World Bank-State Council study urges priority on China land reforms

Report lists six key issues in mainland push to have 60pc of population live in urban areas

PUBLISHED : Wednesday, 26 March, 2014, 5:29am
UPDATED : Wednesday, 26 March, 2014, 5:37am

Beijing must put land reforms at the top of its agenda to turn more rural people into city dwellers, a joint study on the mainland's new urbanisation model launched by the World Bank and the Development Research Centre of the State Council said.

Beijing could afford the costs brought by its urbanisation plan for the next two decades if it could make the necessary policy adjustments to resolve distortions in the way of resources allocation, officials from the two institutions said yesterday at an international conference.

A book titled Urban China will be published after final rounds of discussions on the study launched 15 months ago.

The government laid out a framework for the country's grand migration plan this month, targeting to have 60 per cent of its 1.3 billion population live in urban areas by 2020 from the current 53.7 per cent as part of efforts to boost consumption and productivity.

But in-depth discussions and debates continue as Beijing seeks to map out the details of the plan.

Mulyani Indrawati, the managing director and chief operating officer of the World Bank, said the joint study suggested a new urbanisation model with "sustainability, inclusiveness and efficiency".

Mainland cities are to spend US$5.3 trillion on infrastructure over the next 15 years. But with more efficient, denser cities, China could save US$1.4 trillion in infrastructure spending - or 15 per cent of last year's gross domestic product, Indrawati said.

The report estimates that total annual cost of all urban public services, infrastructure and social housing would average 6.1 per cent of GDP from last year to 2030.

"Every year, 20 million Chinese move into cities. That is 1.8 million a month, the equivalent of the cities of Hamburg or Vienna," Indrawati said.

"I don't think that China can shift its growth model from investment and export-based to more domestic-driven and consumption-based without addressing the urbanisation issue."

The report outlined six priorities for establishing an urbanisation model.

"Perhaps the most urgent is the land agenda: once cities have expanded in an inefficient way, it is hard to reverse," it said.

The government should allocate rural land in a more market-driven manner and increase transparency in secondary land-market transactions, it said.

The five other priorities are reforming the household registration, or hukou system; placing urban finances on a more sustainable footing, including levying property tax; reforming urban planning and design; managing environmental pressures; and improving governance at the local level.

Liu Shijin, a vice-director at the Development Research Centre, said the joint study was submitted to various government agencies for their reference in drafting the urbanisation plan.

While many believe land reform and property tax may serve as breakthroughs for the success of the overall plan, Liu said: "It's also an area that's not easy to see breakthroughs."

Indrawati agreed that the tasks are challenging and warned that carrying out the reforms too slowly would weigh on China's economic growth in the long run.

The government has yet to offer detailed plans for land reform. It has vowed to speed up laws on property tax, but little progress has been made so far.