New urbanization plan ambitious: analysts

A basketball court in a renovated district of Zaozhuang, Shandong province. The central government aims to accelerate such projects, part of the nation's urbanization drive, with total investment expected to exceed 1 trillion yuan ($162 billion) this year. Guo Xulei / Xinhua

China's first urbanization plan demonstrates its ambition to achieve multiple goals through a massive economic and social program, analysts said.

These goals, as stated in the 30,000-character New-style Urbanization Plan (2014-20) released on Sunday, include boosting domestic demand, addressing rural and agricultural problems, facilitating industrial upgrading, promoting regional development and advancing social benefits for all.

The multiple goals are evident in the text of the plan, which not only discusses giving migrant workers full urban rights - a policy repeatedly pledged by the government - but also deals with a wide spectrum ranging from better city layouts, employment, regional development, public service systems, reductions in energy use and even the conservation of cultural heritage.

"It is a comprehensive plan across different government departments that deals with a full range of issues. What impressed me is it actually concentrates less on the economic aspects and more on social and environmental matters," said Jonathan Woetzel, co-chair of the Urban China Initiative and director of McKinsey & Co.

He said this showed the government attaches much more importance to the quality of urbanization and puts the urban inclusiveness at the center of the program.

"I don't think the government has a choice (in terms of advancing urbanization). Instead, its goal is to find ways to help migrant workers," he said, adding the specific number in the plan should be interpreted more as an "expectation" than a "target".

Although the urbanization plan is more of a response than an initiative, some experts do see solid benefits from it.

"This plan emerged at a time when the Chinese economy faces increasing downward pressures," said Yi Peng, a researcher with Pangoal, a think tank.

"From a long-term perspective, pushing forward this new-style urbanization could address the financial gap between urban and rural areas, boost domestic demand and stabilize social expectations. From a short-term perspective, it could increase investment opportunities in shantytown redevelopment and urban transportation - although its primary goal is not to achieve a great leap forward in the property sector," he said.

Analysts also said the implementation of the plan will be challenging. China's urbanization process, although it has only recently just passed its halfway mark, has already shown signs of slowing. The urbanization ratio, measured as the urban population's share of the total population, rose by only 1.16 percentage points in 2013, according to the National Bureau of Statistics. That's the slowest since 1996, except for 2008, when the global financial crisis hit China.

Analysts said this is why in the plan the government set a low-key goal for the urbanization ratio: The number should rise to 60 percent of the total population by 2020. Given China's urbanization ratio had already reached 53.7 percent by 2013, it means the nation should only add 0.9 percentage points annually in the following seven years to reach the goal.

However, the government is more concerned about quality of life, which also has its challenges. The plan states 45 percent of the population should have urban hukou (household registration permits) by 2020, which means they should have equal access to a variety of social entitlements linked with a hukou by then. By 2013, only 35.7 percent of Chinese held urban hukou. It is not generally regarded as being easy to add another 10 percent points to this figure.

This is why the plan states China will strive to narrow the gap between the urbanization ratio measured by regular residents and the urbanization ratio measured by urban hukou holders by 2 percentage points, indicating a stronger emphasis on social inclusion. Currently the gap between the two is 18 percentage points.

Realizing these goals will require considerable financial input. A Chinese Academy of Social Sciences report estimated the average cost for each rural resident to move will be 131,000 yuan ($21,480), of which 26,000 yuan will be covered by the government.

To cope with the financial challenge, the plan states there will be a "diversified" and "sustained" funding mechanism. For the first time, the State Council has agreed to allow local governments to issue municipal bonds.

Woetzel said municipal bonds are important but will not be enough. Local governments should be able to raise their fiscal revenues by levying property taxes and receiving more money from the central government.