The Chinese urbanisation rate is one of those megatrends that is rarely discussed but sets the course for asset market over decades. Bloomie has an odd piece on it today:
China’s urbanization rate is set to beat previous international predictions over the next decade, providing an antidote to the country’s shrinking workforce and declining birthrate, an influential Chinese economist said.
About 75% of the Chinese population will be living in cities by 2030, up from the current 64%, according to Lu Ming, an economics professor at the Shanghai Jiao Tong University specializing in urban development.
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“Even if China’s workforce or overall population starts to decline, urbanization can still make sure that the labor supply to the manufacturing and services industry will keep expanding,” said Lu, who participated in an economic round-table with President Xi Jinping last August. “The process of population flowing into bigger cities will lead to more efficient utilization of labor resources, which will lead to continued economic growth,” he said in an interview recently.
…Lu said China’s urbanization rate could reach the level of developed economies at 85% to 90% in the coming two to three decades. By comparison, the urbanization rate was 83% in the U.S. and 92% in Japan last year, World Bank data shows.
“The trend of population flowing into major city clusters will not change,” said Lu. “The biggest challenge to China’s urbanization will be how to expand investment to cater to that inflow, in cities where public services and facilities are already in a shortage.”
Quite right. Except the professor a little behind the times. The peak number people China needs to move to reach these levels of urbanisation by 2930 is long past. In fact, to reach 75% urbanisation by 2030, China would have to dramatically slow the number of people it is moving (and therefore investment):
When we add that much of the investment into apartments and infrastructure has been made in advance…well…urbanisation looks more likely to make demographic challenges more difficult for growth not less…