Open Journal of Social Sciences, 2014, 2, 12-17
Published Online September 2014 in SciRes.
How to cite this paper: Pan, Q.H. and Xu, R.F. (2014) An Empirical Study on the Factors of Chinese Urbanization Process
and Policy Proposals about the “New-Type” Urbanization. Open Journal of Social Sciences, 2, 12-17.
An Empirical Study on the Factors of
Chinese Urbanization Process and
Policy Proposals about the
“New-Type” Urbanization
Qinhua Pan, Ruofan Xu
Schools of Economics and Management, Tongji University, Shanghai, China
Received April 2014
First of all, this thesis will compile negative effects of this process since the reform and opening-up
policy was enacted. And then the policy background, the connotation and the main function of
new-type urbanization will be introduced. Followed by an empirical study, this thesis will also
analyze the main factors of traditional urbanization and make corresponding policy proposals for
modern urbanization nowadays.
The Factors of Urbanization, the New-Type Urbanization, Empirical Study
1. Introduction
With the adjustment of national economic structure, the momentum of Chinese economy is changing from rely-
ing on export and investment to domestic demand. Meanwhile urbanization is the most powerful weapon to en-
hance internal demand. Prime minister Li Keqiang points out that, as the law of modernization development, the
urbanization ratio of China will improve continually in future ten or twenty years. A considerable amount of ru-
ral remaining labor force and population will transfer to cities each year, which will lead to rapid increase in in-
vestment and consumption, and also more kinds of human resources for city development. Some scholars argue
that urbanization is one of the three engines of Chinese economic transition: according to the data provided by
McKinsey & Co, the urbanization ratio of China is now at 52.6% (2013), and will be up to 70% in 2020. More
people transferring to cities means more consumption and more opportunities for employment.
So, this thesis aims to find out the key factors in the process of urbanization in a way of empirical test and
analyze the results in order to make some corresponding policy proposals for the new-type urbanization. The
structure of this journal is about 4 sections: Firstly, the problem of Chinese urbanization; Secondly, the introduc-
tion of so-called new-typeurbanization; Thirdly, the empirical study of urbanization; Last but not least, the
corresponding policy proposals.
Q. H. Pan, R. F. Xu
2. The Problem of Chinese Urbanization
Lengthways from 1978 to 2011, the urban population of China went from 172 million to 690 million; the ratio
was from 17.9% to 51.3%. Although the level of urbanization was seemingly near to the average of the world,
the conflicts and contradictions were more and more non-neglectable.
1) Low-cost and predatory mode
Low-cost way of urbanization, which accelerated the process of population migration, left some problems.
The worst one may be urbanization lagged behind industrialization, neglecting the importance of population ag-
glomeration except economy agglomeration. Take the rate (urbanization ratio:industrialization ratio) in 2011 for
example, it was 1.1 (51.3%:46.8%) compared with 1.95, the average level of the world.
2) For rural residents, the real right of land performs practically no function
This problem included that farmers land rights was impaired in the past 30 years; the local government
finance relied on auctioning lands; the efficiency of land utilization was low; the framework of land law was
3) The Urban and rural household registration system
In China, Urban population refers to all people residing in cities and towns including 160 million rural mi-
grant workers (or peasant-workers). However because of the hinder of registration system these workers were
not treated equal to other citizens.
4) The imbalance and inharmony of urbanization development
Compared with the west, the east areas were overburdened by rapid urbanization, causing resources of econ-
omy and society mismatch. As population was over-intensive, metropolis like Beijing, Shanghai and Guangzhou
had a lot of troubles such as water, air, education, healthcare and so forth.
On the other hand, the similar structure of regional economy and the convergence of industrial structure
bringing excessive competition lead to lower utility.
5) High level of energy dependence
In future decades, the need for urbanization of iron, copper, chromium, sylvite, oil, natural gas and so on will
be rigid, the bulk mineral imports will ascend consistently. Thus the degree of foreign-trade dependence will al-
so become higher.
3. The Introduction of New-Type Urbanization
3.1. The Policy Background
In the Central Economic Working Conference Dec. 16th 2012, the conclusion of discussion indicates that urba-
nization is the historic mission of Chinese modernization development and also the way to expand domestic
demand, so its vital and urgent to make urbanization develop in a healthy and ordered way. Meanwhile, the Na-
tional Planning to Promote the Healthy Development of Urbanization (2011-2020), which is the master planning
outline of national urbanization, has already finished and will be published soon.
3.2. The Connotation and Function of New-Type Urbanization
1) The connotation
Until now, there are no standard definitions of new-type urbanization. Generally speaking, the new-type ur-
banization contains four aspects: a) coordinated with the development of industrialization and agricultural mod-
ernization; b) adapted to population, economy, resources and environment; c) having equal opportunities for all
kinds of cities (Large, medium or small) and towns to blossom; and d) with population aggregation, citizeniza-
tion and the coordinated development of public service. All in all, the characteristics of new-type urbanization
are urban-rural overall development, urban-rural integration, production-city interaction, economization and in-
tensification, ecological and livable, harmonious progress.
2) The function
Firstly, in the macro level of nation, the new-type urbanization is the engine of economic growth.
International experience shows that domestic demand is the endogenous power of economic growth, espe-
cially for large countries. It’s essential to convert the growth pattern from relying on investment to consumption.
But there should be a stage of transition, which means investment and consumption have the same privilege to
boost growth in this time. The new-type urbanization will be the key to this kind of transition.
Q. H. Pan, R. F. Xu
Then, in the meso level of industry, the new-type urbanization will impulse industrial accumulation and up-
As the advantage (compared with rural areas) of capital technique, transportation, living conditions, human
resources, communication etc., a large number of labor force and production activities converge on urban re-
gions. Thus the scale of the urban market increases rapidly, impulsing industrial upgrade continually.
Lastly, in the micro level of economic entity, the process of the new-type urbanization has benefit to improve
residentsincome, especially for rural residents.
Those people who migrate from countryside to city mostly go in for secondary and tertiary industry, with
higher level of salary than what they have earned in rural areas; for citizens, their income can also be improved,
as investment and consumption was boosted by those immigrations.
4. The Empirical Study of Urbanization Influencing Factors
Past empirical studies on urbanization [1]-[3] were mostly based on the analysis of time-series, and the data
covered both national level and some specific administrative districts’ level.
While, this thesis will use the panel data with the model of two-way fixed effect [4]. Based on the existing
achievements by other scholars, this paper will take a further step to analyze the specific factors of Chinese ur-
banization, will explain the outcome and will make some policy proposals for the way of future development
(the new-type urbanization).
4.1. Selecting Data
Considering the availability, the data of this thesis include 28 provinces of China (excluding Chongqing, Hong
Kong, Macao, Hainan and Xizang) from 1987 to 2008. The independent variables (explanatory variables xi) are
listed in the following Table 1.
The dependent variable (explained variable yi) is the urbanization ratio, the ratio of urban population to total
population [5].
4.2. The Outcome of Regression
As the result indicates, we find that the significant factors of Chinese urbanization include: GDP per capita of
provinces, the provincial tertiary industrial structure, household registration system, the way of land-expansion
urbanization, economic openness and rural income level of provinces (Shown in Table 2).
4.3. Analysis of the Outcome
For the proxy variable of household registration system: peasant-workers (migration), the coefficient of it is sig-
nificantly positive, which means the increasing number of peasant-workers in cities boost the economic devel-
opment of cities leading to improve urbanization level, but also they are counted as temporary alien workers of
the nominal urban population. This is because hindered by the household registration system, they cannot gain
the permanent urban residence certificate (in Chinese it calls: hukou) easily.
The variable of the areas of city (land) represents the way of land-expansion urbanization, the coefficient of it
is significantly positive proves that land-expansion was one of the ways to improve urbanization level. General-
ly speaking, one of the prominent problems or featuresin the process of Chinese urbanization is that the
growth of urban built up area is much faster than the gather of urban people apparently. The result of this thesis,
the coefficient of land is small but significant, proves this point of view.
The coefficient of GDP per capita (GDPpercapita), one of the four variables of economic development, is
significantly positive. So it means increasing the average (not only the aggregate) income level of one region
can enhance the urbanization level truly, which fits our instinct.
However, the coefficient of tertiary industrial structure (third_second) is significantly negative, which means
at present the tertiary industry in our country hasn’t absorbed rural surplus labor force adequately. As many re-
gions of high level tertiary industry in China are the developed areas such as Shanghai, there may be some cer-
tain rejective intention against immigrations. At the same time, the primary industrial ratio is not significant.
The economic openness of one region represents the development level and the geographic position of prov-
inces (in China, east areas near the sea are considered more exoteric and developed) indirectly. The coefficient
Q. H. Pan, R. F. Xu
Table 1. Selected variables of the factors of urbanization.
Factors of Urbanization Specific Index & Variable Name Explanatory of Index
Economic development
GDP per capita:
GDP per capita of provinces
Logarithmic GDP of primary industry:
ln 1stGDP
The development of provincial primary industry
Logarithmic GDP of secondary industry:
The development of provincial secondary industry
Logarithmic GDP of tertiary industry:
ln 3rdGDP
The development of provincial tertiary industry
The added value of the tertiary industry/The
added value of the secondary industry:
The provincial tertiary industrial structure
The added value of the primary industry/The
added value of the secondary industry:
The provincial primary industrial structure
The proxy variable of urban and rural household
registration system
The areas of city
-up urban area:
Represents the way of land
-expansion urbanization
Economic openness
alue of provincial imports and exports/GDP
(converted to dollar ):
Reflects the openness, economic level and geographic
position of provinces (in China, east areas near the sea
are considered more exoteric)
Income level
Logarithmic urban income:
The absolute urban income level of provinces
Logarithmic rural income:
The absolute rural income level of provinces
Rural income/
urban income:
The relative income level of provinces
Population growth
Logarithmic natural population growth rate:
The growth of provincial population
Education level
(control variable)
College and high school students per ten thousand
college & highsch
Represents the stock of provincial
human capital
Average education years:
Represents the knowledge level of provinces
Government expenditure
(control variable)
Agricultural expenditure:
Represents the support of provincial agriculture
Fiscal expenditure / GDP:
Represents the proportion of provincial fiscal
Infrastructu re
(control variable)
Capital stock:
Represents the capital level of provinces
Length of high way:
Represents the road construction of provinces and the
convenience of the connection between cities and
country sides
Fixed investments:
Represents the investment level of
provincial infrastructure
(control variable)
Employee of
primary and secondary industry:
primaryworker & secondaryworker
Represents the employment distribution of provinces
Q. H. Pan, R. F. Xu
Table 2. The result of the two-way fixed effect modela (The dependent variable is urban ratio).
Explanatory Variables (xi) Coefficient
Economic development
GDPpercapita 0.00189*
ln 1stGDP 0.01106
ln 2ndGDP 0.02909
ln 3rdGDP 0.03954
Industrial structure third_second 0.06682***
first_second 0.01593
Household registration system migration 0.00003***
The areas of city land 0.00002***
Economic openness iexport_ratio 0.03387***
Income level
lnurbanincome 0.15328
lnruralincome 0.07139*
incomeratio 0.05330
Control variables: agriexp capital highway govexpense college highsch primaryworker
Dummy variables of year: yes
R2 (within) = 0.991 Number of obs: 173
(between) = 0.0357 Number of groups: 26
a. The significance testing used robust standard error. As some observations were missing, the number of obs was low and 2 groups were missing.
*represents that the estimation is significant at 10% level, **represents 5% and ***represents 1%.
of it (iexport_ ra tio) is significantly negative reflects the problem of rejection of outsiders, because rejection of
outsiders may downgrade the level of urbanization to some extent.
In the three variables of income level, the coefficient of rural income level (lnruralincome) is significantly
positive indicates improving rural income can boost the urbanization ratio. While neither the urban income level
(lnrubanincome) nor income gap between urban and rural area is significant.
5. The Conclusion and Proposals
The result of regression based on the panel data of 28 provinces from 1987 to 2008 finds out the influencing
factors of traditional urbanization to some degree. The main factors are the household registration system, land-
expansion mode, GDP per capita of provinces, the tertiary industry ratio, the rejective intention of developed re-
gions and the rural income level. Based on these findings, the following policy proposals are made:
5.1. Lead by Metropolis, Boosted by Urban Agglomerations and Avoid Relying on
Land-Expansi on
Taking advantage of the lead of metropolis to boost the development of urban agglomerations is designed as one
of the principle thinking of urbanization. It aims to use urban agglomerations to drive large, medium and small
cities and towns to develop coordinately. At the same time, by improving the structure and scale of cities, con-
trolling the number of metropolis and giving priority to developing small towns, satellite towns, towns w ith
professional characteristics, economic growth and urbanization development can be realized.
When it comes to selecting the way of urban pullulation, its necessary to avoid traditional expansion mode of
enclosure. As is analyzed before, land-expansion did play a vital role in the past process of urbanization. How-
ever, with the severe lack of land resources and agricultural land this extensive form of enclosure movement
needs to be reformed immediately. The goal of urbanization should be changed from expanding the land of ci-
ties to improving the hardware and software facilities in city areas, optimizing the urban layout and creating
characteristic cities.
Q. H. Pan, R. F. Xu
5.2. To Reform the Household Registration System
In our empirical outcomes, one of them with Chinese characteristics is the peasant workers who truly have in-
creased the nominal urbanization level (by 2011, the real ratio of urbanization is about 35% to 36%, far less than
the official statistics: 51%) but were not considered as citizens (of course they didn’t have the same rights and
protection as city people had). Some scholars argue one of the crucial points of new-type urbanization is to en-
suring the peasant-workers both the urban residence certificate (hukou) and the equal treatment of urban citi-
5.3. To Reform the Scale of Cities and to Increase the Number of Medium and Small Cities
The outcome above indicates metropolis may have rejective intention against immigrant people from developing
regions whose economy level and income level are far less than the big ones. Given this, increasing some me-
dium and small cities moderately can narrow the gap of different regions, and also promote the citizenization of
peasant-workers orderly. Thus the real urbanization ratio can be improved.
New medium and small cities should embrace the centre city or metropolis positioned them as satellite cites
with complementary function to form urban circle and create economy of scale jointly.
5.4. To Narrow the Income Gap between City and Country Side and to Improve the Rural
As is proved above, the increase of rural income can enhance the level of urbanization. With the economy of
scale brought by the process of urbanization, the added value created by peasant workers is also counted as the
increment of citiesnet profit. So, the local governments should not only consider immediate rewards but also
put the task to improve rural income into the development of new-type urbanization.
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