Introduction
In the last 25 years China has experienced a massive urbanization movement.
The proportion of people in the cities has increased dramatically. China
has tried to slow this movement by encouraging improving the technology
of the agricultural industry in the countryside. This has had the adverse
effect of decreasing the demand of labor in agriculture, which in turn increases
the urban migration. Investment from developed countries has also played
a large role in urban migration. Foreign Direct Investment for the most
part has occurred in China's coastal regions in the major cities. China's
urbanization also increases the productivity level for most industries.
This paper is broken into five sections. The first section will look at
the history of urbanization in China starting with the founding of the People's
Republic of China in 1949. The second section of the paper will examine
the rural industrialization that is taking place in China right now. In
the third section will look at the agricultural industry in China. The fourth
section looks at the effects of Foreign Direct Investment on China's economy
and the urbanization movement. The fifth section looks at the effects of
urbanization on productivity in different industries.
China's Policies and History
In the early stages of the People's Republic of China, the government focused
on industrialization and urbanization. The Communist government enacted
a Five-year plan in which they attempted to industrialize as much as the
Western developed powers within five years. This idea came from the Soviets,
who focused on industrialization in cities. The grain ration at the time
was greater for urban residents and it created a large migration to urban
areas. In the late 1950s the government enacted the Great Leap Forward which
also discouraged agricultural development. They tried to focus on the steel
industry which did not have the same productivity as the agricultural industry.
China began to change its policies in the late 1960s during the Cultural
Revolution. There were initially high levels of young people migrating to
urban areas. The government reacted to this "by moving millions of
urban students and other urban residents to work in rural areas." This
created an excess of rural workers that lasted until the late 1970s.
Prior to 1978 in China, it was very difficult for people to move to other
parts of the country. A Chinese person was registered for his hometown.
If he left the region he was registered for, he would have no source of
food or housing. It would also be very difficult for a migrant worker to
find work near his new home. Deng Xiaoping's reforms of 1978 loosened the
food rationing and job allocation policies. The old restrictive policies
have not been completely abandoned as "the household registration system
still exists; as a result, urban population growth still has not matched
economic development." China's reforms in the late 1970s played a major
role in urbanization movement.
Rural Industrialization
Recently the Chinese government has been encouraging increased industrialization
in the rural areas of China. These policies have very large impacts on the
urbanization of China. The improved technology in the countryside has made
the demand for labor drop sharply. The farmers can now use the new tools
promoted by the government to do work previously done by unskilled laborers.
This leads to a large surplus of workers in the countryside who decide to
move into the cities to look for work. Another positive aspect of rural
industrialization is that job opportunities for women are increased. With
better technology women are able to do a greater amount of jobs. This increases
the labor force and creates more unemployed workers. This forces more people
to migrate towards cities where there are more job opportunities.
China's urbanization strategy has been very different from other developing
countries. Most countries try to have their urbanization happen through
rural to urban migration. This is defined as urbanization from above. China's
strategy is to develop small towns and rural industries. They want to encourage
unskilled workers in the countryside to stay in these small towns. This
strategy has been relatively successful. Opportunities for peasants in small
towns in the countryside have increased. There has been mixed results of
the effort by the Chinese government to encourage small town development.
The goal is for intraprovincial migration to be higher than interprovincial
migration. This is the case for Chinese women in the countryside. Employment
opportunities for women have certainly increased but are definitely limited
by what province they live in. The focus on increasing opportunities in
the countryside have helped create opportunities for peasant workers, but
has also led to higher levels of interprovincial migration for men. Overall
the policies have worked slightly, but have not discouraged urban migration
significantly. This shows these policies may not be the best plan of action
for the Chinese government. Since the "Chinese government lends a substantial
amount of money to rural enterprises, it is doubtful whether this is the
best use of its scarce resources." China's goal has been to discourage
rural to urban migration. This technique overall has proven to be ineffective
and China should focus its funds areas such as increased productivity in
urban areas.
Role of Agriculture
The agricultural development of China has played a tremendous role in its
urbanization. Both agricultural and industrial development are joint contributors
urbanization. Agricultural development effects urbanization on multiple
levels. The increased productivity in the agricultural industry leads to
less employment needed to sustain current production. Another effect of
increased productivity is that the agricultural industry is now able to
feed the growing urban populations. With the increased technology, the agricultural
industry has the capacity the feed the rapidly growing urban population.
The increased technology in the countryside has just as important a role
in urbanization as the increased industrialization along the coastal cities.
Historically, China's economy has been agrarian so "it is reasonable
to assume that the supply of urban labor is constrained by agricultural
productivity." This means that agricultural productivity must improve
for China's urbanization to continue.
Effects of Foreign Direct Investment
Prior to 1978, China's economy was not open to other nations for investment.
Following Deng Xiaoping's Reform and Open Door policies, China opened its
economy for foreign investment. Since then China has become the developing
world's largest recipient of Foreign Direct Investment. Most of this investment
occurs in urban regions along China's coastline. China's inner rural area
does not receive nearly the same amount of investment. The investment generally
occurs along the coast in labor intensive manufacturing sectors. This leads
to more unskilled workers who are currently receiving low wages in agricultural
industries in the countryside to migrate to urban areas to obtain higher
wages. High levels of Foreign direct investment in China's coastal region
has also led to very high level of imbalance in China's urbanization.
The increased level of Foreign Direct Investment was a major factor in the
growing economy. It has also led to a very unbalanced urbanization. Most
of the urbanization in China has come in the large cities along the coast
such as Shanghai and Beijing, both of which also have very high levels of
Foreign Direct Investment. There are other areas in China which have experienced
unusually high levels of urbanization without much foreign investment. Certain
cities in China's northeast region, have very high levels of urbanization
but that has been explained because those cities already had high levels
of industrialization dating back to the Soviet and Japanese influence in
the early 20th century. Other cities in China's northern region such as
Inner Mongolia, have had very high levels of urbanization. This is explained
by the fact that the surrounding area has very dry land. The land is not
suitable for farming and the unskilled workers in the countryside have no
choice but to move to cities to try to find work.
Increased Urban Productivity
As cities become more populated, their productivity also increases. Therefore,
China's growing cities have the opportunity to provide many more jobs to
unemployed workers from the countryside. There are some issues with the
increased productivity that must be examined. The speed at which China is
urbanizing is very fast, and could possibly be actually hurting the cities'
productivity. China needs to find an optimal speed in which the maximum
amount of workers will be able to migrate to urban areas, without limiting
productivity growth. In the United States, when a city's population is doubled,
the labor productivity rises by 5-6 percent. They are not quite as efficient
in China, as when the population of a city doubles there, the productivity
only increases by 3.6 percent.
There are also two different types of effects on the economy through urbanization.
There is the traditional urbanization effect. This is the gains in productivity
the economy will have due to increased availability of labor and the improved
infrastructure. There is also the localization effect. This deals more with
the availability of labor, infrastructure and facilities for the specific
industry. Initial research showed that light industries benefit more from
urbanization, and the heavy industries benefit more from localization. Since
then, studies have shown that both factors play a role in increased productivity.
Urbanization, however, plays a larger role in low-technology industries
while localization is the more important factor in high technology industries.
Most industries in China benefit more from localization than they do from
urbanization. In one study the "findings suggest that the strong agglomeration
economies found in China are mainly due to positive externalities realized
by firms from others in the same local industry." This means that the
economies do not benefit from the growing population but from the growing
number of other new firms in the same area. Another factor that must be
examined when looking at urban productivity is whether or not there is an
optimal size for a specific industry. In the study by Zuohong Pan, twenty-eight
different industries are examined. Of these 28 industries, Pan concluded
that eight have already reached and surpassed their optimal level of production.
This is a very important aspect to look at when devising urbanization policies
for certain cities.
Conclusion
There are many factors that are driving urbanization in China. These include
China's more liberal internal migration policies. The government's attempts
to industrialize the countryside to increase job opportunities have also
had the adverse effect of driving unskilled workers to the cities. Foreign
Direct Investment has also promoted the growth of China's cities along the
coast which has increased the employment opportunities for rural peasants.
China also must examine whether urbanization has reached its peak level,
and if so, how they can limit future urban migration.
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