Citi Asia chief expects capital markets to benefit from China's urbanisation

PUBLISHED : Wednesday, 15 January, 2014, 1:38am
UPDATED : Wednesday, 15 January, 2014, 5:41am

The development of capital markets on the mainland will get a boost from Beijing's urbanisation drive in the next decade, says the chief executive of Citi Asia Pacific.

In the next decade, there will be 400 million people moving to cities, which will need to identify sources of funding and capital to pay for urbanisation projects.

"Capital markets can play a larger role in the future," Stephen Bird said at the Asian Financial Forum. "That will attract foreign investment."

Bird said most of the funding for urbanisation so far was supported by the central government.

Urbanisation was highlighted by the political leaders when they charted the roadmap for comprehensive reforms at a key Communist Party meeting in November last year.

Beijing plans to spend 40 trillion yuan (HK$51.3 trillion) over the next two decades on its urbanisation push - an amount equivalent to its annual gross domestic product in 2012.

Economists said an expansion of the bond market could also fund urban development.

Apart from the opportunities in the finance market, speakers at the forum said the process of urbanisation was creating huge demand for improved infrastructure, health care, education and environmental quality.

Fosun International chief executive Liang Xinjun highlighted health care as he noted the rapid growth of the middle class bolstered demand for health-care services and an ageing population spurred demand for the health-care and hospitality sector. By the end of last month, about 200 million people out of the nation's 1.34 billion population are over 60 years old, he said.

Health-care spending at present accounts for only 5.1 per cent of the country's GDP, against 17.9 per cent in the US, according to Liang. He expected the percentage to jump significantly in five to 10 years.

Liang said developers should think of a new business model to help city governments push ahead with urbanisation instead of the traditional model of buying a site and building a project for sale. He said employment was the key issue in determining if urbanisation was successful.