While urbanization has been good for growth and economic transformation, China now needs a new model, World Bank Managing Director Sri Mulyani Indrawati, 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," she said 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 noted.
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.
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 of the State Council.
The report suggests that China should reform the hukou system to create a "mobile and versatile" labor force with equal access to a common standard of public services, and place urban finances on a more sustainable footing while creating financial discipline for local governments.