is the excessive level o debt and the problemsservicing that debt. With respect to that issue,the China Banking Regulatory Commission isencouraging banks to securitize troubled loans inorder to remove them rom bank balance sheets.Tese securities will necessarily be priced at adiscount. Still, ultimately nancial market pric-ing will have to be liberalized in order to preventuture imbalances rom developing. Meanwhile,bank prot margins are very high as banks unloadloans through securitization.
Te Chinese government has set November asthe date or the Communist Party’s next plenary meeting. Tis is expected to be the meeting atwhich the leadership will approve a detailed set o reorms. Among the areas likely to be addressedare nancial market liberalization, privatization o state-owned enterprises, reorm o the householdregistration system (
), and labor marketregulations. Tis will be an opportunity or theleadership to set the agenda or the next ve years.Tis is widely anticipated especially because thegovernment has signaled that it is more concernedwith structural reorms than short-term stimulus.One o the important drivers o economicgrowth that the leadership wants to promoteis urbanization. Given that China has already engaged in massive urbanization, this may seemodd. Aer all, in the last 20 years, the urban shareo China’s population increased rom less than 30percent to more than 50 percent. Yet more will beneeded to sustain growth. Te view is that whenworkers move rom arms to actories or oces,their productivity increases strongly, thereby help-ing to drive strong economic growth. Tis is criti-cally important because, due to the lagged impacto the one-child policy, the working-age popu-lation has stopped growing. Tus boosting theurban labor orce will require more migration. Yetthe pace o migration has dwindled due to workerrustration with low wages, poor living condi-tions, and second-class status owing to the
system. Tis slower pace is one reason that thegovernment is likely to reorm the
system.While the government sees a huge potentialpositive return rom urbanization, there is grow-ing concern about the potential costs o urbaniza-tion. A new report prepared jointly by the UnitedNations and a Chinese government think tank says that, over the next two decades, it will costat least 41 trillion Chinese yuan ($6.8 trillion) toacilitate the migration o 210 million workers.
Te study anticipates that China’s urban popula-tion will rise rom 666 million in 2010 to 976million in 2030. It also says that the costs couldbe even higher i investments are undertaken toclose the gap between migrants and others interms o living standards. Te question arises asto how to und this investment. Already local
While the government sees a huge potential positivereturn rom urbanization, there is growing concernabout the potential costs o urbanization.
Asia Pacifc Economic Outlook—October 2013