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Economist sees urbanization as leading growth engine

By Fu Jing (China Daily)
Updated: 2009-04-28 08:02

A more focused urbanization program could generate an investment of 225 trillion yuan ($32.9 trillion) and maintain rapid economic growth in the next decade, and thus help China shed its export-oriented development model.

This is the prescription of Wang Jian, a leading light of China Society of Macroeconomics, for the treatment of the country's economic woes.

Wang was one of the first economists to champion China's expanded global business ties in 1987. But "the times have changed now", he told China Daily Monday.

The development imbalance has been huge over the past few years. It has been most noticeable in the rapid development of the country's coastal areas, driven by the overseas demand that now has become unstable, and in the potential threat from the weakening of the dollar-dominated world financial system.

Related readings:  China's economy slows to 6.1 percent in Q1  China's economy to bottom out in mid 2009: World Bank  Urbanization boosts construction material market  Consumption is the key for sustainable growth  Waking up domestic consumption  China seeks balance between food security, urbanization  'Supercities' to tackle urbanization challenge

These developments have made many economists agree that it is time to focus on domestic consumption. But raising domestic consumption to the level where it can sustain the national economy is not going to be a short process. It will need a far greater amount than the $586 billion the government announced on November 9 to tide over the global financial crisis, he said.

"It will have to be a strategic move, a long-range process Its overarching theme has to be 'building new cities' across China."

Without such a strategy, investments in public infrastructure are likely to cause confusion and even delay economic recovery, he said. Urban development is probably the only way to shift the economy's dependence from export to domestic consumption.

Wang said that if the government could help about 450 million rural residents settle in urban areas in the next decade, it would generate an investment of 225 trillion yuan.

About 100 million people in the country moved home from villages to urban areas from 2003 to 2008, creating roughly 54 trillion yuan for investment in urban development programs.

On an average, Wang said, providing every rural resident with a job and home in an urban area would create a 500,000-yuan investment in facilities and services such as houses, roads, education and social security.

"Multiply the average figure by 450 million, and we get a nationwide urbanization program that can generate an investment of 225 trillion yuan in the next 10 years."

Urbanization is the country's next gold mine, especially when the government is eager to reorient its industry to cash in on new opportunities offered by domestic consumption, he said.

Corroborating Wang, David dollar, World Bank country director for China, said making urbanization the main engine of China's economic growth is a "good idea".

"The long-term trend will be of more workers moving from the countryside to cities," Dollar told China Daily. And this is a good time to build some of the infrastructure that would be needed for the transition such as public transport systems, inter-city high-speed passenger trains, and waste-water treatment and clean energy plants.

Wang Xiaolu, economist and deputy director of the National Economic Research Institute, too said urbanization was the "only solution" to the development imbalance in cities and rural areas.