Limiting urban population has drawbacks

Liang Jianzhang, CEO of Ctrip and a respected demographer who obtained his PhD in Economics from Stanford University, recently wrote an article that said that controlling the population scale in cities would limit talented people’s potential to perform well.

He explained that we should compare the correlation between the total population of the country and the population of the largest city. If we look at this, the population scale of Chinese metropolis still has much potential. For instance, Tokyo’s population is 37 million, more than one-third of Japan’s total population. So he suggested that the population scale planning of Beijing and Shanghai should be at least 50 million, considering that currently our country’s total population is more than 1.3 billion. If we went against economic rules and imposed restrictions on the population scale of metropolis, problems may worsen as follows:

First, it may weaken the metropolis’ capacity for innovation and drag the economy down. The advantage of a metropolis is that high-potential productive population are attracted to the city, then help make the metropolis function as an engine for an innovative economy. As the rate of return on investment stays low in 3rd and 4th-tier provincial cities, compared to the relatively outstanding performance of the metropolis, both investment and talent resources would better be guided into the metropolis to sustain growth.

Second, limiting the population scale in the metropolis would also worsen the imbalance of population structure, which has already caused problems for China’s economic development. The universal two-child policy could alleviate the pressure, but the fertility rate is estimated to still stay low for a period, especially considering the high cost of living in urban cities. Encouraging more population inflow is one aspect, but supportive measures is another, such as giving direct economic subsidies in the form of tax exemptions or preferential policies for social insurance, which could ease the burden when urban residents consider having more children.

In response to concerns that increasing the metropolis’ population size may pose challenges for the capacity of property and potentially push up prices, Liang suggests that there’s no need for Beijing and Shanghai to reserve too much arable land or occupy arable land in remote areas to foster urbanization. It could only reduce the land efficiency. Actually, from an empirical analysis, authorities should increase urban land supply, as a fundamental way to curb real estate prices.

In conclusion, Liang emphasized that only maintaining a young and planned population could fuel the urban development’s future and make Chinese metropolis become a world innovation center. Having a metropolis that is livable and full of room for young people to raise the next generation is a precondition for China’s pursuit of its road to become an advanced country.

Wu Zheyu organized and rewritten from public information.