(Bloomberg) -- China vowed to deliver better public services for workers who moved to cities from the countryside, an effort that would boost the economy by removing an obstacle to urbanization.
Local authorities should provide public services to rural migrants and families settling in cities instead of only those who have an urban hukou, or household registration, according to a five-year plan on urbanization issued by the State Council — China’s cabinet — on Wednesday.
The central government will reward regions that attract more migrant workers from the countryside and population inflows in general. Cities that see an increase in residents should be allocated greater land quotas, according to the document. It also pledged to step up vocational training for migrant laborers, and ensure their children can go to school in the cities where they work.
The changes would affect some of the 177 million migrants who make up about a third of China’s urban employees. Mostly working low-paying jobs in industries like construction and manufacturing, they’ve had limited access to social welfare in urban areas because their hukou is tied to a person’s place of birth.
The government last issued a five-year plan on urbanization in 2022. The fact that it came up with an update just two years later “shows that policymakers are a little panicked about the slowing pace of urbanization during the Covid years,” said Ernan Cui, an analyst with Gavekal Dragonomics.
The new plan reveals greater urgency in pushing for faster urbanization so as to create demand for property and infrastructure, according to Cui. But the measures are unlikely to be enough to restore the kind of growth from urban construction seen in the past, partly due to a decline in the overall population and over-development in many cities, she said.
Economic Engine
Rapid urbanization, once an engine of growth in China, has slowed in recent years after fueling the boom times over the past four decades. While the share of city residents surged from around 20% of the population when economic reforms started in 1979, further inroads are in doubt given that China has reached what some analysts call late-stage urbanization.
About 66.2% of the population lived in cities last year, compared with 53% in 2012, according to Zheng Shanjie, head of the National Development and Reform Commission.
Boosting the urbanization drive, which is tied closely to giving out more permanent residencies for cities to migrant workers, will help spur domestic demand, Zheng said in March during the National People’s Congress.
Every one percentage-point rise in the urbanization rate can drive about 1 trillion yuan ($139 billion) of investment and another 200 billion yuan of consumption, Zheng said at the time.
The State Council document targets a rate of “nearly 70%” in urbanization in five years. It also encourages cities to gradually start providing government-subsidized housing to migrant workers by building more public rental homes.
Trivium China, a Beijing-based policy research consultancy, estimates a four percentage-point increase in the share of urban residency holders would be equal to 50 million people, roughly the same as the population of South Korea.
(Updates with analyst comments starting in fifth paragraph.)
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