin, a researcher with the Chinese Academy of Social Sciences.

Strength in unity

Yu Zhengsheng, Secretary of the Shanghai Municipal Committee of the Communist Party of China (CPC), said at a news conference on June 8 the merger of Huangpu and Luwan districts would help further integrate and optimize the resources of downtown Shanghai. The government, however, has not yet given a specific date by which the merger will be completed.

Currently, Huangpu District covers 12.49 square km in the heart of Shanghai, including the famous Bund area. Its population is about 429,900. Luwan District covers 8.03 square km and is home to about 269,400 residents.

The districts are home to a large number of financial institutions, corporate headquarters and entertainment venues. They also have some of the city's most famous tourist destinations and shopping districts, such as the Bund, Nanjing Road, Huaihai Road, Xintiandi and Yuyuan Garden.

Though relatively small in terms of area and population among Shanghai's 18 districts and counties, Huangpu and Luwan districts are extremely central and rank at the top in terms of overall economic development and per-capita assets.

Data from Shanghai's tax authorities show the revenue generated by Luwan and Huangpu districts stood at 15.8 billion yuan ($2.47 billion) and 13.7 billion yuan ($2.14 billion) in 2010, respectively.

Despite this, the two districts have been plagued by economic slowdown in recent years and their overlapping functions are seen to be an obstacle to growth.

Local officials said the merger plan was proposed with the aim of facilitating the long-term development of both districts, and was expected to enhance the efficiency of their urban functions and reduce administrative costs.

"The merger will help consolidate the advantages of the original two districts and form a new economic growth point," said Yu Hongsheng, Director of the Urbanization Development Research Center of the Shanghai Academy of Social Sciences.

The Huangpu-Luwan merger marks the third time Shanghai has adjusted its administrative divisions during the past 10 years. Early in 2000, Huangpu District absorbed its neighboring Nanshi District and in 2009 Nanhui District was merged into Pudong New Area.

But unlike the previous rounds of consolidation in which "a strong district took over a weaker one," Yu said in the latest case, "the change should benefit both districts."

One of the potential benefits would be to integrate their cultural and economic resources under one administration.

For example, much of the famed shopping street Nanjing Road is in Huangpu District and Luwan District has Huaihai Road, an iconic strip for fashion retail in Shanghai. "The new district will greatly facilitate urban planning," Yu said.

Lu Qilin, a researcher with the Shanghai-based real estate agency Shanghai Deovolente Realty, said commercial properties in Huangpu District would be upgraded after the merger.

"Central Huaihai Road in Luwan District, for instance, is more developed than East Huaihai Road in Huangpu District. They are in fact two parts of the same road. When the two districts are combined, the two roads will be developed as a whole," Lu said.

As the Huangpu River passes through both districts, it's hoped the merger will help unify the development of much of the city's riverside, and perhaps help the redevelopment of the venue of the 2010 World Expo, which were built along the Huangpu River in the two districts.

"The merger will contribute to more reasonable overall planning. Each area is expected to develop different but complementary functions," said Chen Xian, a researcher at Shanghai Jiao Tong University.

The merger is also considered a major step forward in the city's development as an international financial center.

"It is not simply a merger of two administrative divisions, but an attempt to build up Shanghai's new central business district," Yu said.

"The merger will bolster the development of the Bund financial zone," said Sun Lijian, a professor in economics with Shanghai-based Fudan University.

"Luwan, with large former World Expo plots available for development, can help the 2.6-square-km Bund Financial Zone develop financial service industries that will complement the Lujiazui Financial Zone in Pudong New Area that focuses on banking services," Sun said.

Shen Hanyao, President of the Shanghai Wharton Economic Institute, said as a world-class metropolis with 23 million residents, Shanghai should have a larger central business district to develop its economic potential.