In East Asia Forum, Kam Wing Chan of the University of Washington looks at the complexities of China’s urbanization process, and argues that it may not be the engine of economic growth that many hope it is:
The assumption is that a rural–urban shift will transform poor farmers into industrial and office workers, raising their incomes and creating a massive consumer class. Imagine farmers who once led simple, subsistence lives becoming workers in the city, buying up apartments and furnishing them with appliances.
Not surprisingly, China has been considered the poster child for this linear model of rural–urban shift and accompanying inexorable consumption growth. To the China ‘boomsayer’, even more impressive consumption is yet to come: another 300–400 million rural dwellers will be converted into city folks in the next 15 years. Prepare for China’s urban billion, advises McKinsey & Company. Think about how many millions of new apartments and how many cities like Shanghai will be needed for all these new arrivals; how many more Ikea-like home furnishing stores? The list goes on.
If one simply looks at the number of people relocating, China is indeed undergoing rapid urbanisation. But while its epic rural–urban shift has many of the trappings of what amounts to contemporary urbanisation elsewhere in the world, urbanisation in China is a more complicated phenomenon that requires a deeper understanding beyond the superficial, one-dimensional narrative.
Present-day China’s urbanism can be quite deceiving as the statistics are often misleading, and city bureaucrats excel at choreographing window-dressing ‘image projects’ and sequestering poverty. Most important of all, behind China’s sparkly modern, urban facade there is one crucial foundation of its prosperity that is unique in modern times and continues to be largely ignored by the business literature: China remains an institutionalised two-tier, rural–urban divided society. This is a consequence of Mao-era social engineering that continues to this day. This division not only manifests itself in economic and social terms, as in many Third World countries in the throes of urban transition, but is also tightly enforced, mainly through a system of hereditary residency rights, called the hukou.