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Urbanization expected to fuel economy
July-30-2010

Accelerated urbanization can keep the country's economy on the fast track for another 15 to 20 years, as more than half of its population will live in cities and towns by 2015, a top Chinese think tank said on Thursday.

The country's urbanization rate will hit 52 percent in 2015 and grow to 65 percent by 2030, the annual report on urban development by the Chinese Academy of Social Sciences (CASS) showed.

By the end of last year, the urbanization rate already hit 46.6 percent, with 620 million people living in cities and towns, the CASS reported.

"The growth potential of the vast middle and western regions, together with the rapid development of small cities and towns, could keep the economy on the fast track for at least 15 to 20 years," Wei Houkai, director of the center for China's regional development at the CASS, told China Daily.

The urbanization rate during the country's 12th Five-Year Plan period (2011-2015) will grow by 0.8 to 1.0 percent each year, the academy reported.

That means more than 10 million rural residents will move to cities and towns annually - a process that is expected to contribute 4 percentage points to the country's GDP growth each year.

Out of the 4 percentage points, 3.6 percentage points will come from newly added housing demand of 1.2 trillion yuan ($177 billion) and 0.4 percentage points is expected to come from people's improved income of 120 billion yuan.

Lu Jing, vice-president of Hong Kong-listed R&F Properties, said at a recent forum that he was quite optimistic about the long-term prospect of China's real estate industry, despite short-term adjustment because of recent tightening policies.

Last year, the disposable income of the urban population stood at 17,175 yuan per capita, but the net income of the rural population was 5,153 yuan per person.

Li Bingren, chief economist of the Ministry of Housing and Urban-Rural Development, said earlier that he expects China's urban infrastructure fixed-asset investment to top 1 trillion yuan ($146 billion) in 2010.

The country's rapid urbanization will result in the accelerated construction of urban public facilities, involving a total investment of up to 7 trillion yuan during the 12th Five-Year Plan period, Li said.

But imbalances in the process mean that the quality of the urbanization will be affected, the CASS reported.

"There are still many problems in the process, such as unbalanced development between the urban and rural areas, widening income gaps, lack of spatial planning and over-expansion of large cities, all of which need to be solved urgently," said Li Guoping, director of the China center for urban management research under Peking University.

More attention will be given to the improvement of migrant workers' living standards, construction of environmentally friendly cities and building of city clusters in the next five-year plan, the CASS reported.