Urbanization boosts core growth of China's economy

Editor's note: As China is busy preparing for the annual two sessions of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC), some Western media have been enthusiastically hyping that the Chinese economy is collapsing. Is the Chinese economy going to fail? What opportunities have China's growth brought to the world? China's Economy from a Global Perspective is a 10-part series analyzing the above questions. The ninth essay focuses on China's urbanization. Wang Huiyao is the President of Center for China and Globalization and former counselor to China's State Council. The article reflects the author's opinions and not necessarily the views of CGTN.

Facing an increasingly complex geo-economic environment, China finds itself at a pivotal juncture in its quest for economic transformation and high-quality development. The country's once stalwart real estate sector, for instance, now displays signs of strain, exacerbating a palpable shortfall in domestic demand.

Amid challenges both at home and abroad, China's steadfast commitment to accelerated urbanization, propelled by sweeping land reforms, emerges as a beacon of optimism. Urbanization reignites domestic consumption and injects new vitality into the Chinese economy.

China's urbanization has seen remarkable progress in recent years. According to National Bureau of Statistics, the share of urban population in the total population was 66.16 percent in 2023, a leap from 17.92 percent in 1978. This dramatic surge in urbanization rates, accompanied by the establishment of a robust framework for urban-rural integration, signifies a profound transformation in China's socio-economic landscape.

But in the meantime, it is worth noting that China still has roughly 300 million migrant workers. While 66.16 percent of China's population lived in cities, this ratio dropped to 47.7 percent when based on residency alone. The country's urbanization rates remain 10 percent lower than in developed countries.

This means migration to cities will continue apace. As Chinese Premier Li Qiang said at the 2024 World Economic Forum, the size of China's middle class – already at 400 million – will continue to swell to 800 million over the coming decade. Obviously, low-income groups in rural areas and migrant workers will be major forces behind the change.

In this context, a new round of urbanization wave is the catalyst for the swelling size of China's middle class. As newly urban households upgrade their consumption in education, housing, medical care and other areas, creating massive market opportunities and instilling more momentum to China's economic growth.

In addition, rural areas are vital for common prosperity. At present, the disparity in per capita net property income between urban and rural residents stands at 10.29, contrasting with the 2.45 ratio in disposable income. Some researchers believe that current transfer model of China's rural homestead, characterized by non-transactional practices – has contributed to this gap, hindering the wealth accumulation of rural populations and impeding labor mobility.

To clear this barrier in urbanization, China has been actively exploring ways to upgrade the structure of rural homestead transfer and deepen rural land system reforms. The Chinese central government has already put forward the concept of the separation of three rights – rural homestead collective land ownership, the qualification rights for homestead allocation, and the homestead land use rights – to address upgrade homestead management.

These endeavors will help revitalize the use of rural lands, providing more opportunities for urban residents seeking leisure tourism and investments in rural areas. Leading agricultural enterprises in rural regions can also seize the opportunity to modernize and expand their businesses, injecting capital, talents, technologies, and other resources into rural revitalization. In addition, rural population who tend to live in urban areas can generate some incomes from rural homesteads. This will inject new vigor into the urban real estate market, paving the way for the stable growth of China's economy.

As Chinese President Xi Jinping said, reform and opening up is always an ongoing task and will never end. From the introduction of the household contract responsibility system in 1982, to urban housing reform in 1994, to joining the World Trade Organization in 2001, and to the proposal of the Belt and Road Initiative, China's reform and opening up has managed to solve its developmental difficulties. Today, the land reform and urbanization is another attempt of China to tackle challenges.

Looking ahead, the coordinated urban-rural development will tremendously unlock China's untapped domestic demand potential, infusing vigor into its economy for decades to come. China's economy has proved its resilience and boundless potential, dispelling "China collapse" theories.

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