China needs at least 50 trillion yuan ($8.1 trillion) in new investment by 2020 to accommodate a burgeoning population of city-dwellers, according to the president of China Development Bank.
China must urgently find special financing channels to support the urbanization process because local governments can’t afford the spending, Zheng Zhijie, the bank’s president, wrote in an article in the May 16 issue of China Finance, a journal run by the People’s Bank of China. Zheng didn’t elaborate on the estimate, which is about equal to the nation’s nominal gross domestic product in 2012.
The figure shows the extent to which China will need to come up with funds for roads and benefits as part of Premier Li Keqiang’s efforts to make urbanization a key engine of growth. China Development Bank, the world’s largest policy lender, created the the nation’s system of local financing for infrastructure projects.
“In the coming 20 years, China’s urbanization ratio will increase by another 20 to 30 percentage points,” with another 300 million to 400 million people moving into cities, Zheng said. “By then, China will have more than 1 billion people living in cities -- the number will be larger than the population of all industrialized countries combined.”
The 50 trillion yuan is necessary to bring the urban population share to 60 percent by 2020 and increase benefits for the almost 200 million migrant workers already living in cities, Zheng wrote.
At the end of last year, 52.6 percent of China’s population lived in urban areas, according to the National Bureau of Statistics, after becoming a majority in 2011. China’s fixed-asset investment excluding rural households was 36.5 trillion yuan in 2012, according to government data.
CDB has already made 6 trillion yuan in loans to finance China’s urbanization process, with 3.4 trillion yuan of outstanding loans at the end of 2012 directly linked to urban development programs, or 71 percent of the bank’s total outstanding loans, Zheng wrote.