China's urbanization reforms will boost its economy

Take the Yangzi River delta as an example: Shanghai and another 15 industrial cites are located here. The growth of the international city of Shanghai is now constrained due to lack of land, overpopulation, congestion and pollution. One feasible solution is to shift some of Shanghai's functions to neighboring cities such as Suzhou, Wuxi, Changzhou, Jiaxing, etc. In such a way Shanghai and its neighboring cities can pursue differentiated and coordinated development.

Supporting the formation of such major city clusters in the most advanced regions has become the keynote of efforts to advance urbanization. The other Chinese regions nominated for city clusters are the Greater Bay District covering Guangdong, Hong Kong and Macau (Peal River Delta); the Beijing-Tianjin region; the Chengdu-Chongqing economic region, and to a lesser extent, hub cities such as Wuhan, Zhengzhou, Xian, Changsha, and Qingdao.

The second tier cities in those city clusters will be offered more land for industrial and commercial purposes to coincide with the expected influx of rural migrants. This expansion of both population and of business activities will stimulate investment, enlarge the tax pool for government benefit, and reduce living and production costs for residents and enterprises in those cities.

The impact on the rural sector will also be profound. With large numbers of rural residents departing for the cities, arable lands will be concentrated in the hands of the professional farm and agricultural businesses that have experienced rapid expansion in recent years. The efficiency of Chinese agriculture will improve substantially thanks to economies of scale and the use of advanced agricultural machinery and technology.

The activities mentioned above are actually part of a process reshuffling control of economic resources such as land – which is simultaneously a process of creation, distribution and exchange of wealth. It is particularly important to remember that those people whose land is being acquired are entitled to have fair compensation. Those rural migrants who seek work in cities must be able to lease their land and receive a good profit from that rental. Generation, distribution and exchange of wealth in such a way should translate into an expansion of domestic consumption and overall economic stimulation.

However, the challenges here are also acute. The free movement of people and consequent reshuffling of resources will put pressure on the social management abilities of government authorities. If the government's administrative arrangements and the legal and policing systems cannot manage the process in a fair and orderly manner, it will lead to chaos, corruption, resentment, disillusion and the formation of Mafia rings.