Managing the Middle-Income Transition

Managing the Middle-Income Transition

Challenges Facing the People’s Republic of China

Edited by Juhzon Zhuang, Paul Vandenberg and Yiping Huang

The growth model of the People’s Republic of China has been based on high investments, exports, low-cost advantage, and government interventions. This model has successfully transformed the country from a low-income to an upper middle-income economy. However, the model has generated contradictions that could undermine future growth. Making the transition to high income requires greater reliance on efficiency and productivity improvement, innovation, and market competition. This book examines the challenges faced by the People’s Republic of China in sustaining robust growth, and policy options for making a successful transition to a high-income economy to avoid getting caught in the middle-income trap.

Chapter 14: Managing urbanization

Lixing Li

Subjects: asian studies, asian development, asian economics, asian politics and policy, asian social policy, development studies, asian development, development economics, economics and finance, asian economics, development economics, politics and public policy, asian politics, social policy and sociology, social policy in emerging countries


Rapid urbanization in the People’s Republic of China (PRC) is likely to remain a driving force of sustained economic growth over the next two decades, as it has been for the past three. Migration from rural areas to cities should generate huge productivity gains, and agglomeration effects will stimulate industrial and services sector development. Urbanization will also spur rural development through a variety of channels. The PRC’s urbanization level is still low compared with international benchmarks, and it has been constrained by the segmentation of factor markets across rural and urban sectors. In addition, migration to cities has brought many new challenges to the government, both local and central. These include addressing rising income inequality, conserving farmland, financing for city government, and public service provision. Urbanization is one of the strategic goals of the Twelfth Five-Year Plan, 2011–2015.

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