Historical Role of Population Urbanization in China

Author:CIRD  Time:2013-07-02   Hits:0

  Chi Fulin

   5 June 2013 

  Despite having observed many difficulties, the majority of Chinese economists share the same judgment that China’s economy is still in the rising period. An important reason for this judgment is that China has a good opportunity to unleash a huge potential for development by a new pattern of urbanization, which will play a historical role in China’s economic and social transformation and equitable and sustainable development. 

  1. Urbanizing rural population has the largest potential for China’s development. 

  Though China has reached the middle and later period of industrialization, the space for urbanization is still large, which contains an enormous potential for development. 

  (1) There is a large space for doubling the actual population urbanization rate. In 2012, China’s nominal urbanization (including both formal and informal urban population) reached 52.6% but the actual population urbanization rate (only counting formal urban population) was only 35%. This is far lower than the world average (52%). Therefore, through policy and institutional innovations, China’s population urbanization rate may well reach 50% by 2020 and 65% -70”% by 2030. 

  (2) The potential for population urbanization to expand domestic demand is enormous. This is because population urbanization will effectively release potential consumption demand and in turn create opportunities for investment. Roughly estimated, population urbanization in China will create a domestic demand as large as Rmb 100 trillion by 2020, which will be an important factor to support the economy to grow at the medium rate of 7-8% annually. 

  2. Population urbanization will promote equitable human development. 

  With profound changes in both internal and external conditions for development and equally profound changes in social demand, this new pattern of urbanization will be vastly different from that in the past. It will not build up new cities or continuously expand existing ones but will focus on improving their quality and capacity of absorbing rural population to promote human development. 

  (1) In advancing population urbanization, the priority will be given to citizenization of migrant rural workers. We define citizenization of migrant rural workers as integrating all migrant rural workers into the urban public service system, or more specifically to unswervingly support “individual migrant workers to integrate into enterpriese, their children to integrate into urban schools, their families to integrate into urban communities and their whole as a social group to integrate into the urban society”. Studies show that 53.2% of the existing migrant workers wish to take residence in big and medium-sized cities and 37.9% in small cities but only 8.9% wish to go back to re-settle down in rural areas. So citizenization of migrant workers is a strategic priority of China’s new pattern of urbanization. As a general trend looks, the existing migrant workers will be basically citizenized in the next 3-5 years, and within 8 years the long standing problem of migrant rural workers will be on the whole resolved. 

  (2) The basic route is to reform and unify the dual urban-rural household registration system. A dual urban-rural household registration system formulated towards the end of 1950s has been an impassable institutional divide between urban and rural residents. Because of the divide, rural residents cannot enjoy equal entitlements to either public resources or social welfare. Now China has started to reform its household registration system. The role of the household registration system in allocating social welfare may well be eliminated and some medium-sized and all small cities will replace the house registration system with a population registration system; within 3-5 years, all medium-sized and some big cities will do the same and within 5-8 years all cities will do the same to universally practice a unified urban-rural population registration system. 

  3. Population urbanization will help double the size of the middle income group 

  At present, the proportion of the middle income group accounts for only 23% of the total population. This is an important cause for the exacerbating polarization between the rich and the poor and an imbalanced social structure. 

  One important goal of advancing population urbanization and speeding up income distribution reforms in China is to create space and opportunities for low and lower middle incomers to flow upward in the society, thus expanding the size of the middle income group. It is estimated that the size of the middle income group may well be doubled by 2020. In the next 2-3 years, the middle income group will expand at the rate of 1.8-2% annually. Then the proportion of the middle income group in the total population will be raised from 23% to 29% and the total number of middle incomers will be 380 miilion in 2015. In the next 5 years, the total number of middle incomers will be as large as 460 million. In the next 8-10 years, the size of the middle income group may well expand at the rate of 2% annualy and around 2020 the proportion of middle incomers in the whole population will reach 40% and the total number of middle incomers will be 600 million. For this purpose, the Chinese government will soon launch a series of reforms such as rform of the rural land system, reform of the income distribution system, reform of the taxation and fiscal system as well as other structural reforms. 

  Transformation towards, and development of, population urbanization will be an important milestone in China’s march towards equitable and sustainable development. It will also be a milestone in the transformation of China from a large investment and production country into a large consumption country. Furthermore, it will be a milestone in China’s efforts not only to make contributions to the expansion of the world consumption market but also to make new contributions to the rebalancing of the world economy. 

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