China Considers Accelerating Urbanization for Long Term Domestic Demand

The National Development and Reform Commission (NDRC), China’s top economic planner, together with other departments, is studying new urbanization policies in hopes of helping rural migrant workers settle down in cities.

“There are 140 million migrant workers nationwide, and that figure can increase to 300 million, taking their families into account. If these people can afford to buy or rent an apartment to settle down in cities, the potential for expanding consumption is huge,” an official with the NDRC told the newspaper.

China’s 140 million farmer-turned migrant workers may benefit from the country’s plans for reforming the urban and rural binary system to speed up its urbanization drive, 21st Century Business Herald reported Wednesday.

“In the long run, some system and policy restrictions need to be lifted in order to urbanize migrant workers and expand consumption,” the official said.

China’s current policies make it very difficult for rural migrant workers to legally obtain permanent residence permit in cities.

Although since the early 1980s the surplus rural labor force started to shift to non-agricultural industries, the urbanization process lagged far behind.

According to the 2009 China Urban Development Report, from 2001 to 2007, Chinese cities expanded 70.1 percent in terms of area, but the permanent urban population only increased by 30 percent in the same period

“Economic stimulus plans must take a long-term perspective, and the urbanization of the rural population is one of the feasible choices,” said Wang Jian of China Society of Macroeconomics.

If the country continues to follow the current economic structure, it would be increasingly hard for macro-control measures to exert influence, and there is also the possibility of overcapacity, he said.

The average urbanization rate for a country with a per capita income of $3,000 should be around 55 percent, Wang said.

According to the report, by the end of 2008, China’s urban population topped 600 million, with an urbanization rate of 45.7 percent.

“If China’s urban population grows to two thirds of the total and the service sector expands to 50 percent of all industries, a long-term release of domestic demand can be created for the benefit of economic growth,” Wang said.

On June 16 this year, Shanghai launched a new residence registration system, relaxing restrictions on non-natives who want to settle down in the metropolis.

So it appears the official 600 million urbanization figure does not include 140 million migrant workers who are in the cities.

China’s urbanization numbers are undercounted.