China / Society

Urbanization is backbone of the booming economy

By Huang Ying (China Daily) Updated: 2013-01-17 08:13

By the end of 2025, 70 percent of the Chinese population will live in cities, and in absolute terms - that would be about 900 million to 1 billion, based on the current population. By the end of 2030, more than 220 cities will have populations exceeding 1 million, with an increase of 400 million city dwellers, Chen said.

In Chen's opinion, most of the 400 million new city dwellers will work in and be customers of the service industry. The modern service industry operates with the application of high-tech approaches such as IT and modern management, and therefore has more advantages over the general service industry. Services concerning consumption, production and finance are what he thinks will flourish in the future.

Urbanization is backbone of the booming economy

A salesman checks masks on a shelf at a drugstore in Chengdu, capital of Sichuan province, on Monday. Sales of masks remained at normal levels even though smog had shrouded the city for days. The city is located in a basin where haze is a constant visitor, especially in winter. Yu Ping / China Daily

The healthcare industry is more complicated because it involves government administration, medical system reform and business operating systems. The requirements of investors who plan to invest in this field are more demanding.

The healthcare industry has bright prospects with the aging Chinese society. Urbanization will generate greater demand for medical services from the public, Chen said.

In China, the medical equipment industry has exceeded 100 billion yuan with an annual average growth rate of 23 percent. It is estimated that the market scale will reach 340 billion yuan in 2015.

Moreover, medical apparatus only takes up 14 percent of the total medical industry while the figure of the global market has reached 42 percent.

Li Qiushi, an analyst at Guotai Junan Securities Co, said in a research report that urbanization is expected to drive 250 billion yuan growth in the pharmaceutical market.

A report released by Shenyin & Wanguo Securities Co said that as urbanization deepens, the sales of durable consumer items like home appliances, automobiles and furniture will grow and other items such as gas and clothing are expected to increase with the development of people's consumption habits.

Migrant workers who have been urbanized accounted for 23 percent of the urban population in 2011, and the ratio is growing. By the end of the third quarter last year, migrant workers and their family members accounted for 27.5 percent of the urban population.

Lessons from developed economies indicate that the increase of 1 percentage point in the urbanization rate will cause final consumption to improve 1.6 percent.

In the consumer goods sector, listed companies account for 8.4 percent of the A-share market's value, which is rather low in comparison with the rest of the world, Chen said.

The demand for consumer goods will grow along with the reform of income distribution mechanism, and the change of the consumption structure amid the urbanization offers venture capital and private equity a lot of opportunities for investment, according to Chen.

Other city-based services, including smart city-related sectors, energy-saving and environmental protection, are also demonstrating a promising outlook.

Cities that are enabled to operate smarter with the technical support of the Internet of thing - cloud computing, artificial intelligence, data mining and knowledge management - are called smart cities. Industries and companies that provide such services are also worthy of attention when viewing investment.

According to BOC International, as urbanization progresses, a series of problems are expected to arise, such as traffic congestion, worsening of the environment and energy emergencies. Smart cities will be able to deal with all these problems through technology-intensive methods and the application of urban information resources.

The subsectors include intelligent transportation, green intelligent buildings, e-governance systems, energy-saving construction materials and green lighting, according to the reports of investment advisory firms.

Ecological civilization development has been integrated into the general layout of socialism with Chinese characteristics for the first time in the report from the 18th National Congress of the Communist Party of China in November, a sign that can be interpreted as an ambition by the central government to improve the country's environmental and ecological condition.

Bai Pengming, a macroeconomic analyst with the Shenzhen-based CIC Research Center, said energy-saving and green industries have increasingly become one of the necessary approaches for different economies to realize sustainable development under circumstances where resources become limited and environmental conditions deteriorate.

Zhang Yang, an analyst from Sinolink Securities Co Ltd, told China Business News newspaper that the new urbanization deserves to be a hot topic for investors in the long run, and probably weighs more than the previous financial reform in significance, because it covers more aspects and has a more widespread effect than the financial reform.

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