Urban Population 51.27% | Rural Population 48.73%

Thursday, January 19, 2012 18:38

It’s official.  There are now more Chinese who call home in one of China’s urban centers than those who remain on the farm.  It is a process that began in the late 70s with Deng Xiao Ping opening up China’s economy, and according to the McKinsey study “Preparing for China’s Urban Billion” it is a process that will ultimately result in over 1 billion urban dwellers in China’s cities by the year 2030.  And the graph above is all one needs to understand why the process will continue.

For city planners, this is a mixed bag. In my work in China’s first tier cities, this is about finding ways to integrate local populations and “new” citizens, while in China’s second and third tier cites it is more economic (making sure there are jobs) and infrastructural (schools, roads, etc).  It is a process that in the short term is leading to all kinds of resource (water, energy, food, oil, steel, cement, coal) imbalances as the national distribution networks are unable to keep up, but over the next 10-15 years the hope is that as these new urban centers stabilize so will this issue.

A couple of notes about why I see this move as necessary:

1) Strength in domestic economy.  If there was one part of the economy that China (and others) was looking to solidify it is that of their domestic economy. It is an economy that is to date almost completely reliant on government expenditure (bridges, port, and KTVs) and exports for manufacturing. Over the last 4-5 years this has been changing, thanks in part to Wall Street blowing up the US (and EU) economy, but it is a re-balancing that has been made easier as the early migrants in China’s gateway cities have begun to settle… and spend.

2) Resource allocation in China, as mentioned on a number of occasions, is a massive problem that urbanization (over the long term) will help to alleviate as infrastructure improvements come online.  It is perhaps the most difficult issue economically for China as logistically China is very inefficient and the gateway cities are always a first priority.  Regardless of the cost to a neighboring province.

3) Social safety nets will become easier to manage.  By attracting (rather than separating) families, the urbanized China will be able to better support its social stability.  Having 150 million nomadic workers is not sustainable.  I one had an ayi whose husband was in Guangzhou, and children in her hometown. she only saw them once a year, and this led to a lot pressure on her (and her family).  Creating urban centers within each province that are able to relieve this pressure is in China’s long term interest.

but, as with every period of transition, there is going to be pain.  And regardless of whether or not China’s planners have the best of intentions, there are going to be groups who get screwed, get angry, and do not benefit from the process.

In this regard, I see a few issues:

1) City planners, who have been focused on economic development, are going to have to invest significant amount of time, money, and people to integrate these populations. They are going to have to achieve the five tenants of harmonious society that I mentioned previously in order to be able to attract and settle populations.  Cities have to get migrants integrated and invested into the success of the city

2) Inflation (from resource constraints).  while there are more than a few reports out about the role of investment banks inflating materials pricing, in China, the major driver is stockpiling of tradeable commodities and demand of consumable items. China’s ag sector is woefully inefficient at getting food from farm to table (up to 60% loss), and until farms move from 660 sq.m of land to 660 hectors per farmer, issues of food inflation, food availability, and food safety are going to persist.

3) Water. While the rest of the world focuses on carbon, China is focused on water.  It’s glaciers are melting, it’s lakes are drying up, and more than a couple of its largest cities are already admitting they cannot carry their populations without the assistance of other provinces.  It was once believed that the southern water resources were enough to supply the north through massive water works projects, this has come under more scrutiny in the last few years as the south continues to experience droughts that are bottoming out boats and dams.

It is THE problem in my mind, and the following quote from the recent Chian Dialogue article China’s thirst for water transfer sums it up nicely:

“China’s population has increased by 700 or 800 million in the past few decades, and people have also been flowing into the cities with unprecedented speed. Urban industry is also rapidly expanding. This is something no other country has experienced. The water those people need just isn’t available locally.”

So, they have made it this far, and there is no reason to be anything but impressed by the progress that has been made.

It is progress that has been anything but perfect, and there are core issues still left to be addressed, but there is no doubt in my mind that with a population the size of China’s the grand framework for balancing China’s economy, environment, and society is in continued urbanization.

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