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Li Keqiang Urges More Urbanization to Support China’s Growth

China's Vice Premier Li Keqiang
Li Keqiang, China's vice premier. Photographer: Nelson Ching/Bloomberg

Li Keqiang, set to become China’s premier in March, said the nation must deepen its rural-urban population shift to support growth while avoiding the economic stagnation associated with middle-income countries.

Urbanization is a “huge engine” of China’s future economic growth, Li, currently vice premier, said today in a full-page article on economic development on page three of People’s Daily, the Communist Party’s mouthpiece.

The article represents the first policy markers laid down by Li, 57, since he was appointed last week to the No. 2 position on the Politburo Standing Committee behind Xi Jinping as part of a once-a-decade power handover. China’s urban population of just above 50 percent is “much lower” than the 80 percent in developed nations, said Li, whose championing of urbanization has been a central theme of his career.

“Urbanization is not about simply increasing the number of urban residents or expanding the area of cities,” Li said in People’s Daily. “More importantly, it’s about a complete change from rural to urban style in terms of industry structure, employment, living environment and social security.”

Li also reiterated points made this month by officials including President Hu Jintao, saying China will “steadily” push forward with making interest and exchange rates more market-based.

Longer Term

Li didn’t discuss the near-term outlook for the economy or provide specific forecasts, instead focusing on longer-term issues. Premier Wen Jiabao said yesterday at the East Asia Summit in Phnom Penh, Cambodia, that the Chinese economy is becoming more stable, will maintain “relatively fast growth” and “develop at a higher level,” according to the official Xinhua News Agency.

China’s gross domestic product is poised to expand 7.7 percent this year, the weakest pace since 1999, based on the median estimate of analysts surveyed by Bloomberg News this month. Growth may pick up to 8.1 percent in 2013, according to the median of 46 forecasts.

Li said China is facing the risk of falling into the so-called “middle-income trap” now that its per-capita GDP has reached such a level. “There are many countries in the world that when they reached the middle-income stage, they witnessed serious structural problems such as growth stagnation, a widening wealth gap and increasing social unrest,” Li said.

Rural Migrants

The incoming premier will have a smaller pool of potential rural migrants to maintain urban growth. The proportion of China’s population in cities swelled to 51 percent by the end of 2011 from about 39 percent over the past decade. More than 100 million people left farms during Hu’s presidency, many for jobs in the factories that pushed China past Japan as the world’s second-biggest economy.

The pace of growth in China’s cities is at risk of slowing, according to Nicholas Eberstadt, a demographer at the American Enterprise Institute in Washington. China’s workforce may shrink, with the number of 15- to 24-year-olds forecast by the United Nations to decline by almost 62 million people in the 15 years through 2025.

Li also said in the People’s Daily article that yuan capital-account convertibility will be achieved “gradually” and China will keep pushing changes to resource pricing. The nation must boost consumer spending to sustain growth and cope with a slowdown in the global economy, Li said.

The yuan was little changed today at 6.2328 against the dollar. The Shanghai Composite Index fell 0.2 percent as of 1:46 p.m. local time.

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