Urbanisation

By Kam Wing Chan

Kam Wing Chan, professor of geography at the University of Washington, is an expert on Chinese population statistics and is a guest contributor to the Dragonbeat blog this week.

How big are Chinese cities? That depends on how you measure them.

Back in 2005, Time magazine proclaimed that Chongqing had become “the largest city not only in China but in the world”, with a population in excess of 30m.

But any Chinese citizen will tell you that Beijing and Shanghai, both with real urban populations below 15m, are larger than their supposed competitor in China’s southwest.

Common confusion over the true population size of Chongqing and other Chinese cities reflects the fact that China has highly complex and confusing urban and city statistical data.

By Tom Miller

Beijing and Shanghai are currently the only two Chinese cities that have unquestionable “megacity” status, with populations well in excess of 10m.

But over the next 15 years, 60 new cities with populations of 1.5m-5m are likely to sprout in China, including six new cities – Tianjin, Guangzhou, Shenzhen, Chongqing, Chengdu and Wuhan – with real urban populations exceeding 10m.

Managing this vast migration in a sustainable manner will require more than steel and cement: creating patterns of urban growth that use resources efficiently and avoid irreversible urban sprawl will determine whether the country’s cities become livable economic centres or urban dystopias fugged up with exhaust fumes.

Most important, creating a viable social welfare system may determine whether these mega-cities are paved with gold or strewn with beggars.

By Tom Miller and Will Freeman

“Rebalancing the global economy” is the mantra of the day – and China, we are told, must play its part. That means shifting China’s economy away from an unhealthy reliance on exporting goods to foreign consumers and instead boosting consumption at home.

Last week, we argued that China’s fast pace of urbanisation, which is projected to see the urban population rise from 600m today to more than 1bn by 2030, would keep demand for commodities high. It seems a small leap of logic to conclude that growing urbanisation – and the accompanying rise of an “urban middle class” – will have a similar impact on consumer goods.

Last autumn’s sudden collapse in commodity prices left a lot of China bulls with egg on their faces. Didn’t China’s insatiable demand for stuff, driven by a long-term process of urbanisation and rising incomes, guarantee the good times would roll for another two or three decades?

For the past seven years, commodity prices were essentially considered a simple function of Chinese demand. As the world’s top consumer of aluminium, copper, lead, nickel, tin, iron ore, steel, coal, wheat, rice, palm oil, cotton and rubber, China was thanked (and blamed) for heralding a new era of inflated raw material prices. After the commodities crash, this theory appears in tatters.

Indeed, over the next two or three years China is likely to play only a small role in setting global commodity prices: even if Chinese demand recovers, markets will be overwhelmed by shrivelling demand everywhere else.

But after the rest of the world stabilises and excess production capacity is absorbed – somewhere between 2010 and 2013 – China will again emerge as the key driver of global demand. Assuming that Beijing maintains economic and social stability – and there is no evidence to suggest that it will not – the pace and scale of industrial and urban development in China should drag up commodity prices. China’s enormous size renders its urban growth even more significant for global markets than was Japan’s in the 1960s and 1970s.

The pace of urbanisation in China, largely driven by rural migrants fleeing the penury of the fields for a better life in the city, is unprecedented. In 1980 a paltry 20 per cent of Chinese citizens lived in urban areas, a figure associated with the poorest countries on earth. By 2030, when more than 1bn Chinese citizens will live in towns and cities, that figure will reach 70 per cent – a higher proportion than in Japan or Italy today.

A recent study by the McKinsey Global Institute forecasts that 100 new cities with populations of 500,000 to 1.5m will mushroom across the country over the next 15 years; these will be joined by a further 60 new mid-sized cities with populations of 1.5m to 5m. By 2025, current trends suggest that six new cities – Tianjin, Guangzhou, Shenzhen, Wuhan, Chongqing and Chengdu – will join Beijing and Shanghai with real urban populations exceeding 10m.

As China’s growth and urbanisation continues for another couple of decades, Chinese demand for commodities will rise substantially – especially hard commodities used for building houses and roads. China has only just reached the most commodity-intensive stage of urbanisation, with metal intensity four times higher than in developed countries and twice as high as in other developing countries, according to the World Bank.

The uptick in metal intensity, which began in the mid-1990s and accelerated at the beginning of the 2000s, correlated with an increase in the urbanisation rate from 30 to 40 per cent. In 2007, more than 50 per cent of Chinese steel and 44 per cent of copper demand was gobbled up by the construction and infrastructure industries. Metal intensity growth is projected to peak along with the population growth rate around 2015, but remain high through 2030.

Global commodity markets have tanked and Chinese demand has stuttered. But the hungry dragon is not yet sated – he’s just pausing between courses.

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