Urbanization: Challenges and Opportunities

The communique issued by the Third Plenary Session of the 18th CPC Central Committee pointed out that "urban-rural dual structure is the main obstacle restricting the integration of urban and rural development", and it is necessary to "improve the system and mechanism for the healthy development of urbanization." Xu Shaoshi, director of the National Development and Reform Commission, said in At the next meeting, it was stated that it would "further revise and improve the national new-type urbanization plan and related policy recommendations." "Urbanization", as a strategic plan at the national level, is continuing to affect the development of China's economy.

Specifically, China's urbanization rate is just over 50%, and there is still a huge gap between the urbanization rate of developed countries and the average urbanization rate of more than 70%; at the same time, the development level of urbanization in the eastern, central and western regions is not balanced, and the resources of large coastal cities Too concentrated, the development of central and western cities and small towns is relatively lagging behind; the core areas of urbanization reform such as household registration and land are still waiting to be solved. These problems have become the key directions for the next stage of urbanization.

The inadequacies of China's urbanization development are also giving birth to huge business opportunities. It is foreseeable that the process of rural population transfer to cities will continue for a long time, and the urbanization of the lifestyle of the huge population will undoubtedly bring a series of needs such as housing, education, medical care, and infrastructure. Opportunities such as logistics, commerce, and retail are equally exciting. In big cities, the deepening of urbanization will bring opportunities for industrial upgrading and service innovation.

"CEConline" invited Qu Jian, Vice President of China Comprehensive Development Research Institute, Zhang Yanlin, Vice President and Research Director of CIC Consulting, Luo Lei, General Manager of Eslite Real Estate, and Wu Weihong, Chairman of Zhejiang Jason Kitchenware, to try to get from research and consulting From different perspectives of experts and entrepreneurs, make an in-depth discussion on the challenges and opportunities of urbanization.

The Essentials of Urbanization

CEConline: Urbanization Is it the same as "building a city"?

Qu Jian: Urbanization is people-oriented urbanization. The construction of the city is only to adapt to the transformation of a large number of farmers into citizens, and the transformation from agriculture to manufacturing and service industries. In the process of this transformation, people's production and lifestyle changes are a requirement for space.

About 13 million agricultural people in China move to cities every year, and the needs of these people themselves require huge city construction. Therefore, "building a city" cannot be used as a derogatory term. It is a rigid demand. In any case, in the process of urbanization, there is no doubt that more cities will be built, and they will definitely appear.

Zhang Yanlin: "Building a city" is only a one-sided understanding, and urbanization is not equal to real estate. The essence of urbanization is that the industrial structure has changed. The proportion of agriculture-based industries is declining, and the population engaged in agriculture is inclined to the secondary and tertiary industries, and these people will continue to gather in cities. This is also a very important link in the process of industrialization.

However, in some local governments, there will be some misunderstandings about "urbanization", only considering how much the urbanization rate is, how much land is needed to build a new city, and how much investment is attracted. These have become the driving force of urbanization, but the employment of farmers after washing their feet has not been taken into account. They definitely want to consume, educate and purchase, but where is the source of funding? Therefore, some places will build "industrial new cities". Because there must be an industry first, people will have income when they go there, and then there will be demand for housing and other aspects.

Luo Lei: The core of urbanization is the urbanization of people's lives. This extension is relatively broad, and real estate is only one of the contents. We are now talking about whether a person is in the city or in the countryside. In fact, the most important sign is the urbanization of the way of work. In the context of urbanization, the way you work is closely related to a certain industry. But in a non-sincere urban environment, the way of work is mainly agriculture. Therefore, the problem of the industry is the core, that is, employment. This is the core of the real urbanization in the future, not building a bunch of houses. Just building a bunch of tall buildings in the countryside is meaningless.

CEConline: "Urbanization" or "Urbanization"? The development of the central and western regions or the surrounding big cities?

Wu Weihong: I think places that are 1 hour away from the central city need to be developed quickly. Today's advanced developed countries are China's tomorrow. Foreign satellite cities are all distributed in the area around the expressway. Such as the continuous expansion of central cities such as Beijing in the past, this approach needs to be changed. To improve people's living standards, they must leave the central city. This will in turn improve the quality of life in central cities and outer small and medium-sized cities. In the central and western regions, the development of small and medium-sized cities may require a lot of investment, and the speed will be slower, because the geographical map of China's population is still dominated by the eastern coast.

Zhang Yanlin: There is no fixed direction for urbanization. Because each area, such as the Midwest and the East, has completely different levels and stages of development, and the goals of urbanization they pursue are also different. The trend of future development must be tailored. For example, the east is a development-oriented and developed urbanization, and it is not meaningful to build an IoT new city or a smart new city in the central and western regions. For example, it is indeed meaningful to build a new city of Internet of Things in Tianjin, which can promote the development of Jinnan District. It is impossible to say that I went to Xinjiang and Shanxi to build such new cities. We must adapt to local conditions. If the development is small, it should be small, if the development is medium, it should be medium, if it should be new, it should be new, etc. From a practical point of view, it is not just about which goal everyone is developing towards, but according to the local economic situation and population situation. System considerations, rather than how much vacant land is taken over, and one-sided pursuit of scale.

Qu Jian: There has been a discussion in China over the past ten years, whether the agricultural population is gathering in big cities, or whether it is transformed in small towns on the spot. I don't think we can draw a conclusion yet, because China has a large population and lacks land resources. Therefore, the advantages of developing large cities are that the land is intensively used, and the benefits for public facilities are also very efficient. First-tier cities such as Beijing, Shanghai and Shenzhen have a population of more than 15 million, but the intensive use of urban land is very good. But the large scale of big cities also brings more and more contradictions, because we have a problem that Western countries do not have, and that is our household registration system. The household registration system caused farmers from other places to move to first-tier cities, and there was a serious problem of semi-urbanization. Only the first process of urbanization was completed, and the second process of urbanization was not completed, that is, only the transfer of work was completed, and the corresponding security system was not completed. transfer. Relying solely on big cities will not solve the problems in the second stage of the urbanization process of farmers, so urbanization must be considered now. Urbanization is easier to implement in our country than urbanization. Because urbanization has brought a lot of pressure to the city by a large number of immigrants from other places, it has also damaged the interests of some existing citizens. By allowing farmers to urbanize on the spot, it can reduce the pressure on big cities, and solve employment, social security, housing and other issues nearby, and the cost is relatively low. Therefore, in comparison, the operating cost of urbanization may be lower.

Luo Lei: I personally think that there is no urbanization without employment. This is a hard indicator, so I don't particularly understand how urbanization occurs in small towns and how it interacts with the transfer of industries. I personally think that the towns around the core city will have more opportunities, because it can rely on the transfer of industries in a certain city. Industrial transfer is where an enterprise invests and chooses a place. It is based on the maximization of the benefits of production factors and the minimization of costs. If it is not close to the market, or if the production cost is not advantageous, the choice is based on these factors. Unless the sudden emergence of an industry in a certain place is due to conditions of scarcity, such as minerals, other transfers are more difficult. Judging from the history of urban development in the world, it is impossible to generate a particularly large-scale regional flow quickly. Basically, it is still a model that operates around the core city circle, and will expand with this city as the center.

CEConline: Will the new round of urbanization be accompanied by the transfer of industries?

Qu Jian: Now there is the fourth round of global industrial transfer. The first three rounds are from the United States to Japan to the Four Asian Tigers and then to the coastal areas of China, and the fourth round is to move from the coastal areas to the inland, Vietnam, Cambodia and other lower-cost areas. Just like all the companies in Hong Kong moved to Shenzhen back then, and now many companies in Shenzhen have moved to second-, third-, and fourth-tier cities, which is itself a process of urbanization development.

Zhang Yanlin: I think the trend of some industries in the eastern region shifting to the central and western regions should continue for at least the next ten years. Our current urbanization rate is 52%, and it will increase in the future. The transfer of industries also depends on the government's determination to adjust the economic structure. For example, if you vacate a part, you must produce part of it internally, which takes time. In this process, can the government tolerate economic deterioration and slowing growth? Therefore, it is necessary to have the determination to force the uncompetitive enterprises in the first- and second-tier cities to transform, so that there can be a development-oriented and developed urbanization.

Rowley: There are many other factors that influence this phenomenon. For example, the early development models of Shenzhen and Dongguan are similar, and both primary processing and manufacturing industries were introduced from Hong Kong and Taiwan. We once saw Dongguan developing quite rapidly. But now there is a huge gap between Dongguan and Shenzhen, the difference is that the government in Shenzhen is more aware of industrial upgrading. This gap is the question of how to upgrade the industries of each city after it develops to a certain stage.

Investment Opportunities in Urbanization - Not Just in Real Estate

CEConlines: What Investment Opportunities Will Urbanization Bring?

Zhang Yanlin: There will be a series of investment opportunities. Specifically, the first government must give, the second enterprise must be active, and neither can be passive. For example, the government should carry out new city planning according to local conditions and guide suitable enterprises to come. Another example is that it is difficult for many companies to change birds from dragons in southern China. But at the same time, they also believe that this is also an opportunity. The adjustment of the industrial structure must keep up with the rhythm, the adjustment should be adjusted, and the transfer should be transferred, which prompts them to take the initiative to deploy locations across the country.

In southern China, there are more service industries, as well as emerging software, Internet, Internet, cultural industries, including mid-to-high-end commerce, etc. These industries will have many investment opportunities in these regions.

In less developed areas, some industries should be built according to local resource endowments. For example, Shanxi is mainly based on coal, so it is necessary to make a fuss about energy and create a new industrial city of energy and new energy. Some places with good tourism resource endowments plan to develop tourism, which will provide support from the perspective of housing prices. Today, it will drive the development of infrastructure, machinery, building materials, municipal pipeline networks, medical insurance, and commerce.

Qu Jian: First of all, the real estate sector will have a direct and big impact. The primary problem that farmers face after entering the city is to live. Only living in peace can they work happily. They need the construction of houses, which will further bring about decoration, decoration, and building materials. demand. The second is the construction of urban infrastructure, such as water, electricity, gas, roads, etc., and the investment will be huge. Third, the entry of these people, they will move to cities and towns because they have jobs, and the work itself will bring considerable opportunities for industrial development, such as catering, education, medical care, manufacturing, etc. These fields will prosper because There is a need for such a large population.

CEConline: How can enterprises seize opportunities in the process of urbanization?

Luo Lei: I personally don't think urbanization will give the central and western regions a particularly great opportunity, and the first-tier cities still have the greatest opportunity. Because its economic radiation ability is stronger. From the perspective of domestic mainstream developers, most of them focus on first- and second-tier cities, and few developers focus their resources on third- and fourth-tier cities. From the perspective of the development law of real estate in the world, this is the safest strategy.

Wu Weihong: Urbanization is a continuous positive. Our sales are growing rapidly in third-tier cities and small towns. Some big brands do not sell at all in third-tier cities, so this is a virgin land and a blue ocean of the market.

I've been talking to dealers about how to sink the channel. Our idea is to sink sales channels to small and medium-sized towns and third-tier cities. We want the countryside to surround the city, but not necessarily the central city, because the marketing cost of the metropolis is very high, the investment is large, the price is high, and the positioning of our products is to benefit consumers. Now with the developed Internet, we can move the flagship store online instead of building a luxurious flagship store in a central city.

Urbanization focuses on small and medium cities, where most of my dealers are located. These dealers have developed more than 100 sales outlets in the following townships. In this way, he distributes to the following towns, and there are no problems in logistics, maintenance, after-sales service, etc.

Urbanization Prospects - What is the impact of the reform of land and household registration?

CEConline: What will be the impact of the household registration reform?

Zhang Yanlin: The household registration reform is imminent. After the reform, more people will go to cities to pan for gold, and there is a huge demand for education, medical care, communication, and energy conservation and environmental protection, which are all relatively large investment opportunities.

Qu Jian: The big problem in urbanization is household registration. It is not the household registration itself, but the welfare issue on the household registration. We have established a corresponding set of social security system on household registration. To give an image example, Beijing hukou is equivalent to a subsidy of 2 million yuan, and Shenzhen is equivalent to a welfare subsidy of 700,000. It is precisely because of such a large welfare gap that the guarantee of private land in rural areas is only tens of thousands of yuan. If the household registration system is abolished at once, everyone will do everything possible to switch from low welfare to high welfare.

It is more realistic to first enter the small towns, then the big cities, then the megacities, and reduce the household registration restrictions in turn. At least on the one hand, it can promote the level of urbanization, and on the other hand, it will not cause major turmoil. This is a realistic arrangement, albeit an unfair one.

CEConline: What are the implications of land reform?

Zhang Yanlin: The future development of new agriculture in China will have great potential. We are still far from developed, and the form of agriculture is still very rudimentary. At present, some small farms are encouraged, including the collective transfer of land to be piloted in some places. This affects both the primary and secondary industries. However, the reform of the land system will be slower.

Qu Jian: If the land property rights are clarified, more and more companies will add farmers. This process is an emerging thing in recent years, and its impact on all classes is not very clear. Experiments should be allowed, companies can add farmers, enterprises and farmers can make money, and pilots can be carried out.

From my inspection in the West, the small-scale farmers' management method is not a long-term solution, and it is relatively backward. In the future, the contracting of production to households will be further improved. Otherwise, the problem of the scissors gap between farmers and cities will not be solved. In the end, because the rural problems cannot be solved and modernization cannot be realized, the price of agricultural products will be high, and the income of farmers will be very low. Farmers who can't get rich are selling high-priced agricultural products, making agricultural prices uncompetitive globally. If this happens on a large scale, we are passive, and it is better to change now.