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China: promote efficient, inclusive and sustainable urbanization


The Development Research Center of the State Council and the World Bank released a report titled China: Promoting Efficient, Inclusive and Sustainable Urbanization on March 25, 2014.

The report suggests reforming the land requisition system to curb the overexpansion of urban space, establishing the residence permit system to offer equal public service to immigrants, seeking stable sources for financial revenue including real estate tax, and allowing local governments to borrow money within the strict framework set up by the central government.

According to the report, as more people move to urban areas, the urban permanent population has increased by 200 million from a decade ago, requiring governments to reinforce environmental protection and tackle health problems caused by pollution.

The research group spent 14 months completing the report, during which the research group also handed in periodic reports to China's policymakers, offering valuable references for creating policies related to new type urbanization.

Lou Jiwei, minister of the Finance Ministry, said: "Urbanization is a powerful engine for the sustainable and healthy development of China's economy. The country should adhere to human-oriented urbanization and rely on system innovation to tap the potential of urbanization through reform. China needs to accelerate fiscal and taxation system reform as well as the reform of investment and financing systems. Also, it should establish a diverse and sustainable fund safeguard mechanism for urbanization through the Public-Private-Partnership (PPP) model and offer basic public services for rural migrant labor."

World Bank President Jim Yong Kim said: "Reforms proposed in the report will help increase farmer land transfer income and provide more services for migrant labor. It encourages local authorities to make lending decisions in a more responsible way. It also suggests that local governments carry out Green City Planning and strengthen environmental management so that everyone can breathe fresher air."

"Urbanization management is the foundation for China to become a modern and high-income society, and it needs to promote efficiency and innovation," said Li Wei, minister of the Development Research Center of the State Council. "The key is to realize a good social management society, putting focus on protecting ecology and tackling pollution. Therefore, it is necessary to build up an efficient, inclusive and sustainable system."

Over the past 30 years, China's economy has experienced record-breaking growth, helping 500 million people out of poverty. Abundant labor force, low-cost land and good infrastructure have created a favorable condition for high-speed economic development. Although China has avoided some common problems in the process of urbanization, pressure also emerges for further development as extensive land exploration leads to inefficient urban sprawl. In addition, pollution threatens people’s health, with arable land and water resources becoming increasingly scarce. By 2030, China's urban population is expected to reach 1 billion, and its urbanization rate will be 70 percent. The Chinese leadership is trying to find a much more coordinated process for China's urbanization.

Sri Mulyani Indrawati, the World Bank's chief operating officer and managing director, said: "China has made great progress in eliminating absolute poverty, better than any other country in the world. China has an opportunity to further improve the living conditions of hundreds of millions. China may become a model of urbanization as long as the Chinese government makes appropriate policies, overcomes pollution, maintains economic growth, and makes cities more suitable to live in."

The report pointed out six priority areas for setting up a new type of urbanization:

1. Reforming the land management system

Since urban expansion mainly relies on requisitioning rural land, the size of farmland has decreased to 120 million hectares, close to the red line for food security.

2. Reforming the household registration system

This move will promote equal rights for basic public services and facilitate free migration of skilled labor.

3. Making financing more sustainable and establishing effective financial discipline for local government

4. Reforming urban planning and design

5. Dealing with environmental pressures

6. Improving local governance

Vice-Minister of the Ministry of Finance Shi Yaobin said that: "China has to draw on foreign experience in the process of deepening reform. The partnership with the World Bank will not only make use of its rich intellectual knowledge and practical cases for China's reform, but help China share experiences with other countries."

Klaus Rohland, the World Bank's country director for China, said that, "Through the cooperation with the Development Research Center of the State Council, we can combine international experience of urbanization with China’s current challenge in urbanization, so as to give more targeted advice."