China's urbanization cruises in fast lane

Hukou reform

Late last month, the State Council announced an overhaul of the hukou system, including equalizing rural and urban status, differentiated settlement schemes for migrant workers and the expansion of basic social services for all residents.

About 100 million people will settle in towns and cities by 2020, and the government will remove hukou limits in townships and small cities, relax restrictions in medium-sized cities, and set qualifications for big cities.

"These changes are a big step in breaking down institutional barriers between urban and rural lives," according to a research note from HSBC chief China economist Qu Hongbin.

It will also help China achieve its urbanization target in a sustainable manner and maintain growth by lifting productivity, Qu said.

Soon after release of the guideline, seven ministries announced that they would include more settlements in a list of national level key townships to receive special support from the government. The new list has 3,675 townships, nearly double the 2004 list. The development of those townships should be prioritized by local authorities.

"In the past decade, a large number of townships emerged," said Feng Kui, a researcher with the National Development and Reform Commission, the top economic planner.

The new adjustment adopts higher requirements, including population, growth potential and service functions, and will help raise the overall quality of urbanization, Feng said.

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