China’s Urban Billion(s)

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China is undergoing many transitions, but underlying them is the transition to an urban society. The majority of Chinese now live in cities, and the number is set to rise, with urbanisation as the main driver of growth – RMB40 trillion has been budgeted to bring 400 million people into cities in next decade.

“Urbanization is the biggest potential force driving China’s domestic demand in the years ahead” (Zhang Ping, head of the National Development and Reform Commission, NDRC).

This has major implications for the economy, policy, society, the environment, and for business. No wonder urban issues are high on the news agenda. Here we expand on some recent headlines…

It is not just bout “mega-cities”. As Wei yang pointed out at the recent China-Britain Business Council conference in London, a focus of urbanisation policy is on small (427 with 100-200k population) and medium (113 with 200-500k population) cities.

There is also a need to “Urbanize by strengthening villages”, to ensure balanced urban-rural development, and to account for the needs of over 200 million migrant workers, with pressure mounting for Hukou reform.

This is an issue raised in Tom Miller’s book, ‘China’s Urban Billion – http://on.wsj.com/XIUChh (he’ll be speaking at Chatham House in London on 17 April). It is also a longstanding issue of concern – see our blog post on McKinsey’s urban billion report back in 2008.

While much attention is given to the development of the big, tier-1 cities, and to New Areas in places such as Chongqing and Lanzhou (where they are literally moving mountains to develop the city)… the expansion of a large number of lower-tier cities has not been lost on businesses such as Adidas, who added “350 more Chinese cities in the past 18 months…“.

But the opportunity is not just for consumer-focused companies, it is also for those involved in urban planning, eco city development, transport infrastructure, specialist equipment, architecture and engineering, new energy, water and the environment. Even in sectors such as airports, where foreign participation is restricted (or just hard to achieve), the scale of development – some 70 new airports, with the larger ones, such as Dalian, Xiamen and Chongqing, requiring investment of RMB30 billion or more – is hard to ignore. Beijing’s new airport alone is budgeted at over RMB70 billion!

There is also massive rail and subway development and, while this sort of infrastructure investment has been key to maintaining China’s economic growth, it has not been without practical purpose. It is laying the foundations for the urban China of the government plan.

There may be examples where the money goes to waste, or of “ghost cities” such as Ordos (a defence of which is here: “Build It and They Will Come”), but, as this post on China Law Blog suggests, it usually doesn’t take long for empty space to fill up in China.

Sustainable development of China’s cities will be a key challenge for the new leadership over the next decade (as they battle the smog and traffic of Beijing), as well as for resources and the environment. But it also presents an opportunity for economic rebalancing – and for positive, and profitable, engagement by international business.

Time for some fresh air, and some fresh thinking.

This post originally appeared in our China Business Blog (@ChinaBLogTweets) Linkedin Group, where we will also post updates. See our Twitter feed for more China business news.

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