Urbanisation and China’s future

By Stephen Angus Peter Junor

Urbanisation in China

Since economic reforms implemented by Deng Xiaoping in the late 1970’s, urbanisation in China has been relentless and it shows no signs of slowing down. Poor economic policy along with labour and market restrictions had previously suppressed urban growth, but since then China has developed into a major economic and political power.

The city remains the hallmark of urban growth and the development of new cities has been rapid.  In 1978 there were 191 cities in China, official reports show this had increased to 658 in 2012. In addition, there are 80 cities that no longer ‘exist’ in name, due to merging with other cities. 2011 saw the urban population outnumber the rural population for the first time, representing a symbolic demographic shift.

Despite massive economic and urban growth, the distribution of wealth has been uneven, particularly in rural areas. The World Bank estimates that almost 12 per cent of Chinese live on less than $1.25 a day, while per capita GDP (Gross Domestic Product) is just over $6000, lower than Iraq and South Africa. Although China’s overall GDP is the second highest in the world behind the US, relative GDP and income statistics highlight the problems of supporting a population of more than 1.3 billion.

Government statistics show that the ratio of urban to rural income is over 3:1, perhaps indicating why the new Premier Li Keqiang has suggested further urbanisation is the way to eradicate poverty. He recently declared that ‘China will wage a war against poverty,’ this follows a conference from December last year where it was decided that urbanisation is ‘the road China must take in its modernisation drive.’

Rapid urbanisation has already helped lift many Chinese out of poverty, and it is hoped that further urbanisation will increase living standards as well as increase domestic consumption, boosting the economy. Reforming the hukou residency system is also on the agenda for the government, to allow rural migrant workers living in cities access to health care and education.

Not only does the government have to deal with urban/rural inequalities, but the disparity of wealth within urban centres also needs to be addressed. Neglected areas can often be found adjacent to massive economic projects, representing an uneasy juxtaposition for the government.

Problems have also been raised where new cities are being developed. Often with little infrastructure, large housing projects are being built on land which was previously used for agriculture. There have been complaints about poor building work, and with no established society or jobs in these cities, the success of many of these projects has been questioned. Food security could also be a problem in the future with a decreasing rural population supplying a growing urban one.

The focus on infrastructure and domestic consumption comes as the government attempt to rebalance the economy, which has traditionally focused on low wages, heavy industry and global exports. By developing services and domestic growth, China will be less vulnerable to outside influences, underlined by the recent recession in Europe and the US, China’s two largest trading partners.

Urbanisation has underpinned the Chinese economy in the last 30+ years and will continue to do so. However, urbanisation comes with many problems. Rapid urbanisation has led to increased energy use; According to the IEA, China consumes almost 20 per cent of the world’s energy, accounting for around a quarter of global CO2 emissions. The consequences of this are all too clear, as regular reports of heavy smog in various Chinese cities come to light.

Urbanisation offers benefits such as better access to education, global connectivity while agglomeration offers a chance for businesses to develop, most notably in green energy. An increase in the urban population has also coincided with more people being lifted out of poverty, but inequalities still remain. The Chinese government is aware that political stability is inherently linked to social stability which in turn depends primarily on the individual benefits of economic growth. Urbanisation may go some way to solving China’s poverty problem, but further issues could arise, such as debt levels, further environmental degradation or a housing bubble.

The government faces a complex balancing act between economic growth, wealth distribution, social stability and environmental sustainability. The future of China as a global power could hinge on whether the government can balance all these issues and as the global economy becomes more and more interconnected, the effects of any instability could have far reaching consequences.

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