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Urbanization is playing a key role in economic development
in China and other emerging markets. Premier Li Keqiang has
made promoting healthy urbanization a key part of the new
leadership’s reform agenda, with a number of supporting
reforms announced following the Chinese Communist Party’s
Third Plenum meetings in November. To better understand the
challenges and prospects facing urbanization in China, HKUST’s
Institute for Emerging Market Studies (IEMS), in collaboration
with the HKUST Leadership and Public Policy Executive Education
Office (LAPP), co-organized a forum on
China’s Urbanization
Strategy: Challenges and Prospects
. Three prominent authorities
weighed in with different perspectives, sharing insights on
different aspects of urbanization in China.
The forum was kicked off by Dr. Chorching Goh, the World
Bank’s Lead Economist for China and Mongolia, who spoke on
“
China’s Next Transformation: Efficient, Inclusive and Sustainable
Urbanization
”. Dr. Goh headed the Bank's team working with
the Development Research Center (DRC) under the State Council
to write a major report on China's urbanization strategy. She
pointed out three challenges China faces in its urbanization
process: the falling population density in cities, high social
inequality, and severe environmental degradation. Tackling these
problems requires a comprehensive policy package, but a crucial
requirement is that the Chinese government redefines its role
by strengthening capabilities in the public sector and relaxing
controls in areas where markets work more efficiently. Reforms
of factor markets (land, labor and capital) should receive top
priority.
HKUST IEMS Director Albert Park, an expert on China’s labor
market, discussed how urbanization can be made more inclusive
by providing greater opportunities to rural migrant workers.
China’s labor markets have become more integrated over time,
benefitting workers in interior regions, and in recent years
the real wages of rural migrants have grown rapidly (by 17%
annually from 2007-2012) which has contributing to a decline
in income inequality. Nonetheless, institutional factors related
to China’s residential registration system continue to create
CHINA’S URBANIZATION STRATEGY: CHALLENGES AND PROSPECTS
(2013.11.18)
barriers to labor mobility and provide less social insurance and
protections to migrants. For example, rural households do not
own the land they cultivate and have limited ability to sell land
use rights or collateralize such rights, complicating decisions
to migrate. Also, it remains difficult for migrants’ children to
gain equal access to schooling in urban areas and for their
parents to use health insurance in distant cities. Benefits of social
insurance programs are uncertain and frequently not portable,
discouraging participation by young migrant workers. Promoting
greater labor mobility furthers both growth and equity objectives.
The government should promote rural land ownership and
stronger property rights over land, equalize public services and
social insurance programs across regions, and abolish the hukou
system in favor of a residence-based benefit system.
Financing is a concern for many countries undergoing
urbanization. In China, the issue is even more acute due to its
decentralized fiscal structure. Professor Christine Wong, Director
of the Centre for Contemporary Chinese Studies at the University
of Melbourne and a leading expert on China's public finance,
analyzed how China’s city leaders meet their financing needs
despite the lack of authority to impose local taxes. It turns out
that they rely heavily on off-budget financial vehicles, especially
land sales and other revenues from real estate development.
The funds raised through these channels enables city leaders to
make infrastructure investments and promote local economic
development. But the disadvantage of this approach is that it
leads to overdevelopment of land, soft budget constraints for
local governments, and increased financial risk for banks and
city governments. To address these serious issues, a fundamental
restructuring of the central-local fiscal relations should be put on
the government’s reform agenda.
After the three presentations, a panel discussion featuring the
three speakers and audience questions led to further discussion
of the appropriate roles of government and the market. Most
agreed that an efficient, inclusive and sustainable urbanization
can only be achieved if the market plays a decisive role and the
government acts as a facilitator.
Dr. Chorching Goh
Prof. Albert Park
Prof. Christina Wong
