China Releases First Official Plan for Urbanization Campaign
SHANGHAI – In the first official plan in connection with China’s long-term target of urbanizing 250 million rural residents over the next decade, the government announced on March 16 an urbanization strategy emphasizing quality of life and environmental protection.
For foreign businesses operating in China, the plan, officially called the “National New-type Urbanization Plan (2014-2020),” promises to bring about large-scale changes to the Chinese domestic market and workforce, as well as foster a range of investment opportunities.
The primary impetus behind this campaign is increasing Chinese domestic consumer spending as a way to support further economic growth and shift away from a slowing export-driven model. Targets quoted in the plan include having 60 percent of the Chinese population (1.36 billion people) living in cities (versus 53.7 percent currently), with 45 percent in possession of urban residency certificates (35.3 percent currently) by 2020.
It is hoped that strengthening the social benefits of urban residents will spur them to increase their consumer spending. Officials also hope that improving education standards will create a more skilled workforce over the long-term. Alongside these targets, the plan also calls for various quality of life improvements, such as improved air quality, expanded public transport and balancing urban development with natural spaces.
The industries that stand to benefit most from China’s urbanization campaign are those closely connected to city infrastructure, such as roads and railways (planned to link all cities with a population of 200,000 or more), airports (planned to be accessible to 90 percent of the population), hospitals, schools and social housing (planned for 23 percent of the urban population), for which estimated state spending is upwards of US$600 billion per year.
In keeping with the campaign’s emphasis, investment opportunities are likely to be concentrated in second and third-tier cities, defined as those with a population under 5 million, rather than China’s largest urban centers.
Foreign investors considering how to best take advantage of these opportunities should also be warned of what some observers are predicting will be problems consequent upon these changes to China’s demographic landscape: urban unemployment, social unrest and strained financing of the many costs involved.
Despite these risks, however, it is clear that China’s urban markets will present potential for growth on a global scale for savvy investors over the next decade.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam in addition to alliances in Indonesia, Malaysia, Philippines and Thailand as well as liaison offices in Italy and the United States.
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