Urbanization set to boost growth

Official statistics show that China's urbanization rate, indicated by the ratio of urban residents to the total population, had risen to 52.57 percent by the end of 2012 from 51 percent in 2011. However, that is still much lower than the average of 80 percent in fully developed economies.

Wang Guoping, director of the Hangzhou International Urbanology Research Center, said urbanization will create huge domestic demand and boost economic growth.

"The transformation of the growth pattern should be related to the development of the urban regions.

"Urbanization is also an important way of improving modern industrialization, so it is one of the key elements for sustainable development," he said.

China's new leadership has pledged to double GDP by 2020 compared with the 2010 figure. Urbanization will be one of the four main driving forces in achieving that goal, with others including industrialization and the modernization of the agricultural sector.

After the 18th National Congress of the Communist Party of China, Vice-Premier Li Keqiang said the urbanization process is expected to accelerate in the next decade, which will boost domestic investment and consumption as more members of the rural population move into towns and cities.

Huang Yiping, chief China economist at Barclay's Capital, said the key task of urbanization should be to integrate migrant workers into the cities while simultaneously developing a modern agricultural sector, rather than embarking on a new wave of poorly planned infrastructure investment.

"In our view, while urbanization creates demand, it is industrialization and the accompanying rise in productivity that creates supply and which will ultimately determine China's potential growth, especially amid a shrinking labor force and slower capital accumulation," said Huang.

"The government is expected to be careful when allocating fiscal spending as it carries out the new urbanization plans," he added.

Some analysts have predicted that by the end of 2020, China's urbanization rate is likely to rise to 60 percent of the population

Chen Xiwen, director of the Office of the Central Committee's Leading Group on Rural Work, warned that one precondition for urbanization should be ensuring a sufficient and stable supply of agricultural produce, which will require improved efficiency in agricultural production, based on advanced technology and management.

"In addition, the provision of housing, social security and education for migrant workers and their children once they settle in the cities, will also present problems that must be solved during the urbanization process," he said.