Date
28 May 2017
Urbanization has become stagnant, with a growing number of urban residents returning to rural areas, attracted by potential profits and friendly governmment policy. Photos: Reuters, Xinhua
Urbanization has become stagnant, with a growing number of urban residents returning to rural areas, attracted by potential profits and friendly governmment policy. Photos: Reuters, Xinhua

How China’s ambitious urbanization plan is unraveling

Some say China will get old before it gets rich and that counter-urbanization will occur before urbanization.

At present, China’s urbanization rate is about 55 percent, below the 70 percent average in developed economies and the 60 percent clip in developing countries.

In recent years, some urban residents have returned to rural areas, particularly in affluent eastern China.

Beijing has an urbanization target of 60 percent by 2020, which means it expects another 100 million rural residents to move to cities.

Counter-urbanization is detrimental to social and economic development but what are the underlying reasons?

Since China’s opening up, urbanization has been accelerating.

The rate was only 17.9 percent in 1978 but by 2011, it topped 50 percent for the first time.

The population has experienced enormous change but hukou, the much criticised national household registration system, has resulted in stagnant urbanization. 

Things have changed and various benefits linked to non-agricultural residence have diminished in recent years.

In eastern China, some families opted to change their hukou from non-agricultural residence to agricultural residence.

The phenomenon has been partially caused by increasing benefits created by the agricultural residence scheme.

Also, some have been forced to leave cities by the high cost of living.

China’s urbanization ratio for permanent residents hit 54.77 percent in 2014, well below the 80 percent average in developed countries and the 60 percent threshold in developing economies.

China is in the middle of fast urbanization in the range of 30-70 percent.

Nevertheless, an increasing number of college graduates from rural families in Zhejiang, Jiangsu and Jiangxi provinces register again as agricultural residents.

Land in rural areas generates more profit and enjoys government support.

As a result, migrant workers and even those already with non-agricultural residence favor agricultural residence in order to share the benefits of land appreciation.

For instance, one would be entitled to contract rural farmland or forestry with agricultural residence.

And they would make money if the reform of rural residential land makes progress and the land is allowed to be traded in the market.

Land reform is should be taken into account when discussing counter-urbanization.

The trend has gone beyond changing household registrations.

Some urban residents have moved to small towns and buy homes there without agricultural residence.

Some say counter-urbanization would have a negative impact on China because the population dividend is fading.

Yet, urbanization is a necessary stage in a developing society. But if more people move to rural areas, they will help ease pressure on cities. 

This article appeared in the Hong Kong Economic Journal on May 9.

Translation by Julie Zhu

[Chinese version 中文版]

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JZ/DY/RA

Senior investment banker

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