China’s Rapid Urbanization: Benefits, Challenges & Strategies

June 19, 2008

  • Urbanization in China on an unprecedented scale
  • Strategies for managing China’s cities
  • The demands and strains of bigger cities

Urbanization in China on an unprecedented scale

June 19, 2008 - While China’s urbanization began almost 4,000 years ago—in fact, Neolithic villages had begun to appear in river valleys a thousand years before that—the country is now urbanizing on an unprecedented scale.

By the end of the 1940s, China had 69 cities. In 2007, it had 670 cities, almost ten times as many. Increasing urbanization is the result of migration from villages, as well as natural increase, leading to the expansion of small towns which have been reclassified as cities.

Of these cities, 89 have a population of over a million, dwarfing the numbers in other large countries such as the United States with 37 of this size and India with 32.

In a rapidly urbanizing world, China is expected to play an important role, chiefly because of its size and the speed at which it is changing. In 1980, China’s urban population was 191 million. By 2007, it was 594 million, excluding migrants.

About half of China’s population now lives in cities. As policymakers meet at the World Cities Summit in June, China’s phenomenal urbanization will be a likely focus, both in terms of coping strategies and the benefits and challenges the country has experienced.

“As more people move to urban areas, not just in China, but elsewhere in Asia and Africa, the focus of development activities must be twofold,” said Justin Lin, World Bank Chief Economist, “Rural development which remains critical in agriculture-based economies; and rapid urban industrial development which is and will be the principal source of growth for the national economy.”

Strategies that have helped manage Chinese urbanization

According to Shahid Yusuf, a Senior Adviser in the World Bank’s Development Research Group, and co-editor (with Tony Saich of Harvard University) of a new book, China Urbanizes, China’s urbanization process is succeeding.

While urbanizing on an unprecedented scale, China has managed to contain migration from the villages or channel it to small or medium-sized cities.

Crowding, but few slums. A cornerstone of China’s urbanization strategy has been the hukou, or household registration system to control migration and to try to channel migrants to small or medium-sized cities.

"One of China’s greatest successes in its rapid urbanization has been that it has managed to contain the process to the extent that there are crowded living conditions but very few slums,” said Yusuf. “This is an important achievement for a developing country.”

Increasingly, however, larger cities are relaxing the hukou rules, and there is an ongoing debate about the future role of this system and what it portends for migrants’ access to urban services.

Low urban poverty and unemployment. With the rapid growth of the Chinese economy, urban poverty has been contained. It is estimated at between 4 and 6 percent of the population. Urban unemployment is also low, in the 3 to 4 percent range.

Decentralization. Another key element of China’s successful urbanization is the devolution of public services and many administrative functions to city governments. In 2005, Chinese citizens’ degree of satisfaction with local governments rose to 72 percent—considerably higher than in many other countries, including the United States.

Containment of urban sprawl. China has also been frugal about its use of land space for urban development—cities now occupy about 4.4 percent of the total land area.

"On the negative side, the income gap between villages and cities is very wide,” said Tony Saich, “Urban air and water pollution is a serious problem, and services to migrants as well as safety nets for the poor and elderly have yet to be adequately tackled.”

The demands and strains of bigger cities

While China has coped more effectively than many countries with the demands of urbanization, a number of issues need to be tackled urgently.

Jobs and infrastructure. Between now and 2025, it’s likely that another 200 to 250 million people will migrate to China’s cities, adding to an existing mobile population of about 155 million. Providing jobs and infrastructure for this anticipated inflow of people poses major challenges. Rapid economic growth will remain critical, with further deepening of the capital markets needed to help finance urbanization.

Important lessons for rapidly urbanizing countries can be drawn not from the United States, which urbanized when oil was cheap, but from Germany, Japan and Korea, where the automotive industry thrives but cities have remained relatively compact.

Energy. Urban residents use 3.6 times as much energy as rural residents; suggesting that energy use is far from its peak. Also, energy intensity (consumption of energy per unit of GDP) is 7 times that of Japan and 3.5 times that of the United States.

Motorization. While the government has identified motor vehicles as an important subsector, the country needs to weigh the pros and cons of further motorization, which leads to urban sprawl, higher energy consumption, and pollution.

Land for agriculture. Urban sprawl also needs to be contained because it will be important to have enough arable land in China for agriculture, given high commodity prices and rising consumption.

Water. China suffers from water scarcity, with just over 2,100 cubic meters of water available per person—one-third of the world average. The situation is more precarious in the northern part of the country, where climate change may worsen arid conditions.

Climate change. Climate change will affect heavily populated low-lying areas. There are likely to be major infrastructure requirements to protect these areas from sea-level rise and flooding.