China’s Urbanization

China’s Urbanization

With a population of 1.3 billion, China faces unprecedented urbanization challenges. The Chinese government, at various levels, strives to accelerate the urbanization process through city expansion and lowering the threshold for farmers to move into cities. Although urbanization is an inevitable consequence of modern economic development, this process has shown signs of “overheating.” Hidden drawbacks, such as intensive pressures on employment and social security, and bubbles in the real estate industry, suggest that the government needs to put the brakes on this trend by carefully scrutinizing and taking steps to control the process.

Urbanization is a historic transformation process by which the means of production and people’s lifestyles evolve from the country to the city. This process is often characterized as farmers’ migration to cities and the continuing development of cities, however, is in fact far more complex. Urbanization is not simply a process in which farmers move to cities. Rather, it is a complex process that not only requires co-development with industries and the entire economic system but also needs to be compatible with the conditions of employment, security, education, public transportation, medical insurance, environmental protection and infrastructure.

Overview of Chinese Urbanization

Of the 1.3 billion people in China, 900 million live in rural areas. The current urbanization rate (percent of the population that lives in urban areas) is 38 percent, well below that of other developed countries and regions (see the table below). However, the rate of urbanization has embarked on a fast track. As shown in the table, average urbanization during the 24 years since China’s adoption of reforms and open-door policies in 1978 has more than doubled compared with the previous 30 years.

Percent of Population That is Urbanized

Region 1950 1970 1978 1990 2000 2002

World 30 37 44 47

African 15 23 32 37

Asian 17 23 32 38

Europe 52 65 72 73

Latin American and

The Caribbean 42 58 71 75

Oceania 62 71 71 74

China 13 17 18 27 35 37

United States 64 74 75 77

Currently, Chinese cities are growing at an unprecedented rate. It is expected that the urbanization rate will increase by nearly 1.5 percent annually. Experts hope that the urbanization level will reach 50 percent by 2010.

Hidden problems of Chinese urbanization

1. Narrow employment opportunities.

It is well known that there is an interplay between urbanization and industrialization; the development of urbanization and industrialization are inseparable, and the urbanization levels of industrialized counties are usually higher. On the one hand, industrialization pushes the development of urbanization. On the other hand, urbanization also boosts the development of industrialization. In 2003, the relative proportion of China’s production outputs from agriculture, industry and services was 14.7 to 53 to 32.3 percent respectively, which indicates that China has not completed the transformation from pre-industrialization to industrialization. During this period, therefore, it is inappropriate to over-emphasize urbanization. In addition, in 2002, the number of employees working in state-owned enterprises fell from the previous record high of 75 million to 40 million, with nearly 20 million people laid-off. As of June 2004, 8.37 million people in China’s cities and towns were unemployed. Some of these unemployed workers, both those who were laid off from the state-owned enterprises and the unemployed in the cities and towns, now seek jobs in the 3rd industry, in direct competition with the newly arrived farmers who have traditionally pursued these positions. This process may make it more difficult for farmers to find jobs in China’s cities. A recent White Book on Social Protection and Security by the Chinese government indicates that the tension between the surplus of Chinese labor and the structural employment problems will continue for a while. China’s entrance into WTO has had a new round of impacts on traditional Chinese industries, and as a result, many workers will lose their jobs. This shock will last for 5-10 years. All of these factors impede the employment of farmers in cities.

2. Blind expansion of cities.

During