Is China’s rate of urbanisation too fast or too slow?

Some believe that China’s rate of urbanisation is too slow while others criticise its rate as not being fast enough. 

While China's urbanisation rate is fast compared to countries in the same per capita income group, the challenges posed by the scale of change are profound, necessitating a more balanced approach and thus a shift in policy focus.

Two definitions of urbanisation

Urbanisation, according to Britannica, is the process by which large numbers of people become permanently concentrated in relatively small areas, forming cities. This definition is about the physical concentration of people.

However, people living in cities permanently are not necessarily urban citizens. If one defines urbanisation as rural citizens becoming urban citizens, then the fact that some people cannot enjoy equal rights and access to public services as other urban citizens, would mean that some people living in cities would only be partially ‘urbanised’.

Figure 1

The chart above plots the relationship between a country’s urbanisation level and GDP per capita in 2016. The upward slope suggests there is a positive correlation between economic growth and urbanisation. Based on this figure, one may argue that China’s urbanisation rate is lower than many other counties in the same GDP per capita group (middle-income countries).

China's GDP per capita income exceeded US$10,000 in 2016. But other countries such as Brazil, Mexico, Iran, Chile, Peru and Uruguay had outperformed China. Even countries with lower GDP per capita, such as Angola, Ukraine and Cuba had higher urbanisation levels.

Two tales of China’s urbanisation speed

The chart below shows how the share of population in urban areas changed in response to GDP growth.

Figure 2: China is not urbanising as fast as other countries 

We can clearly see that the line for China (under that for Malaysia, on the left column) was less steep than those for Indonesia, Vietnam and Thailand. The chart on the right-hand side shows even steeper slopes.

Using this methodology, some policy advisers, including those from international organisations, suggest that China’s urbanisation rate has fallen behind other low- and middle- income countries in the process of industrialisation.

I was presented with these charts by some international advisers who were trying to put the case for faster urbanisation. They argued that the less steep slope perceived by economists was a sign of market distortion and should be corrected by faster urbanisation.

Many scholars inside China also held a similar view using similar measurements. The underlying logic behind this line of argument is that there exists a more or less recognised standard of urbanisation to per capita GDP ratios and when a country’s performance is below average, they need to be brought in line with other countries.

However, this can be misleading when used to guide a country’s urbanisation strategies, because it does not take into account the relationship between the timeframe and the scale of changes.

The chart below shows a different scenario with timescale factored in. According to the database provided by the World Bank, before China became a middle-income country in around 2005, only Indonesia from the top ten most populated countries urbanised faster.

Figure 3

China's urbanisation outpaced Indonesia in the five years after it joined the World Trade Organization in 2005. It also caught up with Brazil in terms of the growth of urban population after it became an upper middle-income country. 

The steeper slope of the urbanisation line for China in the chart, at different stages of its economic development, shows that it has been urbanising at a higher speed than the other countries depicted for a substantial amount of time.

An exceptional rate of urbanisation?

If we look deeper into the scale of change, within 25 years China’s urban population increased by an astounding 491.1 million, despite the restrictive one-child policy which led to lower natural growth in urban populations.

Prior to 2017, some of the largest cities such as Beijing, Shanghai, Shenzhen and Guangzhou each hosted between two and five million migrants – most of whom were rural-urban migrants. They work in urban manufacturing and service sectors. In this sense, China has been urbanising exceptionally fast rather than being slow.

Figure 4: Share of people living in urban areas, comparing China and other countries with a large population, 1978-2020

The next article will examine what motivated the ‘too slow’ argument including economic development theory and, in contrast to this, the equalisation of social rights for all urban residents. If one follows the second argument, the policy solution would be to grant all migrants in urban China equal social rights as local citizens.