A key reform the central government seeks to push forward with more vigor, and is likely to gain impetus during the upcoming plenum of the Communist Party of China leadership, is urbanization — a massive, ambitious endeavor that will definitely change the face of the nation.
From the viewpoint of the new administration under President Xi Jinping and Premier Li Keqiang, the program could very well be the lynchpin of the country’s economic restructuring efforts.
More than the movement of hundreds of millions of people from the countryside to the cities or the transformation of crumbling villages into bustling urban centers, which by themselves are herculean tasks, urbanization involves the overhaul of old economic, financial, demographic and administrative systems that are no longer responsive to China’s new challenges.
It lies at the heart of the government’s aim to change the country’s economic structure from an export-oriented model to one driven by domestic consumption. It holds the key to achieving the essence of economic progress, which is to uplift the lives of the people and reduce the wide disparity of incomes across the nation.
The Xi-Li administration has pledged to boost the nation’s urbanization rate to 60 percent in 2020 from 52.6 percent in 2012. That’s in line with the 70 to 80 percent urbanization level in developed countries. The country will also double per capita income by 2020 from the 2010 level, aiming to fulfill its vision of a more harmonized society.
Migration to cities
A top political scientist said the urbanization strategy is very likely to involve mobilizing people from the countryside to work and live in the cities, and developing those cities, instead of reconstructing villages into urban areas.
Under the current “hukou” or household registration system, however, more than 160 million migrant workers don’t hold urban residency, and therefore cannot enjoy the same benefits, including education and healthcare, accorded those officially registered as city residents.
To clear this huge hurdle, leaders look set to initiate the much-anticipated reform of the hukou system at the third plenary session of the Communist Party of China (CPC)’s 18th Central Committee to be held in Beijing from Nov. 9 to 12.
Urbanization will head in the direction of encouraging the migration of rural population to growing urban centers instead of turning villages into towns and cities, Cai Jiming, professor at the School of Social Sciences and director of the Centre for Political Economy at Tsinghua University, told the Hong Kong Economic Journal’s EJ Insight in a phone interview.
“It will cost much more and take a long time to urbanize rural areas by building the infrastructure and public utilities there. Second or third-class industries also have to be developed in these places, but they will cause pollution problems as they will contaminate air and water and damage resources,” Cai said.
“Instead of transforming villages, it will be more effective to turn small cities into big cities, big cities into metropolis [with more than 1 million population], and metropolis into megalopolis [with more than 10 million population],” he said.
The number of cities in China has more than tripled to 660 from only 216 in the 1970s when China opened up its economy, while the number of towns has almost reached 20,000.
Although the number and size of cities and towns have surged, Cai said the urban population is not increasing at the same pace.
The three megalopolises of Beijing, Shanghai and Guangzhou can accommodate more people as their population densities are not very high by international standards. Shanghai’s population density, for example, is less than half the level in Taipei or Tokyo, he said.
With more rural residents migrating to cities in the coming years, Cai said the government cannot choose to ignore their grievances pertaining to the hukou system as it will fuel social unrest.
“The voices of the migrating population are becoming increasingly strong and authorities will have to resolve the ‘benefits’ problem behind the hukou issue,” he said. The government will probably grant hukou to 100 million rural residents by 2020, he said.
Premier Li had indicated that the government wanted urbanization efforts to be people-centered, rather than just having more people flowing into cities without providing them with a good quality of life.
In fact, the hukou reform will help narrow income disparity in China, which remains at an alarmingly high level. The target is to bring down the nation’s Gini-coefficient, a measure of income inequality, to below the critical 0.4 level, often cited as a threshold for social unrest.
China’s Gini-coefficient stood at 0.474 in 2012, down from a peak of 0.491 in 2008. The Gini-coefficient measures the wealth gap on a scale of 0 to 1; the higher the figure, the larger the income inequality.
“Reforming the hukou system is a major means of reducing the wealth gap. The mainland authorities will go in this direction,” said Liao Qun, chief economist and general manager of research at China CITIC Bank International Ltd.
“Granting them the hukou can enhance their consumption power, which will in turn drive domestic demand,” he added.
The government vowed to boost the total urban population to 60 percent, or 840 million, by 2020, and to about 70 percent by 2030, a level found in developed countries. The year 2011 serves as landmark when the urban population surpassed the number of rural residents for the first time at 51.3 percent.
However, Yang Weimin, deputy director of the Office of the Central Leading Group on Financial and Economic Affairs, has argued that the urbanization rate only stood at 36 percent if those residing in cities but do not hold the hukou as city residents are excluded.
Cai estimated the urbanization rate to be 43 percent. He argued that rural people living in cities who don’t hold urban residency can enjoy the conveniences of urban living and avail themselves of public services such as transportation, although they are not entitled to a wide array of social benefits such as housing, education and medical care.
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