OECD Urban Policy Reviews: China 2015
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OECD Urban Policy Reviews: China 2015

China needs a new model of urbanisation to match the shift to a new model of growth. For decades, both urbanisation and growth have been based on robust export demand, cheap labour, cheap land and artificially low pricing of environmental externalities. None of these can support growth or urban development in the future. This review examines the major challenges associated with the shift to a new model of urbanisation, looking at a range such issues as social and labour-market policies, land use and transport planning, urban planning, urban governance and public finance. The review presents a new assessment of China’s major cities, which defines functional urban areas based on settlement patterns and commuting zones rather than cities defined as administrative units. The results show, among other things, that China has many more mega-cities, with populations above 10 million, than the official data suggest. The good news for China is that the reforms needed to foster what the authorities call “people-centred urbanisation”, while complex, are coherent with one another and supportive of the broader shift to a growth model that relies more on domestic demand and productivity growth.

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Over the last three decades, urban development has taken off in the People’s Republic of China, in tandem with its extraordinary growth performance. On the whole, urbanisation and development have reinforced one another. The growth of cities has been driven in large part by the dramatic growth in agricultural productivity set in motion by the first wave of reforms and the end of the 1970s, which reduced the need for labour on the land and generated unprecedented income growth. This, in turn, helped spur the development of China’s urban sectors, which took off as the country opened up to external markets, turning China into an export powerhouse. As cities grew larger and denser, the economic benefits of agglomeration came into play, helping to sustain productivity growth. The results have been staggering. The urban population has roughly quadrupled, reaching more than 750 million. Hundreds of millions of people have been lifted out of poverty, and China has been transformed from an overwhelmingly agrarian and relatively poor country into a predominantly urban, industrial middle-income economy. GDP has risen more than 16-fold, and its share of global GDP has risen almost 7-fold.

 
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