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Across the Strait
China's Economic Transition
Urbanization Gone Awry

China hopes to evolve from the world's factory to a major consumer nation. But measures to stimulate domestic consumption are causing severe social inequality. How can China reform its imbalanced urbanization policy?

Photos: cw

Even though the Chinese economy posted 11.9-percent growth in the first quarter of 2010, nerves are raw in Zhongnanhai – China's governmental headquarters in Beijing. As the rest of the world seems to sink into economic quicksand with no end to the global crisis in sight, Chinese leaders scramble to stimulate domestic demand by pushing for the urbanization of rural China.

Things have changed in China's fourth-, fifth- and sixth-tier municipalities. The women in these small towns and villages might still make a living working in the fields, but they don't look like field workers anymore. The typical small-town woman wears jewelry, high heels and make-up, and occasionally stops in at the beauty shop in town to buy some skin-care products. Young male migrant workers use their spare time to surf the Internet in their cramped dormitory rooms. They play online games and order the latest consumer electronics from the big cities online. The rural population already accounts for one quarter of China's Internet users, exceeding 100 million people.

Fueled by China's "reform and opening-up" policy, the urban sprawl that began in the cities and towns on the affluent east coast has been constantly expanding further inland. Some 300 million farmers have moved to urban areas, and as a result the number of Chinese cities has exploded from 86 sixty years ago to 665 today.

Professor Lu Bin, head of the Department of Urban and Regional Planning at Peking University, notes that in the beginning the goal of urbanization was to achieve balanced regional development.

The Chinese government has promoted various schemes to forge tighter connections among the country's 40,000 towns. In the 1990s it introduced the "Go West" policy to develop China's interior around Chongqing, and the transformation of old industrial bases in the northeast. Since 2000 it has promoted the "Rise of Central China" strategy, which aims to merge six central provinces into one economic region, and the establishment of a nationwide high-speed rail network with four vertical and four horizontal lines.

The latest example is the establishment of a model zone for industry transfer in the Wanjiang city belt in Anhui Province. The project, which was just approved by the State Council and has been strongly promoted by Chinese president Hu Jintao, is the first regional development project that focuses on industry relocation.

Under the project Hefei, Wuhu, Tongling, Ma'anshan and Anqing cities are to take over industries from the Yangtze River Delta region, thanks to their geographic proximity. So far more than 500 companies have moved to the Wanjiang city belt, more than half of them from the Yangtze River Delta.

Based on the current speed of development, the consulting firm McKinsey projects that one billion Chinese will live in cities by 2030. As many as 221 Chinese cities will have a population of 1 million or more compared with 35 such cities in Europe today.

Unbalanced Development

Why is China promoting urbanization so aggressively? It's because leaders have discovered that while the Chinese economy has grown rapidly over the past three decades thanks to market reforms, the rising affluence cannot conceal that development has been vastly uneven across the country.

Executive president of China (Hainan) Reform and Development Research Institute and respected economist Chi Fulin notes in the 2009 Annual Report on China's Reform, which he edited, that thirty years of reform have caused structural imbalances such as "high investment, low consumption," "weak domestic demand, strong external demand," "high industrialization, low urbanization," and "high carbon consumption, low carbon reduction."

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