Urbanization faces obstacles: experts

China is mulling an urbanization program as a way to boost domestic consumption, but the plan may not be as effective as hoped, experts told the Global Times Saturday.

The National Development and Reform Commission (NDRC), China's top economic planner, has finished drafting a national urbanization plan, aiming to further tap domestic demand, Beijing-based China Times reported Saturday.

According to the Beijing-based Economic Observer newspaper, the plan is expected to be unveiled in March, and it will involve policies ranging from investment in better basic infrastructure to upgrading towns into cities and improving benefits for farmers during the process of farmland requisition.

Tian Yun, an economist with the China Society of Macroeconomics under the NDRC, told the Global Times that the slowdown in growth of foreign trade last year is a major factor behind the authorities' efforts to boost urbanization.

China's foreign trade was expected to grow by about 6 percent for 2012, Minister of Commerce Chen Deming said on December 28, down from the annual target of 10 percent that had been set by policymakers earlier in the year, and well below the 22.5 percent year-on-year growth registered in 2011.

China's economic growth also slipped to 7.4 percent in the third quarter last year, the seventh consecutive quarter of slowing down.

Chen Naixing, a researcher with the Chinese Academy of Social Sciences, told the Global Times that considering the current situation, reforms are urgently needed to remove barriers to the country's economic growth, and urbanization offers a solution as it can help boost market demand.

But both Tian and Chen noted that although it looks appealing, the country's urbanization process has encountered some obstacles, like the hukou (household registration) system, which blocks migrant workers from enjoying equal benefits in urban centers.

"Improving basic infrastructure is one aspect of urbanization, but letting people become urbanized is more critical," said Tian, noting that local governments have the capability to deal with the issue, but it requires them to make sacrifices.

"Policies like offering urban social benefits to migrant workers, cutting taxes on companies and individuals, and lowering administrative costs, can effectively promote urbanization and foster economic growth," said Tian. But he also noted that such moves would reduce government revenue, which makes some policymakers unwilling to push ahead with them.

In terms of the town upgrading policy, East China's Zhejiang Province announced at the end of last month that it is mulling upgrading dozens of towns into cities, as a way to hand over more administrative power to the locals to promote urbanization.

"But everything basically remains the same, except the area names," Niu Fengrui, director of the Institute for Urban and Environmental Studies at the Chinese Academy of Social Sciences, told the Global Times, adding that he thinks such a change is purely cosmetic.

Tian also said although such a program is worth a try, it might not be as effective as the authorities hope.