More mainlanders are now living in urban areas than in the countryside, according to a report released by a government think tank this week.
The Chinese Academy of Social Sciences report also sheds light on a new social group - 'pseudo' city dwellers.
These are new arrivals from rural areas who live on the margins of their adopted cities because most are denied access to social security due to restrictions imposed by the decades-old hukou household registration system.
Citing statistics from the sixth national census completed in November last year, the report, Blue Book on Social Development: China's Social Situation, Analysis and Forecast for 2012, concludes that the urban population will exceed half the total population this year.
Professor Li Peilin, chief author of the blue book, said the new statistics marked a milestone in social transformation on the mainland that would fundamentally change the way people lived, worked and saw the world.
'Urbanisation is a third growth engine along with industrialisation and market-oriented reform because rising land values will become an important source of economic growth and fiscal revenues,' he said.
'Rapid demand in the housing market in this process will be good for the need for a shift in the mode of economic growth [from being driven by trade] to boosting domestic consumption.'
But Li also said the urbanisation process posed challenges because of the need to address inequalities in access to welfare.
The annual blue book offers insight into public sentiment about a range of social issues.
It lists rising consumer prices, difficulties in gaining access to decent medical care and the widening income gap as people's main concerns this year.
Corruption was also a worry, with a survey in 10 mainland cities showing the percentage of people concerned about the issue rising from 19.4 per cent to 29.3 per cent.
The most alarming finding was that only 17.6 per cent of migrant workers from rural areas had access to the medical insurance available to those with urban household registration. Only 30 per cent were covered by the social security fund.
The report found that 30 per cent of people registered in rural areas were living and working in cities and they accounted for nearly 40 per cent of the urban population.
But only 40 per cent of them had been able to take their families with them, meaning 60 per cent were forced to separate from their families in the hope of finding a better life in urban areas.
Sociologist Lu Xueyi said 160 million farmers were now living and working in cities and the urban population could exceed 80 per cent by 2050.
Lu said it was time for policymakers to address some of the pressing issues migrant workers were facing, with social tensions rising as a result of such issues as pay disputes.
Liu Shouying, a research fellow from the State Council's Development Research Centre, said there was no turning back in the urbanisation process but the plight of migrant workers had been an issue too delicate for any regional government to address alone.
'Behind the process of urbanisation is a need for a redistribution of enormous social benefits, which have so far been reserved for urban dwellers, and a delicate balancing act between urbanisation and sustainability in major metropolises like Beijing and Shanghai,' he said.
'This is something the central government could be capable of delivering and it's better to deal with it sooner rather than later.'
China is planning the world's biggest mega city by merging this many cities in the Pearl River Delta for a metropolis of 42 million