China's New Urbanization Plan
September 10, 2014
The Prime Minister of China, Li Keqiang, hopes to see 60 percent of the Chinese population living in cities by 2020 as a result of his "National Plan on New Urbanization."
In a new paper for the National Center for Policy Analysis, Research Associate Xinyuan Zou explains how this urbanization plan will work:
- In 2013, 712 million Chinese residents were living in cities while 600 million were living in rural areas. The urbanization plan seeks to coordinate the development of cities and towns, expecting 100 million new urban residents by the end of the decade.
- Because those living in China's cities earn 3.23 times more than those living in rural areas, the state hopes that the plan will boost consumption spending, raising China's consumption from 34 percent of GDP up to 45 to 50 percent by 2020.
Zou notes that China's economy is complicated, because it uses central planning along with free markets. Real estate is China's most popular industry, and land developers lease land from the Chinese government for a leasing fee, then develop it privately. There have been problems, however, with such government involvement. For example, when the city of Ordos in Mongolia built 100,000 apartments with government support, 90 percent of the buildings remained entirely empty because the government misestimated demand for housing in the area.
As more people move to China's cities, Zou writes that demand for government investment and development will increase. He encourages the government to limit its involvement in the market and allow the free market to work.
Source: Xinyuan Zou, "China's 'National Plan on New Urbanization,'" National Center for Policy Analysis, September 10, 2014.
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