Productivity 'key challenge'

Woetzel said that each model has its own challenges and benefits, and while no model is perfect, he suggested that an urbanization model where cities are concentrated is the best for China, because the scattered model requires more land and is more challenging in terms of food and power security issues, and more difficult to finance.

McKinsey estimates that China will have 10 to 12 mega-cities with populations of 15 to 20 million, around which city clusters will form. A cluster consists of one mega-city and 20 to 50 other smaller cities. Most of the population will live in medium-sized cities with populations of between 500,000 and 5 million, it added.

About 70 percent of the country's population will live in small and medium-sized cities. It also forecast that by 2030, China's small cities will be the biggest contributors to its GDP.

Professor Huang Taiyan, the president of the Shenyang-based Liaoning University in Liaoning province, said the Chinese government should focus on urbanizing people, instead of urbanizing land. The government's role should be to integrate migrants, and to create both career and commercial opportunities for people from rural areas.

Urbanizing the population means creating jobs first, but the biggest issue should be to provide training opportunities and create jobs in the manufacturing and service sectors for new urban dwellers from rural areas - this has become a problem because banks are not keen to lend money to factories and service businesses, in particular small and medium-sized enterprises.

"The Chinese economy is still an investment-dominated economy, and a healthy urbanization process should be based on a steadily developed manufacturing scale, because that would offer business opportunities to service sectors such as the logistics, packaging, power and finance industries, and these sectors in fact employ the most migrants from across China," Huang said.

Huang added that financial policies should be readjusted so that banks are encouraged to lend money to small businesses, and to enable local governments to make specific budgets to spend on better housing for low-income groups, healthcare, social welfare and education projects.

In comparison with US or European cities, cities in China are generally bigger and denser. However, there is less technology than in many European cities.

Li Changping, president of the Beijing-based China New Rural Planning and Design Institute, said it is the time for the country to develop better plans to improve the quality of its urbanization process, particularly to address problems such as the inadequate services provided to new urban residents, antiquated infrastructure and imbalanced distribution of resources between mega-cities and small and medium-sized cities.

"Over the past century, global cities in the process of urbanizing have all made mistakes," Li said. Examples include the low density in Los Angeles and the low-income favelas, or ghettos, in Rio de Janeiro. He believes that certain Chinese cities are repeating some of those mistakes, especially in terms of urban sprawl, the constant construction of industrial parks and water pollution.

"There are quite a lot of technologies and useful methods that have been introduced and applied in European, US and Japanese cities because they have had more time to experiment and make improvements, so China should really grab this advantage," Li said.

Such growth opportunities have already been discovered by firms from Europe, said Florian Schmied, Shenyang board chairman of the European Union Chamber of Commerce in China.

Schmied said that around 50 European companies from Germany, France, the United Kingdom and Sweden will come to Shenyang over the next three years to form an industrial park in the Hunnan new district and develop sustainable urbanization projects.