In 2013, Premier Li Keqiang proposed the idea of mass urbanization—a process involving moving 250 million people move from rural areas to cities over a little more than a decade—as a means of ensuring robust future economic growth. Ian Johnson wrote in the New York Times, “China is pushing ahead with a sweeping plan to move 250 million rural residents into newly constructed towns and cities over the next dozen years — a transformative event that could set off a new wave of growth or saddle the country with problems for generations to come. The government, often by fiat, is replacing small rural homes with high-rises, paving over vast swaths of farmland and drastically altering the lives of rural dwellers. So large is the scale that the number of brand-new Chinese city dwellers will approach the total urban population of the United States — in a country already bursting with megacities. [Source: Ian Johnson, New York Times, June 15, 2013 \~]

“This will decisively change the character of China, where the Communist Party insisted for decades that most peasants, even those working in cities, remain tied to their tiny plots of land to ensure political and economic stability. Now, the party has shifted priorities, mainly to find a new source of growth for a slowing economy that depends increasingly on a consuming class of city dwellers. The shift is occurring so quickly, and the potential costs are so high, that some fear rural China is once again the site of radical social engineering. Over the past decades, the Communist Party has flip-flopped on peasants’ rights to use land: giving small plots to farm during 1950s land reform, collectivizing a few years later, restoring rights at the start of the reform era and now trying to obliterate small landholders. \~\

“China has long been home to both some of the world’s tiniest villages and its most congested, polluted examples of urban sprawl. The ultimate goal of the government’s modernization plan is to fully integrate 70 percent of the country’s population, or roughly 900 million people, into city living by 2025. Currently, only half that number are. Aggressive state spending is planned on new roads, hospitals, schools, community centers — which could cost upward of $600 billion a year, according to economists’ estimates. In addition, vast sums will be needed to pay for the education, health care and pensions of the ex-farmers.” \~\

The urbanization plan must “guarantee farmers’ property rights and interests.” Land would remain owned by the state, though, so farmers would not have ownership rights. The plan aims to give farmers “a permanent stream of income from the land they lost. Besides a flat payout when they moved, they would receive a form of shares in their former land that would pay the equivalent of dividends over a period of decades to make sure they did not end up indigent. “Urbanization is in China’s future, but China’s rural population lags behind in enjoying the benefits of economic development,” said Li Shuguang, professor at the China University of Political Science and Law. “The rural population deserves the same benefits and rights city folks enjoy.” \~\

Websites and Sources: Wikipedia article Wikipedia ; Hutongs in Beijing A good book on hutong life is “Last Days of Old Beijing: Life on the Vanished Backstreets of a City Transformed” by Micheal Meyer (Walker and Co., 2008). Web Sites on Hutongs Wikipedia ;China Highlights China Highlights ; Travel China Guide Travel China Guide Chinatown ; China

Aims of Moving 250 Million Chinese to the Cities

China’s new prime minister, Li Keqiang indicated at his inaugural news conference in March 2013 that urbanization was one of his top priorities. He said. "Urbanization will not only drive tremendous consumption and investment demand, and create employment opportunities, but directly affect the well-being of the people." In November 2012, Li asked the World Bank to help conduct a study on urbanization to deal with worker migration. In 1982 the urban population was only 20.6 percent, Today it is 53.7 percent, resulting in enormous economic growth, with an average annual 10 percent increase in gross domestic product. In 2013, it seemed that urbanization was going to be launched with much fanfare as a national policy, but after much criticism of the policy, the Chinese government appeared to back off, but still many of its initiative are going forward quietly.[Source: Wall Street Journal, Los Angeles Times, New York Times]

Ian Johnson wrote in the New York Times: “The primary motivation for the urbanization push is to change China’s economic structure, with growth based on domestic demand for products instead of relying so much on export. In theory, new urbanites mean vast new opportunities for construction companies, public transportation, utilities and appliance makers, and a break from the cycle of farmers consuming only what they produce. “If half of China’s population starts consuming, growth is inevitable,” said Li Xiangyang, vice director of the Institute of World Economics and Politics, part of a government research institute. “Right now they are living in rural areas where they do not consume.”

Daniel K. Gardner wrote in the Los Angeles Times, “Premier Li Keqiang wants to wean the Chinese economy off its dependence on export trade in cheap electronics, clothes, toys and tchotchkes of all variety. Let the Chinese people consume instead, he says, and let them consume products and services of high value. But how do you take a developing country like China, where saving has traditionally been favored over spending, and transform it into a nation of mass consumers? Simple, Li explains: You urbanize it, because city dwellers earn much more and spend much more. China's urban dwellers are 53.7 percent of the population (by contrast, developed countries are 80 percent urban on average). Li and the State Council, China's Cabinet, are convinced that increasing that figure to 60 percent by 2020 — taking 100 million rural Chinese and plopping them down in cities — can generate a flurry of domestic spending. If all goes well, Li's hope is to move an additional 150 million by 2025. That would be resettling 250 million people — 80 percent of the U.S. population — in 11 years into cities. [Source: Daniel K. Gardner, Los Angeles Times, April 21, 2014. Gardner is a professor of history and East Asian studies at Smith College]

Dinny McMahon wrote in the Wall Street Journal, “In theory, urbanization stimulates growth because city dwellers typically earn more than their rural counterparts, allowing them to spend more on consumer goods and services. The Chinese export sector drove earlier waves of urbanization but is thought unlikely to do so again, what with demand still weak in developed economies and rising costs making Chinese goods less competitive globally. Massive overcapacity in many industries, including steel, solar and shipbuilding, will further constrain job creation. In recent years, cities have filled the gap with construction jobs created by a nationwide investment boom. While that has kept China's economy buoyant, it also has thrown up empty suburbs and ghost cities like Tieling New City across the country. The investment boom has threatened to fuel inflation and bog down the financial sector with bad loans, particularly if people don't move in and bring the promised economic dividend. [Source: Dinny McMahon, Wall Street Journal, August 9, 2013 ~]

Tom Holland wrote in the South China Morning Post, “At first glance Li's policy appears to make good sense, considering that China's explosive economic expansion of recent decades has accompanied the rapid growth of the country's urban population. City dwellers are more productive than their cousins in the country, so they earn higher incomes. What's more, the holders of urban residence permits, or hukou, enjoy better access to housing, health care, unemployment insurance and pensions, while their children get a better education. As a result, they save less of their income as a precaution against hard times ahead, and spend more. So, reason China's leaders, if we move more people into the cities and give them urban hukou, they will both earn more and spend more of what they earn, powering the next phase of consumption-driven economic growth. [Source: Tom Holland, South China Morning Post, August 14, 2013 ]

Challenges and Problems with Urbanizing China’s Rural Population

Li Keqiang has cautioned that the urbanization drive would require a series of accompanying legal changes “to overcome various problems in the course of urbanization.” Problems with the urbanization scheme, Ian Johnson wrote in the New York Times, “could include chronic urban unemployment if jobs are not available, and more protests from skeptical farmers unwilling to move. Instead of creating wealth, urbanization could result in a permanent underclass in big Chinese cities and the destruction of a rural culture and religion... While the economic fortunes of many have improved in the mass move to cities, unemployment and other social woes have also followed the enormous dislocation. Some young people feel lucky to have jobs that pay survival wages of about $150 a month; others wile away their days in pool halls and video-game arcades. [Source: Ian Johnson, New York Times, June 15, 2013 \~]

“Top-down efforts to quickly transform entire societies have often come to grief, and urbanization has already proven one of the most wrenching changes in China’s 35 years of economic transition. Land disputes account for thousands of protests each year, including dozens of cases in recent years in which people have set themselves aflame rather than relocate. \~\

“Skeptics say the government’s headlong rush to urbanize is driven by a vision of modernity that has failed elsewhere. In Brazil and Mexico, urbanization was also seen as a way to bolster economic growth. But among the results were the expansion of slums and of a stubborn unemployed underclass, according to experts. “There’s this feeling that we have to modernize, we have to urbanize and this is our national-development strategy,” said Gao Yu, China country director for the Landesa Rural Development Institute, based in Seattle. Referring to the disastrous Maoist campaign to industrialize overnight, he added, “It’s almost like another Great Leap Forward.” The costs of this top-down approach can be steep. \~\

Dinny McMahon wrote in the Wall Street Journal, “China has a record of building first and creating demand later, notably in Shanghai, where a decade ago the towering new Pudong business district initially failed to attract tenants but later became a symbol of China's success. Many smaller cities lack the pulling power of Shanghai. "With more and better job opportunities in higher-tier cities, many lower-tier cities have actually been experiencing a net outflow of population, while land sales [to home builders] there increased rapidly, exacerbating the housing oversupply," wrote Credit Suisse property analyst Du Jinsong in a recent note. According to population data collected by Mr. Du on 287 Chinese cities, about two-thirds, mostly smaller urban centers, had fewer residents than people who were registered to live there, suggesting people have been leaving their home cities. [Source: Dinny McMahon, Wall Street Journal, August 9, 2013 ~]

The government had been pledging a comprehensive urbanization plan for several years but various concerns have delayed it. Johnson wrote: “Some of them include the challenge of financing the effort, of coordinating among the various ministries and of balancing the rights of farmers, whose land has increasingly been taken forcibly for urban projects. These worries delayed a high-level conference to formalize the plan. Central leaders are said to be concerned that spending will lead to inflation and bad debt. Such concerns may have been behind the call in a recent government report for farmers’ property rights to be protected.” \~\

Impact China’s Urbanization Drive on Rural People

Ian Johnson wrote in the New York Times, “In one survey by Landesa in 2011, 43 percent of Chinese villagers said government officials had taken or tried to take their land. That is up from 29 percent in a 2008 survey. “In a lot of cases in China, urbanization is the process of local government driving farmers into buildings while grabbing their land,” said Li Dun, a professor of public policy at Tsinghua University in Beijing. [Source: Ian Johnson, New York Times, June 15, 2013 \~]

“Farmers are often unwilling to leave the land because of the lack of job opportunities in the new towns. Working in a factory is sometimes an option, but most jobs are far from the newly built towns. And even if farmers do get jobs in factories, most lose them when they hit age 45 or 50, since employers generally want younger, nimbler workers. “For old people like us, there’s nothing to do anymore,” said He Shifang, 45, a farmer from the city of Ankang in Shaanxi Province who was relocated from her family’s farm in the mountains. “Up in the mountains we worked all the time. We had pigs and chickens. Here we just sit around and people play mah-jongg.”\~\

“Some farmers who have given up their land say that when they come back home for good around this age, they have no farm to tend and thus no income. Most are still excluded from national pension plans, putting pressure on relatives to provide. “It’s a new world for us in the city,” said Tian Wei, 43, a former wheat farmer in the northern province of Hebei, who now works as a night watchman at a factory. “All my life I’ve worked with my hands in the fields; do I have the educational level to keep up with the city people?” \~\

Experiments with the Urbanization of Rural Chinese

Ian Johnson wrote in the New York Times, “The idea of giving farmers a flat payout and a form of shares in their former land “has been tried experimentally, with mixed results. Outside the city of Chengdu, some farmers said they received nothing when their land was taken to build a road, leading to daily confrontations with construction crews and the police since the beginning of this year. But south of Chengdu in Shuangliu County, farmers who gave up their land for an experimental strawberry farm run by a county-owned company said they receive an annual payment equivalent to the price of 2,000 pounds of grain plus the chance to earn about $8 a day working on the new plantation. “I think it’s O.K., this deal,” said Huang Zifeng, 62, a farmer in the village of Paomageng who gave up his land to work on the plantation. “It’s more stable than farming your own land.” [Source: Ian Johnson, New York Times, June 15, 2013 \~]

“Financing the investment needed to start such projects is a central sticking point. Chinese economists say that the cost does not have to be completely borne by the government — because once farmers start working in city jobs, they will start paying taxes and contributing to social welfare programs. “Urbanization can launch a process of value creation,” said Xiang Songzuo, chief economist with the Agricultural Bank of China and a deputy director of the International Monetary Institute at Renmin University. “It should start a huge flow of revenues.”\~\

“Even if this is true, the government will still need significant resources to get the programs started. Currently, local governments have limited revenues and most rely on selling land to pay for expenses — an unsustainable practice in the long run. Banks are also increasingly unwilling to lend money to big infrastructure projects, Mr. Xiang said, because many banks are now listed companies and have to satisfy investors’ requirements. “Local governments are already struggling to provide benefits to local people, so why would they want to extend this to migrant workers?” said Tom Miller, a Beijing-based author of a new book on urbanization in China, “China’s Urban Billion .” “It is essential for the central government to step in and provide funding for this.”

See Ghost Towns, Ordos, Inner Mongolia

Burden of Urbanization on Local Chinese Governments

Ian Johnson wrote in the New York Times, “In theory, local governments could be allowed to issue bonds, but with no reliable system of rating or selling bonds, this is unlikely in the near term. Some localities, however, are already experimenting with programs to pay for at least the infrastructure by involving private investors or large state-owned enterprises that provide seed financing. [Source: Ian Johnson, New York Times, June 15, 2013 \~]

“Most of the costs are borne by local governments. But they rely mostly on central government transfer payments or land sales, and without their own revenue streams they are unwilling to allow newly arrived rural residents to attend local schools or benefit from health care programs. This is reflected in the fact that China officially has a 53 percent rate of urbanization, but only about 35 percent of the population is in possession of an urban residency permit, or hukou. This is the document that permits a person to register in local schools or qualify for local medical programs. Granting full urban benefits to 70 percent of the population by 2025 would mean doubling the rate of those in urban welfare programs. \~\

Clear policies of how the mass urbanization will take place are still unclear. Daniel K. Gardner wrote in the Los Angeles Times, “Beijing should institute a local property tax. Today, local governments have no revenue base of their own. That encourages local officials seeking funds to resort to the seizure of land within their jurisdictions. Officials "compensate" the landowners at perhaps 20 percent of the land's value and then sell it to developers at a huge profit. One reason for today's urban sprawl is the unsystematic and lawless appropriation of land, often on the outskirts of cities and towns. A local property tax would yield more stable and steady revenue. This would not only discourage land seizures, which invite social protests and riots, but also enable local authorities to be more deliberative and environmentally attentive about the needs of growing cities. [Source: Daniel K. Gardner, Los Angeles Times, April 21, 2014|]

Addressing the Costs of Mass Urbanization on China’s Environment

Daniel K. Gardner wrote in the Los Angeles Times, “ I am no economist, so I am willing to accept Li's premises that more city folk means more consumption, and that more domestic consumption, especially of high-value goods, will boost the economy. But that shift has been costly to China's environmental well-being. Much of the air, water and soil in the country is now toxic. We have all seen images of the thick soupy air that envelops cities such as Beijing, Shanghai and Harbin, and renders daytime there into night. We have read about the acidic air that rains down and contaminates the country's waterways and soil. [Source: Daniel K. Gardner, Los Angeles Times, April 21, 2014. Gardner is a professor of history and East Asian studies at Smith College |^|]

“The migration plan is sure to result in more construction, an expansion of urban infrastructure and an increased demand for housing, automobiles, large appliances and air-conditioning and heating systems. All of this is good news for the domestic consumption side of the equation. But it bodes ill for an environment that already bears the scars of three decades of urbanization and higher consumption.|^|

“Many measures to ensure protection of the environment come to mind for this urban migration to succeed, but a few are particularly important: Authorities should plan for denser cities, not more sprawling cities. In recent years, increased urbanization has translated into urban sprawl: the creation of suburbs far from city centers. These suburbs are residential, with few services. Residents commute to the city centers for most of their needs. This has meant more cars, more roads and highways, and more congestion. Densification allows for more efficient energy and water use, improved waste and wastewater management, and reduced dependence on private transportation. Critically, densification also reduces encroachment on China's increasingly scarce arable land. |^|

“The price tag for moving 100 million to 250 million people out of the countryside should include upfront costs for the design and construction of smarter cities. Efficient and green public transit, gray-water recycling, non-fossil fuel energy production, sky gardens, rainwater collection systems, public utilities consolidation and the like would go a long way toward making the booming cities clean and livable. Beijing must change its criteria for assessing local officials. Promotion or demotion is determined today by the success those officials have had in developing their local economy and contributing to the country's GDP. But if China's air, water and soil are going to survive the onslaught of the new urbanization, the central government must unambiguously signal that environmental protection weighs at least as heavily as economic growth in performance assessment. Only then will local officials shift their priorities away from a policy of economic growth at all cost. |^|

“And perhaps most urgent, Beijing must undertake structural reform. Today, there is no central supervisory body or mechanism with real authority to monitor and enforce compliance with environmental policies and regulation. Responsibility for monitoring is shared among at least six State Council ministries and agencies, with often competing agenda and goals. Environmental authority is too disparate and weak. The Ministry of Environmental Protection has limited financial and human resources (e.g., 300 employees versus 17,000 in the U.S. Environmental Protection Agency). It is time for Beijing to give it the authority and resources to become a genuinely effective national environmental protection agency, one capable of enforcing compliance among local officials. |^|

China’s Urbanization Push Runs into Trouble

Before it was supposed to be officially launched in November 2013, China's mass urbanization drive has run into obstacles and issues such as what to do if new urban residents are left deprived of their former ability to make a living from the land. Tom Holland wrote in the South China Morning Post, “Li Keqiang's flagship economic policy is running into problems even before its official launch.” The plan is “already provoking opposition from local government officials and drawing criticism from economic analysts. That's awkward for Li, who on his appointment in March made shifting more of China's rural population into cities the centrepiece of his economic rebalancing programme, declaring "urbanisation will usher in a huge amount of consumption". [Source: Tom Holland, South China Morning Post, August 14, 2013 ]

“Beijing's plans have run into trouble on two fronts. First, local government officials and businesspeople have baulked at the cost involved in granting urban hukou to hundreds of millions of rural residents, asking where the money will come from. If Beijing is to hit its target of 70 percent urbanisation by 2030, the authorities would have to grant urban registration not only to some 230 million farmers, but also to around 250 million holders of rural hukou who currently live as second-class citizens as migrants in the cities.

“With the cost of granting an urban residence permit with full benefits reckoned at about 100,000 yuan (HK$127,000), the total cost of the programme would come to roughly 48 trillion yuan. Spread evenly between now and 2030, that would amount to more than 5 percent of current gross domestic product each year. Inevitably, businesses would have to shoulder much of the cost in the form of higher social insurance contributions on behalf of their workers. One 2010 study estimated these would push company payroll costs up by a third.

“As a result, it's little wonder that local government officials and businesspeople are leery of Li's urbanisation plans. But they are not the only ones. Economists are also questioning whether they make good sense. The doubters make a point that should have been obvious to China's leaders, but that appears to have passed them by: it is not rapid urbanisation that has powered the country's economic growth in recent years. Rather, it is economic growth that has driven rapid urbanisation. More specifically, China's growth has been propelled by industrialisation.

“Urbanisation is merely a by-product of that industrialisation, as workers have moved to industrial centres where they can be more productive. Forcibly moving people from rural areas to urban ones will do nothing to power growth unless they have productive jobs to go to in their new homes. It could even backfire spectacularly, by depriving the new urban residents their former ability to make a living from the land. As a result, instead of concentrating on raising the urban population, Li and the rest of China's new leadership would be better off focusing on creating new employment opportunities, both in the cities and in the countryside.”

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Chinese government, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

Last updated July 2015

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