Ur­ban­iza­tion slows, rais­ing chal­lenges for so­cial ser­vices

China Daily (Canada) - - CHINA - By ZHENG YANGPENG zhengyang­peng@chi­nadaily.com.cn

As China pins its hopes for boost­ing con­sumer de­mand on growth in the num­ber of ur­ban res­i­dents, an omi­nous sign looms large: The pace of ur­ban­iza­tion in the world’s most pop­u­lous coun­try is slow­ing.

Ac­cord­ing to the lat­est data from the Na­tional Bureau of Sta­tis­tics, China added 19.29 mil­lion people to the ur­ban pop­u­la­tion in 2013. This seemed im­pres­sive, but it was lower than the 21.03 mil­lion new ur­ban res­i­dents seen in 2012.

From 2008 to 2013, the ur­ban­iza­tion rate of the coun­try climbed from 45.7 per­cent to 53.7 per­cent. But the an­nual gain was smaller each year. In 2010, there was a 3.35 per­cent­age point gain, the high­est an­nual in­crease. The gain dropped by 1.3 per­cent­age points in 2012 and then by an­other 1.16 per­cent­age points last year.

“A coun­try’s ur­ban­iza­tion pace tends to slow as it reaches 50 per­cent,” said Song Li, a re­searcher at a think tank un­der the Na­tional De­vel­op­ment and Re­form Com­mis­sion. “This means time is not on our side.”

The de­cel­er­a­tion of ur­ban pop­u­la­tion growth is a chal­lenge for the coun­try’s am­bi­tious ur­ban­iza­tion plan, but it is not the only one. The fast buildup of debt by lo­cal gov­ern­ments is an­other.

At the end of 2013, China’s na­tional au­di­tor re­vealed that the di­rect debt of lo­cal gov­ern­ments had grown to 10.9 tril­lion yuan ($1.8 tril­lion) by the mid­dle of last year. On top of that was an­other 7 tril­lion yuan in var­i­ous debt guar­an­tees.

Ge­o­graph­i­cally, debt ac­cu­mu­lated most at places where eco­nomic ac­tiv­ity was most brisk: Jiangsu and Guang­dong owe the most, ac­count­ing for 14 per­cent of the to­tal.

How­ever, debt also surged in China’s poorer western prov­inces, where lo­cal

The lo­cal govern­ment debt is­sue will def­i­nitely af­fect the re­sources they will be able to de­vote to pub­lic ser­vices.” FENG QIAOBIN PRO­FES­SOR OF PUB­LIC FI­NANCE AT THE CHI­NESE ACADEMY OF GOV­ER­NANCE

gov­ern­ments des­per­ately pur­sued bigticket in­fra­struc­ture projects to sup­port ur­ban­iza­tion.

Rel­a­tive to the size of their economies, the western prov­inces of Guizhou, Yun­nan and Qing­hai bear some of the heav­i­est debt bur­dens, along with the city of Chongqing. The to­tal debt-to-GDP ra­tio in Guizhou, for ex­am­ple, has reached a star­tling 80 per­cent.

Given the cen­tral govern­ment’s in­creas­ing scru­tiny (it has iden­ti­fied “curb­ing debt” as a key pri­or­ity in 2014), lo­cal gov­ern­ments may find it dif­fi­cult to pay for such things as so­cial en­ti­tle­ments for lo­cal mi­grant work­ers, a key el­e­ment of the “new-style ur­ban­iza­tion”.

“The lo­cal govern­ment debt is­sue will def­i­nitely af­fect the re­sources they will be able to de­vote to pub­lic ser­vices,” said Feng Qiaobin, a pro­fes­sor of pub­lic fi­nance at the Chi­nese Academy of Gov­er­nance.

Take Bei­jing, for ex­am­ple. The city bore 649.6 bil­lion yuan of di­rect debt as of mid-2013, while its gen­eral fis­cal rev­enue for the year was 366 bil­lion yuan. Even with land sales rev­enue counted, Bei­jing will strug­gle to re­pay its an­nual prin­ci­pal and in­ter­est.

But an­a­lysts said this would not hin­der the cen­tral govern­ment’s de­ter­mi­na­tion to put equal­ity in so­cial ser­vices at the cen­ter of the ur­ban­iza­tion pro­gram, as it was de­tailed in the Cen­tral Ur­ban­iza­tion Work Con­fer­ence at the end of 2013.

The con­fer­ence, the first of its kind, re­quired a “hu­man-cen­tric” ap­proach — in other words, pro­vid­ing the coun­try’s 333 mil­lion mi­grant pop­u­la­tion with equal so­cial se­cu­rity, pub­lic hous­ing and ed­u­ca­tion, the same as en­joyed by full ur­ban cit­i­zens.

Two moves fol­lowed that con­firmed Bei­jing’s “hu­man-cen­tric” ap­proach.

In late De­cem­ber, the Min­istry of Pub­lic Se­cu­rity sketched a re­form roadmap for the na­tion’s long-crit­i­cized hukou (house­hold reg­is­tra­tion) sys­tem. By 2020, the min­istry will es­tab­lish a new sys­tem based on reg­u­lar places of res­i­dence and sta­ble jobs, rather than on a per­son’s place of ori­gin.

More­over, the State Coun­cil an­nounced on Feb 7 that the na­tional pen­sion in­sur­ance sys­tem for ru­ral and ur­ban res­i­dents would be uni­fied to pro­vide equal ac­cess for all.

Ex­perts said both the hukou and pen­sion in­sur­ance re­forms re­quire money, as the govern­ment raises the sub­sidy for ru­ral hukou hold­ers. A pos­si­ble so­lu­tion to the money gap, pro­vided by the Third Plenum of the 18th Cen­tral Com­mit­tee of the Com­mu­nist Party of China in Novem­ber, is to set up a mech­a­nism match­ing the rate of fis­cal trans­fer pay­ments from the cen­tral govern­ment with the pace at which farm­ers be­come lo­cal ur­ban res­i­dents. The more a city ab­sorbs mi­grant work­ers, the more money it would re­ceive from the cen­tral govern­ment.

An­other so­lu­tion would be to boost lo­cal gov­ern­ments’ cof­fers to meet their heavy spend­ing re­spon­si­bil­i­ties, pub­lic fi­nance pro­fes­sor Feng said. But the first task, Feng said, is to ex­pand the tax rev­enue base of lo­cal gov­ern­ments, which could be ac­com­plished by ex­pand­ing property taxes and other taxes.


Pre­lim­i­nary work on new hous­ing on the site of a for­mer shan­ty­town gets un­der­way in Taiyuan, Shanxi prov­ince. The pace of ur­ban­iza­tion in China is slow­ing as lo­cal govern­ment debt threat­ens so­cial spend­ing plans.

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