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China needs inclusive, sustainable urbanization: WB

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BEIJING, March 25 (Xinhua) -- While urbanization has been good for growth and economic transformation, China now needs a new model to support market-based allocation of land and capital in its urbanization, the Washington-based World Bank said here on Tuesday.


"China has avoided some of the common ills of urbanization, notably poverty, unemployment and slums, but despite the success, the strain is starting to show," World Bank managing director Sri Mulyani Indrawati said here at the International Conference on Urban China: Toward Efficient, Inclusive and Sustainable Urbanization.

China's growth has been driven by investment rather than productivity, but investment has become less effective in generating growth both in cities and nationwide. Urbanization has relied on land conversion and land financing, which is causing urban sprawl and, on occasion, ghost towns and waste, she said at the event, which was attended by experts and government officials.

Barriers to migration have kept China's urbanization rate artificially low, curbing economic opportunities and widening urban-rural income inequality. Citizens without urban household registration (hukou) do not enjoy equal access to public services in cities, another barrier to mobility, said Indrawati, chief operating officer of the global lender.

Smog and poor water are putting the health of citizens and particularly their children at risk. Land-intensive urbanization has reduced farmland, and it creates competition for water, adds to pollution, while undermining agricultural productivity and food security, she cautioned.


Through better allocation of land, labor and capital, a new model of urbanization can help China share the benefits of urbanization more widely than in the past, and it can be environmentally sustainable while ensuring China's food security, she said at the release of a joint report by the World Bank and the Development Research Center (DRC) of the State Council.

"New urbanization is not merely about bricks and mortar. It puts people at the center of the strategy," she stressed.

The report suggests that China should reform the hukou system to create a "mobile and versatile" labor force with equal access to public services, and place urban finances on a more sustainable footing while creating financial discipline for local governments.

If managed well, urbanization can create enormous opportunities: allowing innovation and new ideas to emerge, saving energy, land and natural resources, managing climate and the risk of disasters. Globally, almost 80 percent of gross domestic product (GDP) is generated in cities. It will be difficult for any country to reach middle-income status and beyond without getting urbanization right, she said.

A new model of urbanization requires a different role for the government. It will support rather than supplant market forces in shaping China's urban landscape, allowing the country's cities to grow more organically and efficiently, noted the report.

The report also suggests that China should establish an explicit framework for local government borrowing. "Allowing local governments to borrow requires a well-defined central government framework, which should include rules that define which local governments can borrow, from whom they can borrow, and the conditions under which they can do so," it noted.

Market-based tools, such as taxes and trading systems for carbon, air and water pollution, and energy, can also be used more to meet environmental targets. The performance evaluation system of China's local officials could be adjusted to give greater incentives for a more efficient, inclusive and sustainable urbanization process, it added.

"Good management of urbanization is essential to unleash the potential of cities to improve efficiency and promote innovation. The key is to ensure good governance at the city level, while meeting the challenge to strengthen urban environmental protection and control pollution. It is vital to develop institutional mechanisms for efficient, inclusive and sustainable urbanization," Li Wei, head of the DRC, said in a statement released with the report.

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