World Bank: China needs new market-based approach to urbanisation

by Reuters
Tuesday, 25 March 2014 03:23 GMT

BEIJING, March 25 (Reuters) - China should let market forces play greater role in its drive to boost the urban population to accomplish its goal of ensuring sustained, consumer-led growth, the World Bank said in a report on Tuesday.

In the report jointly prepared with China's Development Research Center, a top-level policy think tank, the World Bank said a market-based allocation of resources would lead to sustainable urbanisation.

"Government would need to rebalance its involvement from exercising administrative control to regulating market-based allocation of people, land, and capital across China and provision of public services to support these allocations," the report said.

China wants to increase the proportion of urban residents among its population of almost 1.4 billion to 60 percent by 2020, up from 53.7 percent now, as it looks to turn the economy into one driven by consumption and services rather than investment and credit.

Last week the government said it was planning a major expansion of its transport networks and urban infrastructure to push the urbanisation drive and would also focus on the environment, amid growing complaints about toxic levels of smog and water pollution.

The report listed six areas for change that it said would lead to a "new model of urbanisation" for China.

The reform of land management to strengthen rights for farmers, limit the amount of land that can be requisitioned by local governments and market-based pricing would be a priority, the report said.

A second major issue is reform of the "hukou" registration system that controls the benefits residents can enjoy and denies basic services to those who relocate without permission.

The report also recommended allowing local governments to borrow money directly within strict rules, as well as reforming city planning, managing environmental pressures and improving governance by making local governments more transparent.

"If China stays committed and implements the necessary reforms, it could become a global model on urbanization, while winning the war on pollution, sustaining high growth rates for its economy, making cities more liveable and allowing more people to benefit from development," World Bank Managing Director Sri Mulyani Indrawati said in a statement accompanying the report.

China's leaders have repeatedly said they will accept slower growth as they attempt to re-engineer the world's second-largest economy.

It has slowed markedly in the first two months of the year, with growth in investment, retail sales and factory output all falling to multi-year lows. (Reporting by Xiaoyi Shao and Jonathan Standing; Editing by Tomasz Janowski)

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