Is the urbanization of China inevitable?

From a loyal MR reader:

Now my economics question…

It’s often taken for granted in popular economics that China has an unalterable rate of urbanization. A good example would be this article by Stephen Roach (–roach). In it he is arguing China’s growth worries are overstated because, essentially, its “urban population should expand by more than 300 million by 2030”. I don’t mean to reduce his argument to simply that statement, nor do I want to concentrate on this article in particular. I merely mention it because I’ve heard it (or something similar) many times before.

But it seems baked into this assumption that “China will add X more urban residents by date T” is some implicit growth factor. (Maybe the 8% growth target?) After all, why move to the city if it doesn’t have good, high paying jobs that can support an urban lifestyle? I mean, 300 million new urban residents at roughly 3 people per household is roughly 100 million new urban jobs! And perhaps the manufacturing/export sector can accommodate them, but since investment is 50% of the Chinese economy and simply by continuity arguments will have to remain a big piece of it for years to come, it seems unlikely that 100 million jobs can be created with the currently composition of economic activity, or anything similar. Also, the current mix of urban jobs has still left roughly half of the urban residents unable to afford high-rise apartment living, so those 100 million or so jobs will have to in essence be even better (higher paying, more stable) than what’s already available.

I find the “urbanization argument” perplexing and seemingly circular, especially when it is used to justify that it shall be the basis of growth. I know it’s not this simple, but am I missing something fundamental here? Stephen Roach is a pretty big name from what I can tell.

Scott Sumner comments on related issues.  Here is an update on recent problems in Chinese real estate.


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