Is China’s Economic Development Less than Meets the Eye?

UW Geography Professor Kam Wing Chan’s online commentaries on contemporary Chinese urbanization, educational attainment, transportation, and internal migration issues have attracted  international attention. He has debunked the widely-celebrated phenomenon of China’s hyper development by showing 1) how Chinese students aren’t actually doing better on standardized tests than US students (showing how skewed the sample of  reported Chinese  test-takers actually is); 2) how Chinese bullet train project is ill-conceived, penalizes the poor, and is a potential disaster of corruption and shoddy workmanship (a fear of Chan’s that, sadly, has turned out to be quite true),  3) how prospects of Chinese urban prosperity are overblown by half because so many urban dwellers have second-class citizenship and are barely living above subsistence conditions, and, most recently in the Guardian, arguing that the rural poor are being being increasingly economically abandoned in China’s headlong rush into mega-urbanization.

A recent Wall Street Journal “Heard on the Street” column (“Bright Lights, Big Questions About China’s Urban Legends”, August 1, 2011), cites Chan’s work in this context:

“Urbanization is a cornerstone of China’s development strategy. But the relationship between a growing urban population and a sustainable growth path isn’t as straightforward as many investors believe.

China’s urbanization, and its beneficial effect on growth, is taken as an article of faith.

Concerned about a Japan-style collapse in China’s property sector? Don’t worry, a growing urban population underpins demand for apartments. Worried about China’s overreliance on investment as a driver of growth? Fear not, a growing army of city slickers will have higher incomes and consume more.

The trend in the official data appears clear enough. China’s urban population has grown from 19% of the total in 1980 to 50% in 2010. That is still some way off an urbanization ratio above 70% in many developed countries, so there is more to come. Urban per capita disposable income in 2010 was more than three times income in rural areas, and 86% of retail sales came from urban areas, so the transition to city life should support higher levels of consumption.

But as is often the case with China’s data, not all is what it seems. The crucial point is that rural residents can move to the city, but without an urban residence permit—known as an urban hukou—they are confined to the margins of city life. According to Professor Kam Wing Chan, an expert on China’s urbanization at the University of Washington, the share of China’s population that has urban residence rights is around 35%, substantially below the 50% of the population that live in the cities.

The 171 million migrant workers who fall into that hole have an average wage of around $3,600 a year, compared with an average of $5,700 for registered urban workers. That is more than they earned in the countryside. But although they might have built China’s glittering new residential compounds, living in dormitories in twilight zones on the edges of the city they are hardly likely to buy an apartment in one of them.”

Heard on the Street: Beware China’s Urban Legends – WSJ.com.

http://faculty.washington.edu/kwchan/

Professor Chan’s online webcast about Chinese economic growth and the growing economic gap between rural and urban populations

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