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China’s rapid urbanization promises a higher quality of life for millions of rural residents but only if urban governments implement and enforce the right policies
hina’s urbanization rate is not extraordinary. It is approaching 50 percent, which is the average for the world as a whole, but far less than the 78 percent rate reached by Latin America and 75 percent by the United States. Much more striking, however, is the sheer number of people involved and the anticipated rates of increased urbanization over the next two decades. If urban migrants are included, more than 650 million Chinese resided in urban areas in 2008, compared with 191 million in 1980. On average, 16.4 million people moved from rural to urban areas annually from 1982 to 2000, and barring a significant slowing of economic activity, this trend will add up to 240 million
24 May–June 2009 chinabusinessreview.com
more to the urban population by 2020. (Even the current global recession and temporary return of many of China’s migrants to the countryside are unlikely to change this trend over the long term.) With the urban sector accounting for 80 percent of China’s gross domestic product (GDP) in 2007, and agriculture for just 11 percent, mass migration to urban areas is inevitable and will help fuel China’s economic growth. The transfer of workers from less productive jobs in rural areas to more productive jobs in cities adds value in urban areas, enhances productivity, and enlarges the purchasing power of the urban economy. According to research conducted by Barry Bosworth and Susan M. Collins,
and facilitate market and informamany of the smaller ones. many knowlQuick Glance has contributed to economic momentum. Before the economic crisis. lion). Traditionfrom the mid-nineteenth through the ally high urban household savings rates mid-twentieth century. resource use. opportunities to expand their businesses well into the future. chinabusinessreview. and recreexpand labor markets.500 per year. It will also continue to generate urban governance. close to 10 percent of highest productivity gains and has the most promising China’s GDP was invested in housing and an equal amount export prospects. Retail outtion exchanges among people and companies. though services are gradually As consumption’s share of China’s total GDP. induce technological spillovers. sectors dependent on exports. manufacturing is registering the housing. and the global m2 in 2006. which infrastructure. and more can afford cars of their own. Urban inhabitants have access to better public economic downturn is proving especially painful for subtransportation. ational amenities were few. urban living area from 6. As many of China’s industrial cities are into physical infrastructure annually. Moreover. the cross-fertilization from diverse industrial capabilities and share of the major urban centers will continue to grow. China’s urbanization has drawn momentends to generate the greatest productivity increases in tum from vast expenditures on urban infrastructure and manufacturing. The middle class. This outlay has helped discovering. edge-producing entities. and in encourage innovation. the potential benefits from economies of scale and agglomIn the early 1980s. Size Moreover. s Urbanization presents several than 1 million. tively—owe much of their growth impemetics. As was the demand for a wide range of business and pollution. Shanghai. business services were scarce. defined here as industrial capabilities. Compared to the early 1980s. Tianjin. s Most Chinese cities are still too from just 69 in the late 1940s to 651 by Urbanization will fuel continued growth small to realize the potential 2007. the Despite the speed at which China’s largest cities have quality of life as measured by per capita consumption has been expanding. and or cost savings that derive from the productive interaction Guangzhou and Shenzhen in Guangdong—have produced of a mix of activities in a concentrated area. tus to the industrial sector. In China. all but a handful are well short of realizing improved significantly. and consumer demand that with deep pools of expertise. such as Shanghai and Tianjin. Such divercent of GDP growth. Most of China’s nificant implications for consumer cross-fertilization from diverse cities are small (population under 1 mildemand. Even in megacities with populations of middle class will offer domestic and foreign producers more than 10 million. Chongqing. six of the largest sification will help them realize “urbanization economies. certain lines of manufacturing are accommodate urban population growth and enlarged the facing national and global market saturation. case in Europe and the United States personal services as incomes rise. the influx of young workers into the urban job and diversity will also stimulate innovation because internamarket has been a source of energy. advantageous for China at its per capita income and Improving quality of life development levels because technological assimilation In recent years. many are diversifying their between 1993 and 2004 and contributed roughly 40 perindustrial base by attracting services companies. affordable housing. respecsumer goods of all types. much has changed. China’s cities lacked a modern retail eration (the concentration of activities in a city). Some of the nearly 20 percent of China’s GDP. (For example.1 manufacturing is subject to cyclical swings. from cars to cosrestrictions. China’s manufacsuggest that there is more room for urban turing has driven growth and generated one-third or more consumption growth. In the larger cities. the range of skills and suppliers associated with them. or even the early 1990s. If their productivity largest cities are already beginning to reap the benefits of advantage and that of other large cities is sustained. services than 40 percent. according to the PRC National in the size of China’s middle class. China’s urban markets should contributed 50 percent of Shanghai’s GDP in 2000 and offer firms growth prospects that are drying up in the indus52 percent in 2007.7 m2 per person in 1978 to 27. and a more sophisticated. but 119 have populations of more those earning roughly $12. industry is a leading sector. affluent of its urban GDP. entretional experience suggests that large cities preneurship. and the opportus Mass urban migration will help nities to absorb and exchange ideas are fuel China’s long-term economic Dynamics of urban change generally more innovative. with sigbenefits of economies of scale and Bureau of Statistics.com May–June 2009 25 . China’s medium-sized numbered nearly 100 million people in challenges for policymakers and large cities—with populations of 1–4 2006 and is the principal market for conrelated to the easing of migration million and more than 4 million. The number of China’s cities climbed they embrace a culture of openness. particularly if growth.” cities—Beijing. In recent years.) This economic composition is trialized countries. however. and economic inequality. which is less expanding as a share of output. increases.F O C U S : E CO N O M Y China’s productivity averaged 4 percent growth annually As Chinese cities expand.
they require sustained attention supported by public investment. Cities are also taking to heart the importance of livability—for example. cities had annexed about 3 percent of China’s land. urbanization presents several serious challenges. Low-income housing remains scarce in China’s cities.0 m2 in 2007. instead. and the demands of temporary residents. (For example. exclusion. well over 100. monitoring. according to Gallup. mostly for the better. Municipal officials are regularly accused of corruption. much of it arable land. Chinese policymakers at the national and sub-national levels must address these to ensure that the full measure of gains that normally accompany larger cities can be realized. and cities have shed the gray. their own workforce requirements. 85 percent of urban residents owned their homes in 2005. much more exists than in the past. but cities are expanding fast and urban sprawl is becoming worrisome. while enhancing the quality of infrastructure and services. In recent years. Challenges for policymakers Great strides in urban development notwithstanding. It allocates funds over a three-year period to construct affordable housing for 7. Once implemented. None of the challenges can be addressed sufficiently by quick policy actions. The verdict on governance to date is mixed.) How cities balance the need to modify or abolish the hukou with their own capacity to absorb newcomers. an extensive survey conducted by the Horizon Research Consultancy Group from 2003 to 2005 shows that China’s urban population is reasonably satisfied with the quality of municipal government.000 hectares of China’s land. s Affordable housing A related priority will be the provision of housing for urban newcomers. this program will ease the bottleneck. s Migration restrictions One key reason why Chinese cities have partially avoided the problems of overcrowding and slums is China’s residential permit (hukou) system. It is typically difficult for rural resi- China’s Population by Residence. s Urban governance How responsive municipalities are to the needs of urban dwellers will profoundly affect the tenor of urban development and the quality of urban life. especially in larger cities. Shanghai lowered the hurdles to acquiring permanent residency in February 2009. green areas in China’s cities increased from 1. which assigns each person an agricultural or nonagricultural hukou at birth. promises to provide a much-needed boost to urban housing. and enforcement enables municipal authorities to restrict rural-to-urban migration by limiting the access of migrants to services available to registered urban residents and by regulating the length of time migrants can spend in the city. much of it prime agri- 26 May–June 2009 chinabusinessreview. Though the quality of housing varies and there is still not enough of it for migrants. but the housing requirements of migrants will need continued attention for the foreseeable future.5 million low-income families and the 2. A gradual easing of hukou restrictions is expected as cities adjust to migration pressures. managing migration will be a priority for urban administrators. It has also checked flows and permitted cities to roughly match migration with the increase in absorptive capacity. and there is an urgent need to increase supply. This system of registration.4 million who are currently living in the shantytowns that have appeared on the outskirts of major metropolitan centers. The cities have experienced economic growth. though the level of satisfaction with the central government is higher. 1980–2007 (million) 900 800 700 600 500 400 300 200 100 0 1980 1985 1990 1995 2000 2005 Source: PRC National Bureau of Statistics Urban Rural dents to change their hukou status to urban. announced in December 2008. dubious land deals that have displaced farmers as city limits expand.com . With millions of rural dwellers likely to seek permanent homes in urban centers. s Land use By 2007.lets and restaurants have proliferated. Inc.8 m2 per capita in 1990 to 9. The system has always been subject to leakage but has been enforced more rigorously in the larger cities. will be an important test. The government’s stimulus package. This is not high by comparison with countries that make up the Organization for Economic Cooperation and Development. The face of urban China has been transformed in little more than 15 years. Yet overall. Because of the spread of mortgage finance. as it is in all developing countries. New infrastructure and the quality of life for the average urban Chinese person are much superior to what they were only two decades ago. while controls on migration and heavy investment in urban infrastructure have managed to limit or avoid the emergence of slums. cheerless façade of two decades ago. squandering public funds on wasteful spending. especially in larger cities. and inattention to the needs of the urban poor and the unemployed. opportunities for recreation are plentiful. Cultural activity is varied and brisk and buildings of considerable aesthetic distinction dot China’s urban landscape.
it will further spur economic growth. adjacent to cities has been lost as suburbanization and ribbon development along main roads accelerates the spread of cities. Industrial competitiveness and dynamism will be a means of sustaining an egalitarian urban society as the number of relatively wellpaid services jobs increases. the construction of a world-class urban infrastructure. copyright 2008. and strictly enforcing zoning laws that manage the spread and character of cities will test the skills and authority of China’s urban policymakers. and the pressure on China’s limited water resources has worsened. and be resisted by those who are adversely affected. World Bank Institute. Inequality in China’s cities is also relatively low. maturing of business services.35 compared to around 0. Shahid Yusuf is economic advisor. The future shape and geography of urbanization needs to be reassessed to reverse environmental degradation and address climate change and resource constraints. Air pollution from China’s energy plants and auto emissions. (Gini coefficients measure degrees of inequality in income distribution on a scale of 0 to 1. and location of urbanization could be extremely costly. Environmental issues are beginning to impinge upon urbanization in other ways as well. As the population has grown. the creation of a modern services economy virtually from scratch. Because China is urbanizing rapidly and urban investments are long lived. and building of infrastructure. China’s cities will lead the economy forward as they have since the mid 1980s. s Inequality The incidence of urban poverty in China is low. technological advances. In addition to higher energy costs—urban residents used 3. providing adequate green spaces. and sustaining them will require expensive manmade defenses. This region contains 52 percent of China’s population but only 14 percent of its available freshwater. creating mixed-use neighborhoods. Sao Paulo.50 and higher for Hong Kong. As sea levels rise. Modifying floor-area ratios to facilitate the vertical development of cities. and there are areas where substantial improvement is badly needed. and sanitation infrastructure. livability. No country has seen its urban population grow by 460 million in such a short period. the disposal of solid waste harms the environment. require protracted effort. The country’s future hinges on how cities navigate difficult challenges and profit from the opportunities unfolding before the urban economy. and in many cities. with Gini coefficients for most large Chinese cities below 0. vulnerable. delaying decisions will only make matters worse. and unemployed. In addition. the World Bank. Climate change adds another wrinkle to the desirable geographical distribution of the urban population.6 times more energy than rural dwellers per capita in 2002. along with technological catch-up. Yet progress has been uneven. The International Bank for Reconstruction and Development/The World Bank. as advanced countries are discovering. with 0 being complete equality and 1 being complete inequality. Urbanization will continue for decades.F O C U S : E CO N O M Y cultural land. This article was adapted from Urban China: Trends and Challenges.com May–June 2009 27 . a statistic that is unlikely to have changed significantly— and increased expenditures on transportation. and Singapore. industry has spread. Although water transfers from southern rivers and measures to economize on the use of water can ease shortages. is pollution. s Environmental factors One rising concern. and no country can claim to have compressed so much urban development into three decades. aesthetics. which is growing because of more vehicular traffic and congestion. water. and expanding urban safety nets would help to support the aged. the growth of an automobilebased culture and vast dormitory suburbs would have severe consequences for health. An increase in services sector growth as a share of GDP could lead to greater income inequalities. Urbanization continues China’s urbanization has taken long strides in the past quarter century. This could change if slower growth reduces the number of well-paying jobs for the swelling urban population. by Shahid Yusuf. with permission. low-lying coastal cities such as Shanghai and Tianjin will be imperiled. The air in China’s cities is being fouled. focusing on energy and water. Maintaining higher growth rates would lessen the risk of urban poverty. Growth will focus on urban sectors through industrial deepening and diversification into new areas. with 2005 World Bank estimates of those living below the poverty line under 2 percent. delays in modifying policies and deferring difficult choices that affect the efficiency. chinabusinessreview. the long-term solution is for China to encourage urbanization south of the Yangzi. prospects remain bright in the long run in part because much of China is still developing and has a vast pool of under-employed workers in rural sectors.) This relatively low level of inequality exists because of legacy factors—wage and salary compression—and because cities that rely on industry generate many mid-level jobs. agricultural production has intensified. has been linked to premature deaths and increased urban morbidity. especially acute in urban centers where a concentration of industry or mining exists. as is happening in cities across the post-industrialized world. and the groundwater rapidly depleted. especially north of the Yangzi River. the water polluted. Though solutions will be painful and costly. China can take pride in its achievement in urban industrialization. Better planning and tightened land-use standards are urgently needed because the longterm costs of low-density urbanization are significant. Though China’s near-term economic growth is clouded by the global recession.
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