Australia-China Chamber of Commerce and Industry
of New South Wales







Urbanisation and Urban Development in China

By Marissa Koop
University of New South Wales

Posted to Web Site:  25 October 2001

About the author:

Marissa is a final-year student and will complete her combined Commerce/Arts Degree at the end of this semester.  Her majors are in Business Economics and Marketing, as well as Theatre and History.

She travelled extensively in Asia -- including China, Hong Kong and Thailand -- so she enjoys studying and learning more about Australia’s neighbours and about the places where she travelled.


Urbanisation and urban development have been on the rise in China since the end of the Cultural Revolution.  This time, with the relaxing of the strict rules regarding population mobility, saw the increased opportunity for Chinese people to move, and work and live, almost anywhere in the country that they desired.

As a result China has experienced a rise in the trend of rural-to-urban migration.  The rate of this trend has accelerated over the last thirty years with the growing income disparity between urban and rural areas being a key contributor to this pattern of population movement.

With such massive amounts of people flocking to the hundreds of cities and thousands of towns across China this is creating increasing pressure for urban development and urban renewal in these areas.

The Chinese government is struggling to meet all of the demands on it in this area and so is actively seeking additional and alternative means of adequately providing for urban dwellers.  The involvement of the private sector in the provision of public facilities is an option that is currently being explored, but is an option not without conflict and difficulties that are yet to be solved. 

Recent trends in rural-to-urban migration and urbanisation:

Urban population increases in China, which has the world's highest population, are linked to the growth of China’s large and fast growing economy.  A two-decade economic boom has spurred rapid urbanisation, powering a vicious circle of rural-to-urban migration and urbanisation throughout the country.

Since China adopted its reform and open-door policy in the late 1970s, the pace of urbanisation has continued to accelerate.  The number of cities soared from 223 in 1980 to the 1997 statistic of 668 cities and 17,000 towns.  

Three Chinese cities, Beijing, Shanghai and Tianjin, are among the world's megacities, those with more than 10 million residents.1

China’s urban population mounted from 191 million (9 per cent of the whole population) in 1980 to 380 million (30 per cent of the whole population) in 1997.

Another 80 million people originated from rural areas stay and work in the cities all year around.  Currently the pace of urbanisation is progressing at 0.5 per cent yearly, one of the highest rates in the world.2 

By the turn of the 21st century it is forecasted that some 90 per cent of the population will live in towns and cities.  In absolute terms, the urban population is expected to peak at 1.2 billion in 2060, which is broadly the same as China’s total population today.  

This near tripling of the urban population will have clear implications for construction and resource management.3

Historical background of Chinese rural-to-urban migration and urbanisation:

China was one of the first countries in the world to have cities, but these remained ''walled cities'' and administrative centres and did not develop into trading centres.

After the founding of Communist China in 1949, former years of fast urbanisation came to a halt when Chairman Mao Zedong proclaimed the Cultural Revolution in the 1960s.  Thousands of young intellectuals were forced to go to the countryside and learn from peasants how to build a socialist life, creating a tide of ''reverse urbanisation''. 

Urbanisation picked up again in the early eighties, when Deng Xiaoping launched economic reforms that heralded one of the world's largest migrations of people from the countryside to the towns.4

The success of the agricultural reforms under Deng Xiaoping in the late 1970s and early 1980s dramatically increased the food supply in China's cities, making it possible for more people to come in from rural areas.

Due to the increased food supply, the authorities temporarily relaxed the enforcement of migration restrictions.  This relaxation, however, was short-lived, and in 1984 new measures strengthened residence regulations and reinstated official control over internal migration.

Nonetheless, migration from rural areas to urban centres continued.  The problem of too-rapid urbanisation was exacerbated by the agricultural responsibility system, which forced a reallocation of labour and left many agricultural workers unemployed.

Thus, authorities permitted temporary mobility because it simultaneously absorbed a large amount of surplus rural labour, improved the economies of rural areas, and satisfied urban requirements for service and other workers.

The pace of urbanisation in China from 1949 to 1982 was relatively slow because of both the rapid growth of the rural population and tight restrictions on rural-urban migration for most of that period.  From 1982 to 1986, however, the urban population increased dramatically to almost 30 percent of the total population.

This large jump resulted from a combination of factors. One was the migration of large numbers of surplus agricultural workers, displaced by the agricultural responsibility system, from rural to urban areas.

Another was a 1984 decision to broaden the criteria for classifying an area as a city or town. During 1984 the number of towns meeting the new urban criteria increased more than twofold and the urban town population doubled.

Although China's urban population, 26 percent of the total population in the mid-1980s, was relatively low by comparison with developed nations, the number of people living in urban areas in China was greater than the total population of any country in the world except India and the Soviet Union.

The four Chinese cities with the largest populations in 1985 were Shanghai, with 7 million; Beijing, with 5.9 million; Tianjin, with 5.4 million; and Shenyang, with 4.2 million.  The disproportionate distribution of population in large cities occurred as a result of the government's emphasis after 1949 on the development of large cities over smaller urban areas.

In 1985 the 22 most populous cities in China had a total population of 47.5 million, or about 12 percent of China's total urban population. The number of cities with populations of at least 100,000 increased from 200 in 1976 to 342 in 1986.5

However this focus was to change and in the years of Deng's reforms, the country favoured smaller, not larger, cities, based on the assumption that large and medium cities could not absorb the vast surplus of rural labour.

This sets China's urban profile apart from other big developing countries.  Unlike Mexico for example, China has a much larger number of small and medium-sized settlements.

But while small cities and towns are still hailed as the hallmark of urbanisation in China, they also excel at irrational use of land, which the country cannot afford.  China must feed one- fifth of the world's population on just seven percent of the world's arable land.6

Pressures on urban development and renewal:

Snap shot of current conditions

Though more and more people are moving to and living in the cities, living conditions have not always kept up with urbanisation.  There is a severe housing shortage in many urban areas, a need to upgrade the backward public welfare facilities and a need to increase the green coverage in growing urban centres.

Amenities associated with city life are still lacking.  The first nationwide survey of ''municipal facilities and urban ecology'' of more than 600 cities completed in 1998 showed that China's cities by and large resemble cities of developed countries in the mid-1960s.

Only 70 percent of urban households use gas.  The rate of ''safe disposal'' for garbage stands at only 40 percent, and for treatment of water, just 19 per cent.  Public green areas average 5 square meters per head.  In urban transportation, there is an average of seven public vehicles per 10,000 persons.7  

So, while urbanisation is accelerating across China cities are struggling to provide adequate infrastructures that are the necessary details of a functioning urban centre. 

Impact of the growing income disparity between rural and urban areas

While urban residents face a lack of facilities it is in fact the rural dwellers that are faced with the biggest problems.  By the end of 1992, there were 80 million Chinese still living in poverty and these people (8.8 per cent of the total rural population) were mostly living in the rural areas of central and western China or in the remote mountains.8

The steadily widening income gap between China’s urban and rural areas features the contrast between the extravagant spending by the high-income urban group and the tremendous financial difficulties facing many others.  Figures from 1999 show the following:

First, the average annual income in the postal and telecommunications sector, 14,400 yuan (US$1,741.82), was more than three times the income of the forestry sector, 4,580 yuan (US$554).

Second, the average annual income in Shanghai, 16,600 yuan (US$2,007.93), was just slightly less than three times the average wage in rural Shanxi province, 6,065 yuan (US$733.62).9

The division of China into rural and urban worlds discriminates against 900 million farmers in favour of 400 million city-dwellers.  Stagnating returns from the land, coupled with rising tax burdens, threaten to send millions more peasants in the wake of the 120 million who have descended on towns and cities nationwide in recent years.

The rural population, 70 per cent of the country's total, buys just 30 per cent of products.  

Some experts argue that freer population flows could slow the widening income gap between town and country, and relieve the pressure on the fragile environment of western China.  Since the ban on internal migration was eased in the 1980s, millions of peasants have swapped farm work for hard but more lucrative labour in the cities.10

However it is the freeing up of internal migration that contributed significantly to the explosion of China’s cities that are already struggling to provide adequate facilities for their current residence.

As China’s urban population increases so does the income gap between urban and rural citizens.  According to economic figures of the first three quarters of 2000, issued by the Chinese National Bureau of Statistics, disposable per capita income of urban residents reached Rmb 4,719 (US$569.90), climbing 8.4 percent, while income for farmers only rose 2.5 percent to Rmb 1,500 (US$181.20).

As more rural citizens leave the farm to pursue work in the city, the remaining rural citizens earn a per capita income equal to just 30 percent of urban residents’ earnings.11

It can therefore be understood that the growing disparity between average rural and urban incomes is a major driver of China’s high rates of rural-to-urban migration.

Urban infrastructure development in China

With its rapidly increasing urbanisation China has experienced continuous reform of investment, construction and management systems of urban infrastructure.  China's urban infrastructure has also embarked on a fast growing track and the investment in urban infrastructure has witnessed a continuous expansion.

Total fixed-asset investment (FAI) in urban infrastructure projects climbed from 2.483 billion yuan in 1990 to 12.83 billion yuan in 1997.  Based upon 1990 constant prices, the average annual growth rate from 1990 to 1997 was 17.23 per cent, nearly 10 percentage points higher than the GDP growth rate during the same period of time.12

Although the pace of urban infrastructure development continues accelerating, the gap between supply and demand remains substantial.  Until recently, the government fiscal expenditure has been the primary source of investment in this field.

Unfortunately, government investment alone and conventional sources of financing such as government transfer and borrowing from banks in particular can no longer satisfy the rapidly growing demands for investment in urban infrastructure.

It is apparent that urban infrastructure cannot be treated as pure social-welfare matter any longer and market-based approaches must be introduced into construction and operation of urban environmental infrastructure.

Various forms of the public-private partnerships, such as subcontracting, licensing, confessional projects and build-operate-transfer (BOT) provide new opportunities for resolving the dilemma.13  

Most certainly, private participation in urban infrastructure delivery will only be likely to take place on a profitable basis.14

Public-private partnerships in China

The inability of the government to adequately respond to the growing needs for urban infrastructure services presents business opportunities for the private sector.  Very often the private sector possesses the financial capability as well as technologies and expertise.

Under appropriate conditions, the private sector will mobilise these resources and help governments to offer adequate and quality services to urban residents.  This can include all kinds of companies, from large-scale trans-national corporations to locally based companies.

Such an environment opens windows of opportunity for public-private partnerships.  The private sector provides the resources and the public gets the urban infrastructure services.

Through these innovative win-win partnerships, the advantages of the private sector dynamism, access to finance, technical expertise, managerial efficiency and entrepreneurial spirit are combined with the concerns and responsibilities of governments to foster social responsibility, environmental awareness, local knowledge and job creation.15

Although there is an increasing number of success stories of such public-private partnership in delivering urban environmental services in China, the investment framework in general could further facilitate partnerships.

Put simply, there is still too high a risk for both the government and the private sector. Accordingly many initiatives are not identified or pursued.  To reduce these risks, the institutional and economic frameworks need to be improved.

The recent experience in China indicates that the following four principles should underline this improvement:

Profit: The government is still somewhat reluctant to allow profit in the urban infrastructure sector. In part, this is because of the belief that poor people cannot afford to pay for these services.

Stability: Both nationally and in some localities, the institutional framework is changing quickly. These changes often develop in a non-transparent way. This is a strong disincentive for many private actors.

Simplicity: A private actor interested in investing or operating in urban infrastructure may have to deal with many local authorities. This can be compounded by involvement of other levels of government and a series of laws and regulations. This creates large entry costs and again a big disincentive for the private sector.

Regulation: The government is, at this stage, unsure of what will happen once they delegate some functions to the private sector. It is worthwhile to be noticed that after this delegation, the role of the government will change, become even more important, to serve as a regulator and supervisor, rather than a doer. This change of role requires new skills and capabilities from government.

There are already a number of success stories in terms of public-private partnerships in delivering urban environmental services and controlling industrial pollution.  However, the success stories are constrained by their specific local conditions.

Many barriers, such as inhibiting regulatory framework, policy conflicts originating from different sectors, lack of awareness and involvement of financial institutions, prevent the establishments of public-private partnerships (PPP) on a larger scale.16


Over the past two decades China has experienced an explosion in both its rate of urbanisation and size of its urban population.

While both rezoning, which has seen a large increase in the areas classified as “urban”, and natural population increases in urban areas, have contributed to this urban population growth it is rural-to-urban migration that has been identified as the driving force behind China’s urbanised population explosion.

With the world’s largest population of 1.3.billion people China’s internal migration pattern means that millions are settling in the cities every year.

Disillusioned by declining rural returns and attracted by the disproportionately higher average city incomes and standards of living these push-pull factors mean that rural residents are leaving their homes in search of a better life in the cities.

With such large and continuous numbers of people entering China’s cities and towns this is creating immense pressure on urban development and renewal.

With over 660 cities and 17, 000 towns the government is struggling to provide adequate facilities and infrastructures.

Urban infrastructure in China has long been regarded as a social-welfare issue with the government taking full responsibility for the financing and operation of urban infrastructure services.

However, due to the accelerating urbanisation process and improving standards of living, the conventional ways of delivering urban infrastructure services cannot meet the growing demands for more and better urban infrastructure services.

Plans and developments involving the private sector and private funds in the provision of urban facilities and services have shown signs of success.

These public-private partnerships have been slow to develop because of basic conflicts of interest by both the private and public sectors as they try to work together.

However with improved coordination they do offer a start to a workable solution to the improvement of China’s urban development for an ever-growing urban population. 


1. Antoaneta Bezlova, “Development – China: Growing Cities Foul Up the Environment”, May, 1999

2. “Public-Private Partnerships in Delivering Urban Environmental Services in China”

3. Michel Andrieu, “China, a demographic time bomb”, International Futures Programme, September 1,1999

4. Antoaneta Bezlova, reference cited in note 1.

5. US Library of Congress, “China: Chapter 2. Physical Environment and Population”, 1987

6. Antoaneta Bezlova, reference cited in note 1.

7. Ibid.

8. Information provided by the Government of China to the United Nations Commission on Sustainable Development, Fifth Session, China Country Profile Implementation of Agenda 21: Review of Progress Made Since the United Nations Conference on Environment and Development, 1992, “Chapter 3: Combating Poverty”, April 7-25, 1997,

9. ChinaOnline, “Widening Gap Between Rural, Urban Income Grows, Raises Red Flag”, March 20, 2001

10. Calum and Lijia MacLeod, South China Morning Post, “China's 'apartheid'’, July 2, 2001

11. ChinaOnline, “Statistics Bureau: Farmers’ Per Capita Income Only 30 Per Cent of Urbanites’’, November 13, 2000,

12. “Public-Private Partnerships in Delivering Urban Environmental Services in China”

13. Ibid.

14. Ibid.

15. “Public-Private Partnerships in Delivering Urban Environmental Services in China’, reference cited in note 12.

16. Ibid.

Additional references:

ChinaOnline, “Survey: Growth in Rural Income Slowing Down”, October 16, 2000

ChinaOnline, “Chinese Incomes Rise, but the Rural Sector is Being Left Behind”, March 1, 2001

ChinaOnline, “Statistics Bureau: Farmers’ Per Capita Income Only 30 Per Cent of Urbanites,” November 13, 2000

Zhongguo Xinwen She, China News Service, November 7, 2000,


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