China’s new urbanisation plan aims to energise economy, but is it ‘rash and impetuous’?

A five-year undertaking could see 70 per cent of all Chinese settled in large cities, with newly granted urban-residency status and benefits

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As of last year, slightly more than 66 per cent of China’s 1.4 billion people lived in urban areas, and leadership wants that percentage to reach 70 per cent in five years. Photo: Xinhua

Published: 9:00pm, 1 Aug 2024Updated: 10:22pm, 1 Aug 2024

China has unveiled a five-year plan to ensure that 70 per cent of its population settles down in urban areas – a push that is believed to be aimed at unleashing new demand, but which has also raised questions about its ability to truly stimulate the economy.

Rural residents, who account for roughly half of the 1.4 billion Chinese population based on their permanent residence registration, or hukou, would have basically no restrictions from the originally rigid system if they want to relocate to cities with populations of fewer than 5 million people, according to the action plan released by the State Council on Wednesday.

Calling urbanisation “an important solution to expanding domestic demand and promoting industrial upgrades”, the plan encourages farmers to move to cities and promises them the same entitlements enjoyed by city dwellers – something millions of migrant workers have had little access to because of the hukou hindrance.

The plan followed a pledge from the Communist Party’s reform-themed third plenum two weeks ago – to grant urban-residency status to new city joiners – and it came at a time when China is struggling to absorb excess supply in the real estate market, which remains a persistent drag on the economy.

“This is the biggest piece of cake for the Chinese economy now, and it is also low-hanging fruit,” said Wang Huiyao, founder and president of the Beijing-based Centre for China and Globalisation think tank, who has been calling for reform in urban-rural integration for years.

Authorities might proceed with caution, depending on how well the policies work, but this is a step in the right direction

Wang Huiyao, Centre for China and Globalisation

As of the end of last year, slightly more than 66 per cent of China’s 1.4 billion people lived in urban areas, but only 48.3 per cent had an urban hukou, according to official figures. This means there are hundreds of millions of people currently living in cities while being denied access to urban benefits.