China: New Urbanisation Plans

09 Sep, 2013    ·   4108

Namrata Hasija comments on the challenges that have put the Chinese urbanisation plan on hold

Namrata Hasija
Namrata Hasija
Senior Research Officer

In March 2011, increasing urbanisation had been noted as part of the Twelfth Five Year Plan by the Communist Party of China’s Central Committee. It is now being reported that the Chinese government has plans to shift 250 million rural residents into newly constructed towns and cities till 2020. The main focus of China’s urbanisation was building physical infrastructure. However, China’s new leadership especially Chinese Premier Li Keqiang has been pushing for ‘healthy’ urbanisation rather than rapid urbanisation without social infrastructure, to provide for the large population shift from rural to urban areas. This has pushed the National Development and Reform Commission (NDRC) to draft a new plan for urbanisation.
What are the new objectives of the NDRC? What are the challenges that the new urbanisation plan faces?

New Objectives of the NDRC
The NDRC, the main economic policy body along with 12 other ministries and commissions has been formulating a National Plan for Promoting Healthy Urbanisation (2011-20) which is also called the ‘master’ urbanisation plan. This plan will be a roadmap for urbanisation in China and is slated to be released to the public soon. The draft has since been sent to local governments for their inputs.
The new urbanisation plan is called chengzhenhua (城镇化, literally ‘city and townification’). Under this plan, the main focus is on the towns rather than expanding the existing cities. This will help in integrating rural and urban China as towns technically fall under the rural government system, with collective land and the rural hukou system. Many towns have been identified to carry out this experiment and the main focus is on small and medium sized cities and towns which have better resource carrying capacity and will be able to accommodate industrial development. Proper city layouts would be prepared keeping in account their resources and also taking care of the environment. The plan also includes improving urban structure of bigger cities like Beijing to enhance their carrying capacity. The other objective is to increase urbanisation from its current 53 per cent to 60 per cent by 2020. The most important task is the smooth transition of the rural migrants to urban migrants by developing public service schemes.

The main objective of the plan is to build city clusters especially in the western and central parts of China. The city clusters in the east coast will be strengthened but new clusters will be developed in western and central China. This would also enable to fill gaps in the otherwise lopsided growth of China wherein the eastern coastal cities were rapidly developed first with huge funds flowing in the creation of SEZs.

Challenges to the New Urbanisation Plan
The main challenge to the new urbanisation plan is the hukou reforms. The major problem in implementing these reforms is the lack of funds. The central government and the local governments need to invest heavily in ‘urbanising’ migrants. The local governments have been avoiding such reforms due to financial burden and local mayors and party secretaries are concerned that if the hukou is freed up they will have to release huge funds to provide services to the migrants. The current projected figures of 53 per cent urbanisation is also not true as many living in the city still have a rural hukou. The real urbanisation is still 35 per cent so the cost of giving benefits to these plus the new migrants by 2020 would be immense. Thus, with more migrating to cities without an urban hukou and jobs, this would instead create an underclass in big cities. With no job surety in urban areas the migrants are growing weary of exchanging their lands in the villages in favour of the urban hukou which gives them no economic security. The main objective of this whole urbanisation process is to increase domestic growth with urban migrants who would consume and also pay taxes. The glitch however, is that the government has to bear all the costs right now.

The second major problem is that the migrants have to exchange their rural hukou for an urban one by giving up their village land. In many cases migrants have been forced to give up their lands at a low price which has lead to many uprisings. This could be more important as towns also come under rural hukou - the focus on townification would result in more land grab. However, a new plan of giving the farmers a permanent stream of income after the payout in the form of shares in their former land has been started. This has also got mixed results: some farmers are getting their shares while others have received no dividend on their shares.

All these hindrances have put the urbanisation plan on hold and it has not been released in public. According to the chairman of NDRC, many city heads have turned down the plan because of the hukou reforms, and Li Keqiang and the new leadership have emphasised ‘healthy urbanisation’. They have also realised that unmindful urbanisation would lead to inflation and bad debt. Thus, the new urbanisation plan has hit a roadblock. However, the NDRC claims that it will soon be revived and the plan will be released soon.