As consumption demand increases and tertiary services grow creating jobs for rural labour, it is expected nation's competitiveness will improve.
BEIJING -- China, which suffered a dramatic fall in the latest global competitiveness rankings, sees further urbanisation as a major strategy to modernise and strengthen the economy.
According to local media reports, the Ministry of Civil Affairs said 12 million people a year would move to urban areas in the next two decades. Over the same period, 20 new cities will be created each year to accommodate people who leave their farms.
China now has 672 cities, compared to the US, which has around 8,800 cities. The US emerged the most competitive economy in the world in the latest annual global competitiveness report by the World Economic Forum released early this month.
China was ranked 41st, representing a decline of 10 places from the 32nd position it attained last year. The fall is due largely to an adjustment in the ranking parameters which gave more weight to technology and innovation.
Mr Mo Xinyuan, an economics editor, said China's rural population placed the country at a disadvantage since educational and other public services were spread out over a wide area.
China's current urbanisation rate is 31 per cent, which means that 69 per cent of the population lives in the rural areas.
He said China was also uncompetitive because, unlike the US, China's agricultural holdings were small as the limited farmland was divided among a large rural population.
Chinese economists said a study of different countries showed that there was a positive correlation between urbanisation and economic growth.
Urbanisation would drive consumption demand and boost the economy, said the State Council's Development and Research Centre.
Furthermore, expanding urban areas and the accompanying growth of tertiary services would create jobs for rural labour. Already at present, 138 million rural residents, or 16 per of the rural population, are not engaged in farming.
Mr Chen Weibang of the Chinese Research Institute of Urban Studies said China's decades-old policy of limiting the growth of cities was found wanting during the Asian financial crisis.
To counter weakened exports during the crisis by attempting to boost domestic demand, state economists found that demand in the cities was limited whereas peasants lacked sufficient purchasing power to stimulate consumption and boost growth.
He noted that some people were fearful of the problems of urbanisation, such as a more acute shortage of land, environmental degradation, traffic problems and crime.
He argued that urbanisation in fact saved land, pointing out that per capita use of space in urban areas averaged 100 sq m, compared to 170 sq m in rural areas.
He also said problems such as traffic and the environment had been resolved in other cities such as those in the West.
China's urbanisation should proceed at a steady pace, because of the large population, with a targeted urbanisation rate of 40 per cent to be achieved by 2010 and 50 per cent by 2020, he said.
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