An Empirical Study on the Factors of Chinese Urbanization Process and Policy Proposals about the “New-Type” Urbanization

doi:10.4236/jss.2014.29003

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Open Journal of Social Sciences, 2014, 2, 12-17

Published Online September 2014 in SciRes. http://www.scirp.org/journal/jss

http://dx.doi.org/10.4236/jss.2014.29003

How to cite this paper: Pan, Q.H. and Xu, R.F. (2014) An Empirical Study on the Factors of Chinese Urbanization Process

and Policy Proposals about the “New-Type” Urbanization. Open Journal of Social Sciences, 2, 12-17.

http://dx.doi.org/10.4236/jss.2014.29003

An Empirical Study on the Factors of

Chinese Urbanization Process and

Policy Proposals about the

“New-Type” Urbanization

Qinhua Pan, Ruofan Xu

Schools of Economics and Management, Tongji University, Shanghai, China

Email: [email protected], [email protected]

Received April 2014

Abstract

First of all, this thesis will compile negative effects of this process since the reform and opening-up

policy was enacted. And then the policy background, the connotation and the main function of

new-type urbanization will be introduced. Followed by an empirical study, this thesis will also

analyze the main factors of traditional urbanization and make corresponding policy proposals for

modern urbanization nowadays.

Keywords

The Factors of Urbanization, the New-Type Urbanization, Empirical Study

1. Introduction

With the adjustment of national economic structure, the momentum of Chinese economy is changing from rely-

ing on export and investment to domestic demand. Meanwhile urbanization is the most powerful weapon to en-

hance internal demand. Prime minister Li Keqiang points out that, as the law of modernization development, the

urbanization ratio of China will improve continually in future ten or twenty years. A considerable amount of ru-

ral remaining labor force and population will transfer to cities each year, which will lead to rapid increase in in-

vestment and consumption, and also more kinds of human resources for city development. Some scholars argue

that urbanization is one of the three engines of Chinese economic transition: according to the data provided by

McKinsey & Co, the urbanization ratio of China is now at 52.6% (2013), and will be up to 70% in 2020. More

people transferring to cities means more consumption and more opportunities for employment.

So, this thesis aims to find out the key factors in the process of urbanization in a way of empirical test and

analyze the results in order to make some corresponding policy proposals for the new-type urbanization. The

structure of this journal is about 4 sections: Firstly, the problem of Chinese urbanization; Secondly, the introduc-

tion of so-called “new-type” urbanization; Thirdly, the empirical study of urbanization; Last but not least, the

corresponding policy proposals.

Q. H. Pan, R. F. Xu

2. The Problem of Chinese Urbanization

Lengthways from 1978 to 2011, the urban population of China went from 172 million to 690 million; the ratio

was from 17.9% to 51.3%. Although the level of urbanization was seemingly near to the average of the world,

the conflicts and contradictions were more and more non-neglectable.

1) Low-cost and predatory mode

Low-cost way of urbanization, which accelerated the process of population migration, left some problems.

The worst one may be urbanization lagged behind industrialization, neglecting the importance of population ag-

glomeration except economy agglomeration. Take the rate (urbanization ratio:industrialization ratio) in 2011 for

example, it was 1.1 (51.3%:46.8%) compared with 1.95, the average level of the world.

2) For rural residents, the real right of land performs practically no function

This problem included that farmer’s land rights was impaired in the past 30 years; the local government

finance relied on auctioning lands; the efficiency of land utilization was low; the framework of land law was

imperfect.

3) The Urban and rural household registration system

In China, Urban population refers to all people residing in cities and towns including 160 million rural mi-

grant workers (or peasant-workers). However because of the hinder of registration system these workers were

not treated equal to other citizens.

4) The imbalance and inharmony of urbanization development

Compared with the west, the east areas were overburdened by rapid urbanization, causing resources of econ-

omy and society mismatch. As population was over-intensive, metropolis like Beijing, Shanghai and Guangzhou

had a lot of troubles such as water, air, education, healthcare and so forth.

On the other hand, the similar structure of regional economy and the convergence of industrial structure

bringing excessive competition lead to lower utility.

5) High level of energy dependence

In future decades, the need for urbanization of iron, copper, chromium, sylvite, oil, natural gas and so on will

be rigid, the bulk mineral imports will ascend consistently. Thus the degree of foreign-trade dependence will al-

so become higher.

3. The Introduction of New-Type Urbanization

3.1. The Policy Background

In the Central Economic Working Conference Dec. 16th 2012, the conclusion of discussion indicates that urba-

nization is the historic mission of Chinese modernization development and also the way to expand domestic

demand, so it’s vital and urgent to make urbanization develop in a healthy and ordered way. Meanwhile, the Na-

tional Planning to Promote the Healthy Development of Urbanization (2011-2020), which is the master planning

outline of national urbanization, has already finished and will be published soon.

3.2. The Connotation and Function of New-Type Urbanization

1) The connotation

Until now, there are no standard definitions of new-type urbanization. Generally speaking, the new-type ur-

banization contains four aspects: a) coordinated with the development of industrialization and agricultural mod-

ernization; b) adapted to population, economy, resources and environment; c) having equal opportunities for all

kinds of cities (Large, medium or small) and towns to blossom; and d) with population aggregation, citizeniza-

tion and the coordinated development of public service. All in all, the characteristics of new-type urbanization

are urban-rural overall development, urban-rural integration, production-city interaction, economization and in-

tensification, ecological and livable, harmonious progress.

2) The function

Firstly, in the macro level of nation, the new-type urbanization is the engine of economic growth.

International experience shows that domestic demand is the endogenous power of economic growth, espe-

cially for large countries. It’s essential to convert the growth pattern from relying on investment to consumption.

But there should be a stage of transition, which means investment and consumption have the same privilege to

boost growth in this time. The new-type urbanization will be the key to this kind of transition.

Q. H. Pan, R. F. Xu

Then, in the meso level of industry, the new-type urbanization will impulse industrial accumulation and up-

grade.

As the advantage (compared with rural areas) of capital technique, transportation, living conditions, human

resources, communication etc., a large number of labor force and production activities converge on urban re-

gions. Thus the scale of the urban market increases rapidly, impulsing industrial upgrade continually.

Lastly, in the micro level of economic entity, the process of the new-type urbanization has benefit to improve

residents’ income, especially for rural residents.

Those people who migrate from countryside to city mostly go in for secondary and tertiary industry, with

higher level of salary than what they have earned in rural areas; for citizens, their income can also be improved,

as investment and consumption was boosted by those immigrations.

4. The Empirical Study of Urbanization Influencing Factors

Past empirical studies on urbanization [1]-[3] were mostly based on the analysis of time-series, and the data

covered both national level and some specific administrative districts’ level.

While, this thesis will use the panel data with the model of two-way fixed effect [4]. Based on the existing

achievements by other scholars, this paper will take a further step to analyze the specific factors of Chinese ur-

banization, will explain the outcome and will make some policy proposals for the way of future development

(the new-type urbanization).

4.1. Selecting Data

Considering the availability, the data of this thesis include 28 provinces of China (excluding Chongqing, Hong

Kong, Macao, Hainan and Xizang) from 1987 to 2008. The independent variables (explanatory variables xi) are

listed in the following Table 1.

The dependent variable (explained variable yi) is the urbanization ratio, the ratio of urban population to total

population [5].

4.2. The Outcome of Regression

As the result indicates, we find that the significant factors of Chinese urbanization include: GDP per capita of

provinces, the provincial tertiary industrial structure, household registration system, the way of land-expansion

urbanization, economic openness and rural income level of provinces (Shown in Table 2).

4.3. Analysis of the Outcome

For the proxy variable of household registration system: peasant-workers (migration), the coefficient of it is sig-

nificantly positive, which means the increasing number of peasant-workers in cities boost the economic devel-

opment of cities leading to improve urbanization level, but also they are counted as temporary alien workers of

the nominal urban population. This is because hindered by the household registration system, they cannot gain

the permanent urban residence certificate (in Chinese it calls: hukou) easily.

The variable of the areas of city (land) represents the way of land-expansion urbanization, the coefficient of it

is significantly positive proves that land-expansion was one of the ways to improve urbanization level. General-

ly speaking, one of the prominent problems or “features” in the process of Chinese urbanization is that the

growth of urban built up area is much faster than the gather of urban people apparently. The result of this thesis,

the coefficient of land is small but significant, proves this point of view.

The coefficient of GDP per capita (GDPpercapita), one of the four variables of economic development, is

significantly positive. So it means increasing the average (not only the aggregate) income level of one region

can enhance the urbanization level truly, which fits our instinct.

However, the coefficient of tertiary industrial structure (third_second) is significantly negative, which means

at present the tertiary industry in our country hasn’t absorbed rural surplus labor force adequately. As many re-

gions of high level tertiary industry in China are the developed areas such as Shanghai, there may be some cer-

tain rejective intention against immigrations. At the same time, the primary industrial ratio is not significant.

The economic openness of one region represents the development level and the geographic position of prov-

inces (in China, east areas near the sea are considered more exoteric and developed) indirectly. The coefficient

Q. H. Pan, R. F. Xu

Table 1. Selected variables of the factors of urbanization.

Factors of Urbanization Specific Index & Variable Name Explanatory of Index

Economic development

GDP per capita:

GDPpercapita

GDP per capita of provinces

Logarithmic GDP of primary industry:

ln 1stGDP

The development of provincial primary industry

Logarithmic GDP of secondary industry:

2ndGDP

The development of provincial secondary industry

Logarithmic GDP of tertiary industry:

ln 3rdGDP

The development of provincial tertiary industry

Industrial

structure

The added value of the tertiary industry/The

added value of the secondary industry:

third_second

The provincial tertiary industrial structure

The added value of the primary industry/The

added value of the secondary industry:

first_second

The provincial primary industrial structure

Household

registration

system

easant-workers:

migration

The proxy variable of urban and rural household

registration system

The areas of city

Built

-up urban area:

land

Represents the way of land

-expansion urbanization

Economic openness

alue of provincial imports and exports/GDP

(converted to dollar ):

iexport_ratio

Reflects the openness, economic level and geographic

position of provinces (in China, east areas near the sea

are considered more exoteric)

Income level

Logarithmic urban income:

lnurbanincome

The absolute urban income level of provinces

Logarithmic rural income:

lnruralincome

The absolute rural income level of provinces

Rural income/

urban income:

incomeratio

The relative income level of provinces

Population growth

(control

variable)

Logarithmic natural population growth rate:

populationgrowth

The growth of provincial population

Education level

(control variable)

College and high school students per ten thousand

people:

college & highsch

Represents the stock of provincial

human capital

Average education years:

education

Represents the knowledge level of provinces

Government expenditure

(control variable)

Agricultural expenditure:

ariexp

Represents the support of provincial agriculture

Fiscal expenditure / GDP:

govexpense

Represents the proportion of provincial fiscal

expenditure

Infrastructu re

(control variable)

Capital stock:

capital

Represents the capital level of provinces

Length of high way:

highway

Represents the road construction of provinces and the

convenience of the connection between cities and

country sides

Fixed investments:

invest

Represents the investment level of

provincial infrastructure

Employment

(control variable)

Employee of

primary and secondary industry:

primaryworker & secondaryworker

Represents the employment distribution of provinces

Q. H. Pan, R. F. Xu

Table 2. The result of the two-way fixed effect modela (The dependent variable is urban ratio).

Explanatory Variables (xi) Coefficient

Economic development

GDPpercapita 0.00189*

ln 1stGDP −0.01106

ln 2ndGDP −0.02909

ln 3rdGDP 0.03954

Industrial structure third_second −0.06682***

first_second 0.01593

Household registration system migration 0.00003***

The areas of city land 0.00002***

Economic openness iexport_ratio −0.03387***

Income level

lnurbanincome −0.15328

lnruralincome 0.07139*

incomeratio −0.05330

Control variables: agriexp capital highway govexpense college highsch primaryworker

Dummy variables of year: yes

R2 (within) = 0.991 Number of obs: 173

(between) = 0.0357 Number of groups: 26

a. The significance testing used robust standard error. As some observations were missing, the number of obs was low and 2 groups were missing.

*represents that the estimation is significant at 10% level, **represents 5% and ***represents 1%.

of it (iexport_ ra tio) is significantly negative reflects the problem of rejection of outsiders, because rejection of

outsiders may downgrade the level of urbanization to some extent.

In the three variables of income level, the coefficient of rural income level (lnruralincome) is significantly

positive indicates improving rural income can boost the urbanization ratio. While neither the urban income level

(lnrubanincome) nor income gap between urban and rural area is significant.

5. The Conclusion and Proposals

The result of regression based on the panel data of 28 provinces from 1987 to 2008 finds out the influencing

factors of traditional urbanization to some degree. The main factors are the household registration system, land-

expansion mode, GDP per capita of provinces, the tertiary industry ratio, the rejective intention of developed re-

gions and the rural income level. Based on these findings, the following policy proposals are made:

5.1. Lead by Metropolis, Boosted by Urban Agglomerations and Avoid Relying on

Land-Expansi on

Taking advantage of the lead of metropolis to boost the development of urban agglomerations is designed as one

of the principle thinking of urbanization. It aims to use urban agglomerations to drive large, medium and small

cities and towns to develop coordinately. At the same time, by improving the structure and scale of cities, con-

trolling the number of metropolis and giving priority to developing small towns, satellite towns, towns w ith

professional characteristics, economic growth and urbanization development can be realized.

When it comes to selecting the way of urban pullulation, it’s necessary to avoid traditional expansion mode of

enclosure. As is analyzed before, land-expansion did play a vital role in the past process of urbanization. How-

ever, with the severe lack of land resources and agricultural land this extensive form of enclosure movement

needs to be reformed immediately. The goal of urbanization should be changed from expanding the land of ci-

ties to improving the hardware and software facilities in city areas, optimizing the urban layout and creating

characteristic cities.

Q. H. Pan, R. F. Xu

5.2. To Reform the Household Registration System

In our empirical outcomes, one of them with Chinese characteristics is the peasant workers who truly have in-

creased the nominal urbanization level (by 2011, the real ratio of urbanization is about 35% to 36%, far less than

the official statistics: 51%) but were not considered as citizens (of course they didn’t have the same rights and

protection as city people had). Some scholars argue one of the crucial points of new-type urbanization is to en-

suring the peasant-workers both the urban residence certificate (hukou) and the equal treatment of urban citi-

zens.

5.3. To Reform the Scale of Cities and to Increase the Number of Medium and Small Cities

The outcome above indicates metropolis may have rejective intention against immigrant people from developing

regions whose economy level and income level are far less than the big ones. Given this, increasing some me-

dium and small cities moderately can narrow the gap of different regions, and also promote the citizenization of

peasant-workers orderly. Thus the real urbanization ratio can be improved.

New medium and small cities should embrace the centre city or metropolis positioned them as satellite cites

with complementary function to form urban circle and create economy of scale jointly.

5.4. To Narrow the Income Gap between City and Country Side and to Improve the Rural

Income

As is proved above, the increase of rural income can enhance the level of urbanization. With the economy of

scale brought by the process of urbanization, the added value created by peasant workers is also counted as the

increment of cities’ net profit. So, the local governments should not only consider immediate rewards but also

put the task to improve rural income into the development of new-type urbanization.

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