China’s urban dreams, and the regional reality (PDF)

EIU: The scale of urbanisation in China has been dizzying. Hundreds of millions of people have moved over the past three decades, leaving the countryside for higher wages in the city. This trend will continue in the next 20 years, when China will remain the main force driving global urbanisation. The Economist Intelligence Unit (EIU) projects that the number of urban residents in the country will increase by 268m between 2010 and 2030—a rise that is likely to represent around one-fifth of global urban population growth over that period.

But what do these sky-high numbers really mean? The country’s new leadership wants urbanisation to continue in a more “efficient” and “human-centred” form than in the past. It believes that growing the populations of Chinese cities is key to unlocking a mass of pent-up consumption potential that will help to rebalance the domestic economy. Provincial and prefectural authorities across the country have set their own urbanisation targets.

Preventing the development of slums around the country’s largest cities remains a top priority, as planners attempt to steer the population towards small and medium-sized cities, to inland city clusters rather than the crowded megacities of the eastern coast. However, not all cities are created equal,
nor will they be treated as such. Migrants will travel to where opportunities—and wages—are greater, regardless of official preferences. Trends in fertility rates, which vary by region, will also work against central planners. There is a strong chance that local urbanisation targets, on which broader economic plans are based, may be missed.

This white paper will examine China’s urbanisation trends from the perspective of the country’s provinces, its highest-level administrative division, and their prefecture-level cities. At the local level, the shift in fortunes will be increasingly palpable. Some regions and prefectural cities will grow much more crowded, while others will not. As companies seek their fortunes in the new urban China, it will be essential to know which areas will see their populations grow and which will see them stagnate.

Key findings:

l For businesses operating in China, choosing the right locations will be hugely important. Trends in urbanisation diverge at the local level, which will drive starkly different requirements for infrastructure and services.

l A growing number of small- and medium-sized cities—but not all of them—will become important centres for consumption and industry. For example, Hefei and Wuhu in Anhui province are examples of cities that international firms should be watching closely for business opportunities, while Yichun and Qitaihe in Heilongjiang province are less attractive.

l Urbanisation trends matter because urban economies are more productive than those in rural areas. They have more efficient labour markets, deliver significant cost savings from industrial and services clusters, generate economies of scale and provide opportunities for infrastructure investment.