China is expected to hold an urban population of one billion by 2030, according to UN. Photo: CFP

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In 1978, there were only 193 cities and 2,000 towns across China. The country, since then, has reformed the administrative division through abolishment of prefectures, leading to a rise in the number of cities and townships. In 1992, it instigated a wave of building development zones and new urban areas that continued over the following two decades. Emergence of city clusters and metropolitan areas enabled Chinese cities to develop in groups since 2002.

Metropolitan areas’ outlying townships, second-tier cities and middle-region cities are revving up development. The urban populations have surged from 170 million to 810 million, the largest migration from rural to urban areas in human history. In course of this, the per capita disposable income of urban residents has increased from 343 yuan to 36,396 yuan, and the average life expectancy from 68 to 76.5.

China’s urban economy has sustained robust growth and continuous structural upgrading. It has gone through three stages. Between 1978 and 1995, the township industry was the mainstay of an urbanization dominated by light industries due to a massive inflow of foreign capital. Between 1996 and 2013, foreign capital and urbanization construction were the principle drivers of heavy industries. Since 2013, urbanization has been centered on the service sector due to a mounting demand for service products. In the past 40 years, the average annual growth rate of the urban economy has exceeded 10 percent. The urban economy’s share in the national GDP accounted for about 50 percent in 1998, and the proportion hit 80 percent in 2016.

Spatial expansion ensures urban development. Between 1978 and 2016, built-up areas and urban construction land grew by 7.4 times and 7.9 times respectively. The urban rail transit system has expanded by leaps and bounds. In 1978, Beijing was the only city operating rail transit with a length that totaled 23.6 kilometers. By last year, 32 cities had launched rail transit systems with a total length of 4,484 kilometers. In addition, information infrastructure and public infrastructure have proliferated in cities and in the countryside, and a digital network connecting rural and urban areas has been activated.

China’s massive and rapid urbanization should be credited for pioneering innovation and exploration in economic development, especially in urban construction. The main reasons are as follows.

The first factor has been adherence to market-oriented reforms. First of all, the independent entities of a market-based economy are the premise of urban economic development. The reform of the contract responsibility system decentralized state-owned enterprises, and the modern system of property rights underwent constant improvement, clarifying companies’ status as economic entities and enhancing their protection. This allowed market competition among multiple economic entities to become a persistent driving force of urban development.

Also, an optimized market system created a favorable environment for the urban economy. The country adopted a dual-track price system and market-oriented reforms targeting goods and services. By 2003, market allocation and market pricing were applied to general commodities and a majority of production materials in China’s cities and townships. Market forces have been strengthening their role and efficiency in resource allocation while the marketization of labor, capital and other factors continue to deepen.

The second key to success has been economic openness. Since the 1990s, China has seized the opportunity to expand its opening up to the outside world and become a part of the global division of labor in a timely manner. At first, China opened its coastal areas by establishing special economic zones. Then, many port cities, border cities and inland cities joined the effort, expanding the openness to the whole country. China has started to integrate into the world economy in all respects since its entry into the WTO. The Belt and Road initiative charted the course for the country’s two-way openness.

Innovation sprouted through urbanization practices, which has been the third factor. The establishment of a socialist market economy made socialism and the market economy complement each other and advance together. It was a major institutional and theoretical innovation that shored up the development of Chinese cities and towns. Other mechanisms were also crucial, such as the household registration system, the dual-track price system, special economic zones, and efforts in the land, fiscal and taxation systems.

China’s urbanization has laid a foundation for urban economics with Chinese characteristics.
The traditional theory of urbanization was largely built under the framework of a closed economic system, while China’s massive and rapid urbanization provides a theoretical case for urban development and transformation in an open economy. In an open economic system, the foreign capital and surplus labor supply brought by the global division of labor, accompanied by the world market, together can lead to a much faster pace of urbanization than that in a closed economy. In addition, the low wages of surplus labor form cost advantages, making industrialization outpaces urbanization. In the later period, the wage increase caused by the slight labor shortage allowed urbanization to make faster progress, thus catching up with the degree of industrialization.

Chinese urbanization has also enriched the core-periphery theory. Under the traditional analytical framework, there are two possible changes for urban patterns: In some cases, the central cities develop and get richer first and their outer parts take a longer time to develop. In other cases, the cities grow stronger without expansion. Global practices of urbanization mainly follow the latter path. China’s urbanization, due to its special national conditions, has presented three features in how urban patterns can change.

The first feature is urban agglomeration. The country’s resources per capita are marginal, but its total amounts are massive. Therefore, it is practical to distribute resources to a few cities first and drive the urban development and transformation there. The second feature is that the urban expansion takes place incrementally. The central cities have no way to impact their outer parts in a short time because of the vast territory and regional differences. Expansion would first be implemented on the outlying cities with the most advantageous conditions, and then it would cover the cities with less advantageous conditions. The third feature refers to the fast and sustainable progress of urbanization. This has come about based on the second feature, such that cities across the country started a cascade of growth and transformation. In this way, the national economy keeps expanding.

Urban economics is used to discuss issues of urban spatial equilibrium and urban development, but it pays little attention to circumstances with Chinese characteristics. China’s urban economics has developed as a footnote of the urbanization process, and it presents and addresses distinct Chinese characteristics. For example, China’s economic mechanism transitioned from a planned economy to a market economy in a dynamic way, involving multiple major players in the urban economy, such as governments, companies and migrant populations. Urban development is supported by the migration of surplus labor from agriculture to other industries and the movement of the agricultural population from rural to urban areas. Foreign companies participated in this process by moving their capital and factories into Chinese cities in the context of global labor division. Local governments contributed through infrastructure construction and public service supply. These factors are all major elements of China’s urbanization, but they perform different functions in different stages, thus driving urban development without suspension.

 

This article was translated from Guangming Daily.

(edited by MA YUHONG)