News Center



Home News Center News

Momentum Relay: From Industrialization to Urbanization

Nov 23-2020   



Superior industrialization alongside lagging urbanization sums up the most fundamental structural characteristic of the Chinese economy, writes Associate Prof. Xu Jianguo of the NSD in a commentary. The analysis of the issue can lead to a better understanding of a range of structural imbalances, and the further development of cities might provide the driving force for the economy.

 

The development of the Chinese economy can be broadly divided into two half-times: industrialization in the first half and urbanization in the second. Over the last four decades, rapid industrialization has been achieved through reform and opening up and the integration of productive factors with the global market. Meanwhile, urbanization hasn’t progressed as impressively. China became the world’s second-largest economy in 2015, yet its urbanization rate only reached 55%, or 1.4 times its industrialization rate of 40%, significantly lower than the global average (2.0 times) and that of the G7 (3.4 times).

 

Urbanization, as its nature suggests, can only proceed slowly over time. However, underdeveloped cities mean a relatively small domestic market and reliance on external demands, therefore putting constraints on industrialization. Another structural characteristic is the underdevelopment of the service industry due to lagging urbanization.

 

Some turning points surfaced in 2013. Service surpassed industry to become the largest economic sector of China. First-tiered cities started to grow faster than second and third-tiered ones, and service-driven cities enjoyed a faster economic pace than industrial ones. Housing prices rose the fastest in large cities as a result of population influx.

 

Current industrial technologies and income level are solid enough to support the spontaneous development of urbanization, and when the market forces grow strong enough, new growth momentum can be generated through technological and industrial upgrading, says Prof. Xu.

 

China’s urbanization rate can rise to 80-90% in the future, and the economic density of first-tiered cities still has significant room to improve. Prof. Xu suggests rolling out the second round of housing reform – as opposed to the first round starting in 1998 and primarily targeting urban residents – which should focus on building affordable housing to help migrant workers settle down in cities and enter the ranks of the middle class. 

Momentum Relay: From Industrialization to Urbanization

Nov 23-2020   



Superior industrialization alongside lagging urbanization sums up the most fundamental structural characteristic of the Chinese economy, writes Associate Prof. Xu Jianguo of the NSD in a commentary. The analysis of the issue can lead to a better understanding of a range of structural imbalances, and the further development of cities might provide the driving force for the economy.

 

The development of the Chinese economy can be broadly divided into two half-times: industrialization in the first half and urbanization in the second. Over the last four decades, rapid industrialization has been achieved through reform and opening up and the integration of productive factors with the global market. Meanwhile, urbanization hasn’t progressed as impressively. China became the world’s second-largest economy in 2015, yet its urbanization rate only reached 55%, or 1.4 times its industrialization rate of 40%, significantly lower than the global average (2.0 times) and that of the G7 (3.4 times).

 

Urbanization, as its nature suggests, can only proceed slowly over time. However, underdeveloped cities mean a relatively small domestic market and reliance on external demands, therefore putting constraints on industrialization. Another structural characteristic is the underdevelopment of the service industry due to lagging urbanization.

 

Some turning points surfaced in 2013. Service surpassed industry to become the largest economic sector of China. First-tiered cities started to grow faster than second and third-tiered ones, and service-driven cities enjoyed a faster economic pace than industrial ones. Housing prices rose the fastest in large cities as a result of population influx.

 

Current industrial technologies and income level are solid enough to support the spontaneous development of urbanization, and when the market forces grow strong enough, new growth momentum can be generated through technological and industrial upgrading, says Prof. Xu.

 

China’s urbanization rate can rise to 80-90% in the future, and the economic density of first-tiered cities still has significant room to improve. Prof. Xu suggests rolling out the second round of housing reform – as opposed to the first round starting in 1998 and primarily targeting urban residents – which should focus on building affordable housing to help migrant workers settle down in cities and enter the ranks of the middle class.